Business continuity planning steps (BCP) in times of energy insecurity

10 Minutes13.06.2023

When drawing up their ESG strategy, many companies are focusing on resource efficiency and energy conservation. When the energy crisis hit, companies that took early action and implemented preventive measures were certainly at an advantage. After all, the debate about the type, cost and availability of energy sources is more important than ever, as companies face energy shortages, price rises, the risk of power outages, and a fundamental inability to plan ahead, which in turn creates considerable uncertainty.

Experts currently consider the risk of energy shortages and grid overloads to be rather low.¹ However, despite the extensive preventive measures taken to maintain supply security and protect against blackouts, the risk of gas and electricity supply disruptions cannot be completely excluded. There are significant threats to critical infrastructure, not least the increasingly frequency of extreme weather events due to climate change and the potential for terrorist attacks.

Business continuity planning – an introduction

This management method is designed to enable companies to maintain or restore their business operations as quickly as possible in the event of a crisis or unforeseen, exacerbating circumstances. It is a holistic method that includes strategies, plans, and measures to prepare for crises, such as designing alternative procedures to be implemented in the event that critical business processes are interrupted. Business continuity planning is a proactive technique that serves to protect companies and their employees from risk, damage and losses by minimizing such issues.

7 business continuity planning steps to ensure your company is resilient in times of crisis

Developing and successfully implementing a business continuity plan for your company and informing all relevant stakeholders at the right time is a challenging task – so we recommend using the following business continuity planning steps as a guide. You can also click on any of the 7 steps to jump to a more detailed description:

Step #1: Define roles and responsibilities

Step #2: Conduct a requirements analysis

Step #3: Identify critical systems and processes

Step #4: Conduct a business impact analysis

Step #5: Make decisions about site-specific measures

Step #6: Develop a communication strategy

Step #7: Implement measures in the supply chain

Step #1: Define roles and responsibilities

When it comes to business continuity management, it is important to clarify roles and responsibility within your company. Who is responsible for technical aspects? Who is in charge of commercial issues and energy procurement? And who handles the legal side of things? You should also define your communication and decision-making channels and establish timelines. Communicate transparently and authoritatively.

Step #2: Conduct a requirements analysis

A task force should be established to oversee the subsequent planning and activities. This includes defining the specific requirements for your company – which means conducting a requirements analysis: What are the technical and legal requirements for your company? What are the energy flows in your company? Which energy sources do you rely on? And what are your company’s significant energy uses (SEUs)?

To identify the technical aspects you need to consider, you must first examine several aspects. For example, in addition to minimum energy requirements and specific system characteristics, you should also determine the necessary lead times for emergency measures, i.e., startup and shutdown times, as well as the associated costs. In terms of the legal requirements, you should analyze licensing and permitting requirements as well as contracts with customers and suppliers (e.g., energy supply agreements, purchase agreements, and delivery commitments in the supply chain, etc.). Conducting this requirements analysis lays the foundation for the next step on your path towards a crisis-proof business continuity plan.

Step #3: Identify critical systems and processes

This step is particularly important in identifying your critical infrastructure (CRITIS). Critical infrastructure is particularly important for your business operations in the event of a power outage. It may even be of particular societal importance if your company manufactures “systemically important” goods or essential pre-products. Before you can draw up your business continuity plan, you must first compile a register of these critical systems and processes. Your energy management department should be able to provide information on load profiles and which systems can be shut down.

Step #4: Conduct a business impact analysis

When considering different power outage scenarios – for example, organized blackouts of different scales and durations – conducting a business impact analysis (BIA) can help you to calculate the likely (financial) damage from medium- to long-term production losses. When brainstorming for the impact analysis, you need to consider the business impact of system outages and the technical impact on products, systems, and raw materials. However, it is also vital to consider customer-related aspects in supply chains and your company’s contractual relationships, reputation, and image, as well as ecological and health aspects.

As part of your business impact analysis, you can define tolerance limits that indicate how long your company can tolerate an interruption in its activities before significant or existential damage occurs. These tolerance limits can then be translated into indicators that help you to prepare and justify decisions and preventive measures. Examples of these indicators include maximum tolerable period of disruption (MTPD), minimum business continuity objective (MBCO), and recovery time objective (RTO). A business impact analysis also allows you to identify potential stopgap measures, such as capacity reserves, warehouses, redundant supply systems, and emergency supply systems.

Step #5: Make decisions about site-specific measures

With a BIA, you can determine the budget required to implement measures at a given location in order to recover from a business interruption – or otherwise manage the situation. This is especially true for urgent, emergency measures that are needed to prevent hazards, ensure operational safety in the event of a limited energy supply, and provide load management or allocate reduced quantities of energy to certain systems. An example of a critical system in the event of a prolonged power outage would be melting tanks, which may need to be tilted to prevent the molten material from cooling and solidifying.

Step #6: Develop a communication strategy

Informing stakeholders is a task you can’t afford to neglect. This means staying in touch with the national load distribution body and the regional load distribution bodies – usually the transmission grid operator and the energy supply company. At the very least, this involves requesting data from the Federal Network Agency or submitting requests for special protection. You should always have the relevant contact details and availability information at hand.

Develop an authoritative communication strategy to inform suppliers and customers of the impeding production outages, and work together to determine how best to manage existing purchase agreements and delivery commitments in this context. It may be necessary to send information notices – sometimes known as protective letters or precautionary defense statements – or to develop customized, detailed agreements with the authorities, energy supply companies, and business partners.

When developing your communication strategy, you should ask yourself the following questions:

• Who do you need to inform about impending production outages – and at what stage? 
• How will you handle guarantees you have given?
• Which multipliers in associations and politics could be helpful in a crisis situation?
• How can you, as a company, make your systemic importance visible to external partners?

Step #7: Implement measures in the supply chain

Other supply chain measures may be necessary, such as renegotiating existing contracts to include the right to withhold performance in cases of force majeure, or the ability to pass on certain levies or increased energy costs to the customer. Ultimately, these measures will also provide a certain degree of legal protection by enabling you to document that you have taken obvious and reasonable measures to deal with the energy shortage and defend against any claims for compensation.

How you can benefit from these business continuity planning steps

With a business continuity plan in place, you can act with confidence and authority in the face of unavoidable threats such as prolonged power outages. It enables you to identify critical systems and processes, and to formulate and communicate urgent measures. As a result, you can protect your company from disruptions to essential processes, critical supply chains, and key production systems – reducing the risk of potentially costly damage, lost revenue, and claims for compensation. An integrated software solution can help you develop and implement a business continuity plan, e.g., by mapping complex processes, organizing data in a transparent and comprehensive manner, and informing all relevant stakeholders at the right time.

Sources

^{_{1 BNetzA (2023): Bericht zu Stand und Entwicklung der Versorgungssicherheit im Bereich der Versorgung mit Elektrizität. German Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway. Bonn;  BMWK (2023): Handlungsempfehlungen zur Gewährleistung der Versorgungssicherheit mit Elektrizität –German Federal Government’s recommendations in accordance with Section 63(2) of the Energy Industry Act (EnWG). Berlin;  BNetzA (2023): Lagebericht Gasversorgung.
2 Will M, Brauweiler J (2020) Business Continuity Planning. In: Leal Filho W, Marisa Azul A, Brandli L, et al. (eds) Sustainable Cities and Communities. Springer International Publishing, Cham, pp 33–44.}}