Canny View: Cyclone a huge test for business continuity plans

In the world of financial advice, it’s all about planning. There’s always a chance something completely unexpected will happen. Photo / Supplied

Following the unprecedented events of Cyclone Gabrielle, many businesses will have found their business continuity plans (BCP) being severely tested.

We all woke up without power on the Tuesday, and many didn’t get it back for days (some are still waiting). That meant no refrigeration, no lighting, no Wi-Fi, and no way to access our cloud-based system without hot-spotting on mobile data.

Then the cell networks went down and we were completely cut off from everything, aside from the odd sporadic text message that seemed to make it through.

Even as prepared as we thought we were with our working-from-home arrangements in a post-Covid world, our BCP ended up failing in the wake of total, extended loss of power and communication.

Our office was unaffected outside of losing power – but the building locks electronically, and once those batteries faded, we had no way in. Many backup security battery systems can run on anything from a 15-minute backup, for your average power blip, with more grunty models capable of around 8-12 hours before they too are exhausted.

Then our office was up and running as Hastings had power restored – but our team north of the bridges was physically cut off, without power, and largely without communication for that first week.

As a service-based business, our first priority, once we knew our team was okay, was to get ourselves up and running so we could be available to our clients.

From this event, we learned we weren’t prepared for everything. So now we have generators and Starlink satellite internet connections on both sides of the river and our remote backup office location, so if an extended power cut happened or the network was compromised again, we wouldn’t be looking down the barrel of indefinite impact.

Rory O’Neill. Photo / Supplied

The key is to have an uninterrupted power supply (UPS) between the generator and sensitive IT equipment, which allows for an even flow of energy to protect the devices, and also allows for downtime between refuelling.

We have had numerous calls from clients since then. They ask if we suffered material damage to our premises, are our team okay, and will this disaster have an impact on the security of their investments?

To the first part – we were exceedingly fortunate in that we and our team members suffered no significant damage from the high winds, or the flooding.

To the second, all our funds are held with an independent custodian. This is global best practice so that if something goes wrong, the funds themselves are safely removed from the centre of the event.

A core component of our investment philosophy is diversification. New Zealand represents a mere 0.67 per cent of the world’s economy (as represented by market capitalisation). Hawke’s Bay as a percentage of New Zealand’s GDP is 2.8 per cent. So, in terms of the pool that is the world’s capitalisation, Hawke’s Bay is not even a minnow.

We’re maybe a spot on the side of one. Notable exposures include Scales Corporation (Mr Apple), and Napier Port Holdings, both of which are NZX listed. Scales Corp shares plunged by 20 per cent in the aftermath, and Port of Napier 10 per cent (taking it back to its 2019 listing price).i

And so, due to the global diversification of our portfolios and the very low weighting of New Zealand, your funds are unaffected by an event like this. We have always had a policy of this nature because should New Zealand suffer a major event, holding a globally diversified portfolio would be a sure bet insurance policy against a highly concentrated New Zealand portfolio – which would have been adversely affected by the localised crisis.

In the world of financial advice, it’s all about planning. There’s always a chance something completely unexpected will happen, though, which will highlight gaps in your planning. This is the same in business, and in life. We can’t say, “This will never happen again” or “it’ll never be worse than this”.

We don’t know that. What we can do is create a plan that allows for flexibility, and for learnings to be applied where shortfalls appear.

Take cybersecurity for example. There’s no such thing as a 100 per cent foolproof system. Successful cybersecurity firms don’t rest on the fact they have deflected x-many attempts at hacking. They continue to respond to new threats, adapting and changing as they learn where old methods won’t cut it any more.

Financial planning and the provision of financial advice is no different, there is no set and forget bottom drawer strategy. World and local events occur, client goals and objectives change, and so does a good financial plan.

· Rory O’Neill is a director and general manager at Stewart Group, a Hawke’s Bay-based CEFEX certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

· The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz i https://www.newsroom.co.nz/business-investing-mon-20-february