Return on investment (ROI) isn’t what you should be looking at: the real metric is value on investment (VOI).
By Karven Naidoo, Client Executive, ContinuitySA
Clients often want to frame discussions about their business continuity and resilience plans and capabilities in terms of ROI. This is understandable because ROI is a common way of assessing whether a business is getting value for its money—but it is not universally applicable.
In particular, it misses the point when it comes to continuity and resilience.
ROI discussions are useful when the amount invested can be linked to the amount the investment returns, but what about when the returns are intangible, but no less important for that matter? This conundrum applies to much of a company’s often gargantuan spend on marketing and brand-building, but it is equally applicable to business continuity and resilience.
By framing the discussion in terms of rands and cents we risk missing the real value that investments in business continuity and resilience deliver. This value far outweighs the cost of undertaking business continuity management, but it is difficult to quantify in purely monetary terms.
So what is this value I am talking about? Some of the main elements are:
- Organisational and process knowledge and improvement. In order to put a BCM programme in place, it is necessary to understand exactly how a company’s processes work and interact with each other, and what their relative importance is. This is something most companies do not understand at a granular level, but it can be invaluable in streamlining processes for greater efficiency, and even cost reduction.
- Improved collaboration. Understanding properly how business processes depend on each other can spur highly productive collaboration between parts of the company once they have realised their interdependencies. In-depth understanding of this nature supports collaborative planning and learning at every level of the organisation.
- Regulatory/ contractual compliance. Ensuring that the company is resilient is now a board responsibility in terms of the King Code of Corporate Governance and a prerequisite for listing on the JSE. Increasingly, too, a company’s business partners want to be assured that it is able to recover quickly from a disaster and will not put the entire value chain at risk.
- Brand and reputation protection. Companies that are hacked or cannot otherwise trade because of a disaster suffer huge reputational losses in today’s always-on business environment.
- Risk identification. Companies that take BCM seriously have to undertake regular risk assessments, which can greatly enhance strategic planning.
Value on investment “measures” the total value of all the intangible, hard-to-quantify benefits that flow from business continuity and resilience management. But one could also argue that it also includes an element of return on investment because, ultimately, the cash value of business continuity must be equivalent to the value of the company itself, including the future income it could generate for shareholders: a resilient company is not sustainable, and so one could argue that an investment in business continuity is an investment in safeguarding the company’s future profits and brand.
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