Thursday, December 4, 2008

ERM-BC-COOP: Lessons from automakers

The shrinking "Big 3" US automakers should provide a lesson for all ERM-BC-COOP practitioners.

As they teeter on the brink of disaster - although I am Ivory soap sure the US government will float the companies a loan - we should be able to see what I have been preaching:


The guys who make the Very Big Bucks (auto company execs) and the folks who make Pretty Good Bucks (union workers) control one of the first dominos in a very long string of dominos.

Not all of those dominos down the line are obviously linked to Detroit. Not all of those dominos are in Detroit or even in the U.S.

I am not an auto company insider so I won't cite statistics, but I know that most parts that go into the average "American" flivver are made by a company other than the so-called Big 3.

GM used to make parts for its vehicles in Kokomo IN at a huge Delco plant. Delco was spun off years ago - is Delco still in business? Parts from molded plastic pieces to nuts and bolts are manufactured by vendors - some fairly large companies, others Mom-n-Pops. How much paint does GM use at one plant for one model? More than I need to paint my house.

If you drive a Chrysler, Ford, or GM product, look at - not just through - the glass. More than likely it will be marked, in small print, "Made in Mexico."

It doesn't stop there.

Those vendors have to get their wares to the customer work site. Trucks, boats from ocean-going vessels to barges, trains, and an occasional plane.

That means people. Lumpers (people who load trailers), drivers, railroad people of all types, ship crews, stevedores, pilots and load masters . . .

And then air traffic controllers, guards, fuel purveyors, gas pump jockeys . . .

People with mortgages, people who think that eating from time to time is a god thing, people who want to stay warm in the winter . . .

All these will be impacted by the ripple effect of a Big 3 failure.

John Donne was right. No man - and men make up organizations that employ them - is an island.

Ben Franklin, at the signing of the Declaration of Independence, is quoted as saying "We must all hang together or, most assuredly, we shall all hang separately."

Call it the domino effect or the ripple effect or anything else that tickles your fancy, but the bottom line remains: no business in the U.S. is immune to a failure by another business, and, in this global economy and all its inter-relations, the U.S.' borders are hardly a fence preventing economic impact - going either direction.

ERM plans must consider both sides of the production stage - vendors, including money vendors - and clients, particularly (but not exclusively) major clients. (Keeping one major and losing many lesser clients easily can bring about the same result - a shuttered business.)

Think about it.

John Glenn, MBCI, SRP
Enterprise Risk Management/Business Continuity
Planner @

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