French strikes turn focus on business continuity plans

Risk managers told Commercial Risk Europe that, as French companies cannot buy direct insurance cover to transfer the risk of strikes, they have to focus on prevention in order to mitigate the eventuality of a long disruption of business. The eventual decision to trigger a business continuity plan is one of the most important decisions that risk managers must make when faced with such difficulties, the experts said. French companies faced varied degrees of disruption in October as thousands of workers in a number of industries protested against pension reforms implemented by the government of President Nicolas Sarkozy. Transportation was heavily affected in parts of the country as oil refineries were closed by strikers and fuel supplies became scarce. The strikes raised the alarms of the business community. There are fears that more protests could take place in forthcoming months as the government decided to stand by the reforms. Mouvement des Entreprises de France, Medef, France's main business association, expressed concern over the effect that the October strikes had on sectors like chemicals, construction and public works.hideAccording to the organisation, companies throughout the country suffered problems such as the delay or cancellation of the delivery of merchandise by rail and road alike, the risk of losing commercial contracts due to the inability of staff to attend meetings, and the loss of revenue by the hospitality sector due to the cancellation of events. Medef also warned that small and medium companies were the most likely to suffer long-term effects of the strikes, and urged the authorities to help them to overcome the difficulties. Large firms have also reported losses, especially those that were directly affected by the strikes. Union Française des Industries Petrolières (Ufip), the association of oil companies, reported that losses suffered by the industry during the October disruptions have reached up to €200m. Oil workers stopped work for more than one month. Oil refineries were closed by the protesters, deliveries of imported oil to be refined were blocked and emergency imports of fuel had to be organised to meet the demand. According to Ufip, the cost alone of keeping a tanker full of oil stationed at sea reaches between $30,000 and $50,000 a day. The long duration of some of the protests also fuelled concerns over the recovery of the still stuttering French economy. Observers recalled that the 1995 strikes, which reached much bigger proportions, cut 0.2 percentage points from France's GDP growth in the fourth quarter, when the movement took place. According to experts, the latest movement did not come close to the events of fifteen years ago. “In 1995, strikes caused so many troubles that companies were forced to make special commercial gestures towards their clients to maintain their confidence and to guarantee their sales,” says Gilbert Brat, Vice President of Association pour le Management des Risques et des Assurances de l'Entreprises (AMRAE), France's risk management association, and Insurance Director of the La Poste group. But those protests were also triggered to a great extent by a plan to reform pension plans, a recollection that makes some fear that the current wave is unlikely to fade away completely in the near future. Commentators have also noted that at that time, in the 1990s, France was in a different situation economically, and it is hard to ascertain how the economy will react if the current wave escalates to similar levels to the 1995 strikes. Jean-François Roubaud, the chairman of CGPME, an SME association, warned in a radio interview that ‘we don't have today, after the economic crisis that we suffered during three years, the means to face strikes that last a long time’. With practice comes expertise, however, and experts say that French companies are often able to deal with the risk of strikes in a reasonable way. Consultants say that strikes are part of doing business in the country and only a few large companies are caught unaware by them. However, the focus tends to be on the risk of seeing their own workers crossing their arms in protests, rather than the effects of an external movement, said Emmanuelle Tran, the owner of Acyan, a Paris-based risk consultancy. “French companies are prepared to face strikes, which are part of their business environment,” she said. “In their risk assessment mappings, strikes are often assessed as a major risk. But up to now they have referred to strikes within their own companies rather than to the impact of a major long-lasting external strike.” Mr Brat said that the best policy is to try and prevent a strike causing major disruption to a firm's routine, as the transfer of the risk is not always a possibility. “We cannot purchase insurance against a strike because the right of workers to strike is guaranteed by the French constitution,” he said. “On the other hand, it is possible to negotiate guarantees against financial losses in contracts of transport insurance, for example. And these guarantees can be triggered in the case of extraordinary events like strikes.” Insurance brokers say that in many cases, if an insurance policy does not have a specific exclusion clause involving strikes, the insured can consider itself protected against losses caused by the disruption of supply chains and other losses caused by the protests. But the situation is far from straightforward and much discussion can take place before a claim is accepted, they add. In addition to that, it is often hard to find enough capacity in the market to purchase business continuity insurance to the levels that large French firms require, brokers remarked. In the end, the experts agree that the best solution for companies is to have a comprehensive business continuity plan in place to deal with extraordinary events that can disrupt their activities. “A company needs to have in place a business continuity plan in order to face events like strikes,” said Mr Brat. “And it has to make sure that its suppliers have drafted similar plans too.” Ms Tran notes that a great number of French firms woke to the need of a BCP during the latest pandemic flu scares. “Many companies claim they have BCPs that can be deployed in the case of an event like a strike,” she pointed out. “But very often the plans are far from operational, or focus on only one topic such as the lack of human resources when the BCP was developed.” Another area that needs to be addressed by a BCP, she said, is the non-availability of data and of infrastructures. "As with any process, to ensure a BCP is operational, it must be documented, people involved must be trained, and the plan has to be tested within the company crisis management plan,” Ms Tran concluded.

French strikes turn focus on business continuity plans

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