Strategies for Managing Business Vulnerability to Electricity Failure

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1 Student Research Report 2007/01 Strategies for Managing Business Vulnerability to Electricity Failure Hannan Stephenson March 2007 Resilient Organisations Programme :: New Zealand ::

2 Executive Summary In an ideal world electricity would be a constant, never faltering supply. In reality from time to time businesses must face the prospect of being without electricity for a period. Therefore there is the need to understand how businesses perceive this threat and what strategies they have undertaken to mitigate some of the associated risks. Once it is understood how businesses view this threat it is possible to advise businesses that do not have any pre-existing strategies on what the most appropriate options are. This project involved an evaluation of businesses current contingency plans and the effect these could have on business continuity. Electrical standby systems were initially used for maintaining essential life and safety systems. Today, the question of specifying standby power systems is becoming an economically driven decision for businesses. Businesses need to consider the real cost of an electrical outage which would include the costs due to: lost production, both employee and plant / equipment; wasted products; lost revenue; lost data; and customer dissatisfaction. This project focused on businesses dependence on a reliable electricity supply and their vulnerability when this supply is compromised. To limit the scope of the project it focused on three business sectors, Construction, Manufacturing, and Fast Moving Consumer Goods in three different geographical locations Auckland, Christchurch and Timaru. The project involved an evaluation of businesses current contingency plans and what effect these would have on business continuity. To evaluate the businesses preparedness the following steps were taken: A literature review of studies into the costs associated with discontinuous business and power outages was carried out; An analysis of the costs and features of various standby systems was completed; A survey that questioned businesses about their preparedness for hazards and also their attitudes towards contingency plans was conducted; A key part of this project was to determine how businesses perceived the threat of electrical outages and what they had done to limit their exposure to such events. Businesses were therefore surveyed to attempt to gain an understanding of how they, the businesses viewed the risk. Some of the key points gained from survey into businesses opinions are listed below: Dealing with a recent outage was far more common in Auckland. Over half of the surveyed Auckland businesses had experienced an electrical outage while only 16% of Christchurch businesses had experienced such an event recently. Of the regions surveyed Christchurch had the smallest number of businesses experiencing any outages but it also had the highest proportion (32%) of businesses with reserve systems installed. This is despite a number of businesses stating that they Resilient Organisations ii March 07

3 perceived they were safer from outages as they were located in a city or Industrial / Commercial Park. Only 8% of the businesses surveyed from Timaru had any reserve systems, despite rural areas experiencing more outages than urban locations. The reliance on electricity to support every aspect of business, from e-commerce (IT and telecommunications), plant equipment, to employee and customer support systems means that the loss of power is a cause for major financial losses no matter what industry a business may consider themselves to be in. Lost employee productivity was the main cost experienced by businesses during an outage with 42% of businesses stating it was their largest contributor to the costs. 46% of the Fast Moving Consumer Goods industry and 32% of the Construction industry had reserve systems. However only 8% of businesses within the Manufacturing sector had any type of reserve system installed. This is a concern given that the Manufacturing industry had on average the shortest post-outage operating time and faced the highest costs during an outage. Manufacturing and the Fast Moving Consumer Goods industries both considered the financial cost to be the largest reason for not having any reserve system installed. The Construction industry however felt that the installation of reserve electrical systems was unnecessary and had therefore never really considered such an option. Some businesses indicated that they had opted out of installing a reserve electrical system due to the relative cost of installation and the benefit received from such equipment. 15% of businesses however estimated they would have recouped the costs of installing a backup system within 12 hours of electrical outages. Over 50% of business felt they would recoup their investment if they faced total outages of 48 hours. A business is not really complete with just a backup electrical system. Further support from business resumption plans can allow businesses to gain the most benefit from their system. Approximately 70% of those businesses with a reserve power system also had some sort of planning in place to assist with the job of business continuity. Most worryingly, 75% of the total businesses surveyed did not have any business continuity plans in place for managing an electricity outage. The results from the survey and information gained from the research all lead to the conclusion that businesses need to think more about their potential vulnerability to electricity failure, consider installing a standby system and introduce a form of Business Continuity Plan. Businesses need to consider a standby electrical system as an insurance policy. Most businesses would already have other insurance policies to protect them from other threats. Power insurance, even if only to deal with small nuisance outages, should be viewed as the justification for installing a standby power system. Businesses should ideally install a standby system able to operate more than just computers. Maintaining businesses IT infrastructure is crucial but core business processes also require people, facilities, equipment, and most importantly customers. If nothing else it will provide your business with a competitive advantage over other businesses that are unable to operate and whichever reserve system is used will provide an economical solution to short term electrical outages. iii

4 A backup electrical system is not complete without some sort of business resumption plan to complement it. Any type of plan related to business resumption related needs to be in place to detail emergency procedures to protect people and property during an electrical outage and also detail the procedure to restore critical business processes. This research represents an introductory attempt to understand how businesses perceive and prepare for the risk which an electrical outage brings, but it does provide the Resilient Organisations Research Group with an improved understanding of how businesses prepare and respond to this hazard. iv

5 In submitting this report I would like to thank: Acknowledgements Dr. Erica Seville Project sponsor and supervisor; Piet Beukman MEM Director; Bev Hall for assistance with everything throughout the year and collecting my mail; Dr. Karl Scarlott for advice relating to survey statistics; Brandt Leeuwenburg and Monique Jackson for providing assistance with the mailing of the survey; Everybody else related to the MEM programme, particularly the rest of the MEM class and all those lecturers, and staff who assisted in some way. Disclaimer This report was prepared in partial fulfilment of the requirements for the degree of Master of Engineering Management at the University of Canterbury, New Zealand. It has been prepared by Hannan Stephenson for the Resilient Organisations Research Group. While the author has taken care to make sound recommendations, the author accepts no responsibility for either the accuracy of, or occurrences resulting from the use of the conclusions or recommendations made in this report. If any business intends to rely on the contents of the report or to implement any of its recommendations, it must do solely on its own judgements. v

6 Table of Contents 1.0 Introduction Resilient Organisations Research Programme Project Scope Background Research Reliability of the Electricity Supply Cost of Electrical Outages Within New Zealand International Current Businesses Protection Methods Backup Energy Supplies Types of Reserve Energy Systems Cost of Standby Electrical Systems Business Continuity Planning Surveys Surveys Conducted into the Area of Electricity Vulnerability Survey Analysis Background Survey Methodology Survey Results Businesses with backup electrical power Businesses without back-up electrical power Respondent Profile Geography Industry Business Size Survey Analysis Regional Analysis vi

7 3.6 Industry Analysis Business Advice Standby Systems Business Continuity Planning Conclusions and Recommendations Areas of Future Research References Bibliography Appendices Appendix A Literature Review Appendix B Annual Reliability Performances Appendix C Interruption Costs Appendix D Electrical Disturbances Appendix E Survey Appendix F Survey Raw Data Appendix G Poster vii

8 Table of Figures Figure 1 Fixed standby generator [33]... 7 Figure 2 Uninterruptible power supply [5]... 7 Figure 3 Battery [6]... 7 Figure 4 Cost of a standby system compared with its output... 8 Figure 5 Replies from each industry demographic Figure 6 Percentage of business experiencing outages within last 3 months Figure 7 Percent of businesses with a reserve supply in each region Figure 8 Contributors to costs across all industries Figure 9 Contributors to losses in (a) Manufacturing and (b) F.M.C.G industries Figure 10 Level of backup systems in each industry Figure 11 Estimated cost of installing a reserve system Figure 12 Time to payoff backup system Figure 13 Overall process of customer cost evaluation [12] Figure 14 Overview of interruption cost measurement techniques [27] Figure 15 Sags Figure 16 Surges Figure 17 Spikes Figure 18 Noise Figure 19 Frequency variation Figure 20 Waveform distortion Figure 21 Poster viii

9 Table of Tables Table 1 Responses by location Table 2 Survey response by industry Table 3 Rearranged Table Table 4 Number of employees per industry segment Table 5 Business size by hour of downtime cost Table 6 Business size compared to the likelihood of having a backup supply Table 7 Industry Segments by hour of downtime cost Table 8 - Categories of standby power requirements Table 9 Reported Annual Reliability Performances ([16](Table S3.1)) Table 10 Cross-comparison of interruption cost studies [27] ix

10 1.0 Introduction 1.1 Resilient Organisations Research Programme Resilient Organisations (www.resorgs.org.nz) is a research group focused on organisations and their systems. The group has a particular interest in the ability of organisations to respond effectively to external events during times of hazard. For organisations a hazard can take on many facets whether it be a natural disaster, such as an earthquake or flooding, or a man made event such as a power outage or terrorism. A hazard is generally something that affects the businesses ability to operate. There is a need for research focused on organisations and their systems, as it is organisations that manage, maintain and operate our infrastructure, and contribute to society and the economy. The ability of organisations to respond effectively following a hazard event will have a large influence on the length of time that essential services will be unavailable, and therefore New Zealand s ability to retain economic competitiveness in the aftermath of a hazard event. 1.2 Project Scope In an ideal world electricity would be a constant, never faltering supply. In reality from time to time businesses must face the prospect of being without electricity for a period. Therefore there is the need to understand how businesses perceive this threat and what strategies they have undertaken to mitigate some of the associated risks. Once it is understood how businesses view this threat it is possible to advise businesses without any strategies on what the most appropriate options are. This project therefore involved an evaluation of businesses current contingency plans and the effect these could have on business continuity. The project focused on three business sectors, construction, manufacturing, and fast moving consumer goods in three different geographical locations Auckland, Christchurch and Timaru. The project focused mainly on businesses dependence on a reliable electricity supply and their vulnerability when this supply is compromised. The steps taken in completion of the project are listed below: Background research (Section 2.0); Literature review (Appendix A); Development of a business questionnaire (Appendix G); Survey of businesses within three sectors and three regions (Appendix F); Analysis and evaluation of survey results (Section 2.0); Business Advice (Section 4.0). Through taking the aforementioned steps the following components of the project are delivered in this report: 1

11 A literature review of studies into the costs associated with discontinuous business and power outages; A literature review of previous companies / countries experiences in times of vulnerability; An analysis of the costs and features of various standby systems; Real data gained from the survey that details businesses preparedness for hazards and also their attitudes towards contingency plans; Advice to businesses in and around the area of reserve electrical systems and business continuity plans. This project therefore provided the Resilient Organisations Research Group with an improved understanding of how businesses prepare for and respond to hazards. Furthermore the project provided Resilient Organisations with information on the general stance of organisations with regard to investment in contingency plans and standby systems. 2

12 2.0 Background Research 2.1 Reliability of the Electricity Supply The reliability of the electricity supply is concern faced by every country in the world. The expectation that the electricity supply will be reliable is the basis for many decisions and impacts on all sectors of the economy. According the CAE, 1993, reliability is considered to be made up of two aspects, adequacy and security. Adequacy as defined by them refers to the ability of the electricity system to provide and transport energy to meet the requirements of customers, while security relates to the ability of the power system to respond to disturbances arising from equipment within either the bulk power system or the local distribution system, an so maintain supply at an acceptable frequency and voltage [15]. Businesses are obviously keen for a reliable supply of electricity. Interruptions to the electricity supply can cause businesses to lose large amounts of money due to employee and equipment downtime, lost business and lost stock. The major priority for most businesses during an electrical power outage is to ensure that all computer data is secure [23]. In the study performed by Tierney, 1995, 55% of the businesses selected from the Des Moines, Iowa region, rated electricity as the most critical lifeline service, while 82% chose electricity as very important to a businesses ability to continue operating [43]. In another report conducted upon behalf of the California Energy Commission, survey respondents were asked for their opinion on how important is reliable, uninterrupted electric service to your organisation [25]. 89.5% of commercial and 95% of industrial organisations responded to this questions by stating that a reliable, uninterrupted supply of electricity is very important to their organisations. 32.4% and 28.1% of commercial and industrial organisations respectively would also be willing to pay extra to ensure that the electricity supply was reliable and not interrupted [25]. The 2004 Small Business Power Poll conducted by Emerson found that only 19% of U.S. small businesses were very confident that the power grid could provide reliable electrical service to businesses [23]. The biggest threats to the reliability of the electricity supply as perceived by the small businesses surveyed was, Mother Nature and the age of the electricity grid. Amin, 2003, wrote an article concerned with how stressed the worlds electrical networks are becoming. The reasons, Amin, 2003, cited for the network infrastructure being stressed are listed below [9]: Demand is outpacing infrastructure and maintenance investments; the transition to deregulation is creating new demands that are not being met; the current electrical delivery infrastructure cannot adequately handle the new demands of high end digital customers and the 21 st century economy; and the infrastructure has not kept up with new technology. Amin, 2003, states that the strain is now beginning to show on today s electricity grid. This is seen by the average outage affecting 15% more people from than from This is because the network is based upon outdated technology developed in the 1950 s or earlier and installed over the last 50 years [9]. 3

13 2.2 Cost of Electrical Outages The costs of electrical outages on the economy, residents, regions and individual businesses have been an area of ongoing research. The earliest found study was Lolanders study on the cost of electrical power interruptions to residential and industrial areas in Sweden, conducted in There are also a large amount of mathematical models used for calculating the overall costs [11, 12]. These mathematical models involve complex formulae, sometimes even combined with large flowcharts (Figure 13) simply to make the best possible estimate as to the cost of the electricity outage Within New Zealand New Zealand has around 53 electricity service providers currently operating. The large number of operatives makes obtaining figures from a nationwide perspective difficult. The report written by the Centre for Advanced Engineering surveyed numerous electricity providers in New Zealand and then compared them with values obtained from overseas [16]. The survey table (Table 9) confirmed what you would expect in that rural areas experienced more total time without electricity and more electrical cuts but surprisingly the electrical outages were generally of shorter duration than in urban areas. The data from CAE, 1993, also showed that New Zealand s level of interruptions was comparable to other surveyed countries around the world. The data concerning electricity interruptions that have occurred within New Zealand was mostly related to the Auckland electricity outages in This outage affected the CBD of Auckland city and lasted for approximately three weeks. No, data giving overall costs was found about this event although ones source quoted that businesses estimated that the outage cost them at least NZD 60,000 per week [28]. Meridian Energy, the energy provider affected by this outage was expected to spend more than NZD 120 million in re-supplying electricity, providing emergency electrical power and in compensating their customers [32]. Information was found in Georghe, 2006, regarding previous studies conducted within New Zealand where the cost of electrical outages on commercial businesses was USD / kwh (Table 9 Young (1987)) International A large number of electricity interruptions occur every year throughout the world. An estimated 300 electricity outages are recorded in Europe each year [27]. Not many electrical outages are widespread though with most contained to a smaller area. Some of the largest electrical power outages throughout the world are briefly listed below: Around 8.5 million electricity consumers were left without electricity in Taiwan following a landslide on July the 29 th, 1999, two months later on the 21 st September 6.8 million users again lost electricity following a devastating earthquake [30, 31]. On the 14 th of August, 2003, there was a widespread electrical power failure in the north-eastern USA and central Canada. This electricity outage affected approximately 50 million people [21, 24, 34]. From the th of September, 2003, an electricity outage affected all of Italy, cutting electricity to more than 56 million people [27, 34]. On the 21 st of July, 2004, approximately 7.5 million people in Greece or two thirds of the population were left without electricity [27]. 4

14 Approximately ten million people were affected by an electricity outage in Moscow, Russia on May the 25 th, 2005 [27]. Electrical power was lost to almost 100 million people on August the 18th, 2005, on Java Island, the main island of Indonesia, and the isle of Bali [19]. The costs of these massive electricity failures were enormous. The electricity outage in the United States and Canada in 2003, is quoted by various sources as costing between USD 4.5 to 10 billion [21]. Between USD 380 and 940 million of those costs was associated with spoiled commodities, with the Associated Food Dealers of Michigan estimating that USD 50 million of costs occurred due to perishable foods being unable to be frozen [21]. Over 20% of the business surveyed by Slavik, 2004, estimated that they were losing more the USD 50,000 per hour of downtime. When you consider that 25% of businesses did not open for two working days then this is a huge cost to a business [37]. The U.S. Department of Energy estimates that electricity outages and fluctuations cost the United States USD 30 billion in productivity annually [23]. The cost of the second Taiwanese electrical outage alone cost around USD 2 billion without taking into account any damage caused by the actual earthquake [30]. A list of the cross-comparison between interruption cost studies conducted around the world in shown in Table 10, Appendix C. Electricity outages do not just cause economic costs on the business community. There is the cost of business closing down because of the electrical power outage. Slavik, 2004, quoted that in the United States Gartner estimates that two out of five enterprises that experience a disaster will go out of business within five years [37]. Gnmt, 2006, states on their website that [1]: 1. 80% of businesses affected by a major incident close within 18 months; 2. and 90% of businesses that lose data from a disaster are forced to shut within two years. 2.3 Current Businesses Protection Methods Backup Energy Supplies The business of providing equipment to other businesses to protect them in times of electrical outages is a business worth going into. The 2004 Small Business Power Poll [22] conducted in the aftermath of the 2003 blackout by Emerson found that 62% of small businesses did not have any type of back up electrical power but 58% were interested in introducing backup electrical power systems. The survey conducted by Slavik, 2004, found that around 40% of businesses would be likely to invest in alternate energy systems. The DHL Business Continuity Survey found that while 92% of companies surveyed agree that business continuity is important, 41% of businesses do not have a plan [18]. This indicates that businesses both here and abroad are generally not prepared to face an electricity crisis. Due to most businesses being unprepared alternative energy systems provided by energy suppliers were widely used during the Auckland electricity crisis of To provide some emergency electricity during this period Meridian Energy brought into Auckland 500 tonnes worth of diesel generators. These generators from overseas combined with many containerised generators were installed at the hospital, university, port and around the city. A ship, the MV Union Rotorua was also commissioned to provide electricity from its gas turbine whilst in the harbour [44]. 5

15 A major reason from businesses perspectives for obtained protective devices would be obviously to maintain electrical power during an outage, but also to have a competitive advantage over those businesses that are unable to operate during an electrical outage. To protect against electrical outages some major backup electrical power suppliers were investigated Emerson, Siemens AG, American Power Conversion, Energy Technologies Inc and Square D. These companies supplied both large and small scale sources of uninterruptible electrical power supplies. Blasingame identified a four step approach for working out your electricity requirements [13]. These were: 1. Calculate what it would cost you if your business couldn t serve your customers in the event of an electrical outage; 2. Walk around your business and identify those components and machines critical to continuous operations; 3. Talk with electrical suppliers about the UPS options and contractors about a gen-set solution; 4. Reread step 1 and then make the investment. An example of a business which invested in backup electrical power following the 2003 electricity outage in the United States is that of Chocospohere.com. Here the owner quotes how the crippling effect seen on businesses without electricity for days made him realise that if faced by such as event it would totally destroy his inventory. As a result of this he invested in backup electrical power that maintains operation of his cooling system in the event of an outage. The electrical power system used to maintain his cooling system comprises of generators and automatic power transfer switches. The business owner, Kryszek, says the amount of inventory that I could lose if we were without power for an extended period makes the cost of backup power relatively small [24] Types of Reserve Energy Systems Backup electrical systems are installed by businesses to alleviate some of the risk associated with lost productivity, lost revenue and equipment damage that can occur during an electrical outage. There are similarities and differences between all types of backup systems. Basically, all solutions provide electricity when the main supply of electricity is unavailable. How they go about achieving this goal is vastly different. Generators (Figure 1) are most appropriate for large power requirements. A generator's energy comes from a range of fossil fuels such as Petrol, Propane, Natural Gas, or Diesel. Enough fuel must be stored or able to be obtained, so that the generator can operate for as long as the outage. When the generator is on, 100% of the capacity of the system is available, whether it is required or not. A generator will therefore have a finite running time unless more fuel is able to be obtained. Generators require maintenance, such as oil changes and regular overhauls as with any engine [39] [5]. Advantages Disadvantages Operate larger loads; Requires maintenance; Run for a reasonable period Can be noisy; Longer start up time 6

16 Figure 1 Fixed standby generator [33] Batteries (Figure 3) or uninterruptible power supply (UPS) systems are generally best suited to modest power loads, such as computer servers or communications equipment. The UPS system, as shown below in Figure 2, is normally used to provide protection against short term outages but can also protect electronic equipment and data from power outages and other electrical irregularities (Attachment D) like sags (Figure 15) or surges (Figure 16). Securing computer data is a major priority for most businesses during an electrical power outage [23] and for reason this is what a UPS system is normally used for. Figure 2 Uninterruptible power supply [5] Figure 3 Battery [6] A battery/inverter system uses energy that is stored in batteries. Batteries are kept charged by a number of methods. In most backup systems, the main supply charges the batteries and keeps them charged and will recharge the system once the electrical outage is over. A generator or photovoltaic array can also be used to charge the batteries. Batteries deliver the exact amount of electricity required at that moment. The running time of the system is therefore directly related to the loads running off the system. If there is a major outage and thus could last for a long time, it is possible to only operate the most essential loads, thus drawing out the supply as long as possible [4]. Advantages Disadvantages Can pick output; Normally short operating time; Doesn t require maintenance; More expensive compared to Quiet; output; Small in size; Operates as soon as needed Other Technologies Traditional sources of reserve electricity are made up of two systems comprising either generators or batteries. Generators are powered by fossil fuels which are becoming a more 7

17 scarce resource while battery systems contain acid which is being constantly impacted by new environmental laws and restrictions. These resource and legislative pressures have made the research into other potential electricity supplies more economically feasible. Hydrogen, bio fuels, solar, wind and municipal solid waste technologies are becoming more attractive alternatives as the price of traditional fuels increases. Most of these technologies are not conducive to the manufacture of standby systems but some such as photovoltaic (PV) arrays could be used in the future. Advantages Disadvantages Renewable energy source; Very expensive; Doesn t require maintenance; Short operating time; Quiet; Weather dependent Cost of Standby Electrical Systems Every standby system is slightly different. All systems are used to assist businesses in maintaining some sense of normalcy during an electrical outage but the cost varies greatly depending on the type and size. Figure 4 shows the costs given by a range of manufacturers for either a generator (fixed or portable) or a UPS/and or battery system. $25,000 $20,000 Price (NZD) $15,000 $10,000 $5,000 $ Rating (Watts) Fixed Generator Portable Generator UPS & Battery Systems Figure 4 Cost of a standby system compared with its output The prices shown in Figure 4 are mostly from overseas companies and have had their prices converted into New Zealand dollars. The costs are therefore just initial costs, with no costs added for other accessories such as transfer switches, electrician costs, freight expenses or ongoing maintenance and fuel costs. These necessary costs will again depend on the type and size of the standby system being installed. The smaller, off the shelf systems such as portable generators and UPS systems are easier to gain information about than the large fixed generators. The larger systems are often more customisable and therefore an interested business would specify the systems needs so that the manufacturer could design and thus quote a suitable system. The size of these systems means there are few readily available systems to gain financial data about. 8

18 Portable generators were priced from approximately $350 to $5,000 and also altered in power output from one to ten kilowatts. These systems would be most useful for businesses within the construction industry that need to have access to electricity at isolated worksites but do not need large volumes of electricity. Each of the characteristics of the portable generators, such as fuel type and noise output during operation, affect the price. A UPS / battery / inverter system is generally used to support electronics such as computer servers and telecommunications equipment only. For this reason it is shown on Figure 4 that the largest UPS system supports less than ten kilowatts. As a single computer generally only uses between two and four hundred watts [2] it is therefore not so crucial that a UPS system produces that much power. The UPS systems ranged in price up to $12,000 but the majority of systems on the market were less than $2,500. It is possible to purchase large vaults of UPS systems capable of supporting large businesses but these systems needed to be built individually according to the businesses requirements. The fixed standby generators are the largest and most expensive systems available. The price for a fixed generator varies greatly from about $3,000 to $23,000 and can supply up to fortyfive kilowatts. Larger systems are available but obtaining any financial data about these systems was particularly challenging. As with portable generators the fuel and construction affects the price paid and the amount of noise emitted when operating. 2.4 Business Continuity Planning Business continuity management plans are nothing new and there is a large amount of literature available. This literature is published by various businesses and organisations on best practice when developing a business continuity management plan. Most of the literature followed a similar, consistent design as seen by the business continuity advice given by the UK government [1]. The 10 minute assessment distributed by the London Resilience Partnership, 2006, contains a range of questions designed to make business personnel consider how prepared they are to face a crisis. Some of the questions related to this studies area of focus, electrical outages. In particular, questions which referenced the major concern of businesses about losing computer files due to an electricity outage [23]. These questions are listed below: Do you have generator backup systems in place? Do you copy/backup your information? Do you have copies of your files and accounts as a separate location? Are your IT systems critical to the running of your business? Do you know how long it would take to recover IT functions? Some standards are available to assist with the design of a business continuity plan. In New Zealand the standard, SAA/SNZ HB Business continuity management is available [38]. This standard published in 2004, sets out a definition and process for business continuity management, and also provides a workbook used to assist in implementing the process. Internationally, there are not many standards available. ISO, ANSI and BSI currently do not have any standards relating to business continuity. However, the BSI are releasing the standard, BS , Code of Practice for Business Continuity Management, in November, This standard establishes the process, principles and terminology of business 9

19 continuity management (BCM), providing a basis for understanding, developing and implementing business continuity within an organisation [14]. This standard also provides a set of controls based on BCM best practice and covers the whole BCM lifecycle. Although, no standards are available at the time of writing, the BS will replace the publicly available specification, PAS 56: Guide to Business Continuity Management (BCM). 2.5 Surveys Surveys Conducted into the Area of Electricity Vulnerability A number of surveys, both within New Zealand and internationally have been done in and around the area of how businesses have coped with electricity loss and whether they are prepared to face such an event. Gaining the resulting statistics from each of the surveys was not difficult but few survey conductors were willing to release the survey questions. The DHL Business Continuity survey [17] dealt with whether businesses had or was in the process of getting a business continuity plan and whether the businesses had experienced any downtime recently. A survey and associated reports entitled An Analysis of the Consequences of the August 14 th 2003 Power Outage and its Potential Impact on Business Strategy and Local Public Policy [37] clearly showed how they had undertaken their web survey. This report gave all questions and statistics and focused on the costs felt by businesses due to electricity outages. The 2004 Small Business Power Poll [22] was conducted by Emerson regarding the Great Blackout which occurred during August 2003 in the United States. This survey has not been released but dealt with how vulnerable small businesses are to electricity outages, and the priorities of businesses with regards protection against such events. Surveys were also conducted for the articles entitled, A Survey of the Implications to California [25] and Predicting Long-Term Business Recovery from Disaster [46]. These surveys although slightly older, give numerous statistics regarding the effects on businesses following prolonged electricity outages. 10

20 3.0 Survey Analysis 3.1 Background A key part of this project was to determine how businesses perceived the threat of electrical outages and what they had done to limit their exposure to such events. To best answer these questions businesses were surveyed to attempt to gain an understanding of how they viewed the risk. Once these questions are answered conclusions can be drawn which will hopefully help provide businesses with a better understanding of the strategy options available to them to mitigate the risks faced from electrical outages. Within the survey there was a particular interest in those businesses that had already obtained the services of a standby or reserve electrical system. These two terms, standby and reserve are used interchangeably and simply refer to a device that will support some aspect of the business by providing electricity during an electrical outage. 3.2 Survey Methodology The survey was designed to find out how vulnerable businesses are to electricity outages, how they perceive the threat of electricity shortages and what measures they have taken to limit their risk. The survey contained a total of 18 questions and was targeted towards business owners and managers. The survey took approximately fifteen minutes to complete and was mailed out on the 6 th of November The survey was submitted to the various companies through the mail, containing a cover letter, a self addressed postage-paid envelope and the survey itself. The survey itself was separated into two sections. The first section of thirteen questions contained both quantitative and qualitative questions investigating what barriers businesses faced in obtaining reserve electricity sources, what businesses currently viewed as the best backup electricity options and the impact of power failures upon their business. The second section had five questions to gain background information on the company, including the businesses size, industry and revenues. Certain criteria were used in determining which organisations were approached for the survey. These criteria related to the region and industry that the business fell into; the business needed to be based in either the Auckland, Christchurch and Timaru areas and operating in either the Manufacturing, Construction or Fast Moving Consumer Goods industry (F.M.C.G.). Businesses that fitted the criteria were selected at random, from business directories [8] and other sources such as the Yellow and White Pages, to obtain a sample population of 500 businesses. In total, the survey process produced 104 responses which is consistent with Doyle, 2004, where he stated that a single mailing could expect a 20% response rate [20]. A copy of the survey is included in Appendix E. 11

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