Just like your IT department, having an implemented and tested Disaster Recovery Plan can mean preventing your organization from losing millions of dollars and disruption to your business.
What is a Disaster Recovery Plan? In short, it’s a blueprint— identifying clear paths of communication, what a crisis looks like for your corporate, how to gather necessary data to make decisions, and an overall set of instructions to protect your company, regardless of the volatility in the currency environment.
Creating a Disaster Recovery plan, especially in volatile situations where time is money, can mean the difference between saving your company millions and compounding an already delicate situation. Not only does creating one build a clear set of to-dos in case of crisis, if tested regularly, it’s also a means of ensuring that your plan will actually work when it comes down to the wire.
In the end, a currency Disaster Recovery Plan can take your treasury department from reactive to proactive when it comes to managing risk. And with 9 crises in the last 9 quarters— effecting 8 different currencies— it’s never been more imperative to be prepared.
As a multinational corporate, your go-to crisis plan should be clear and understandable to anyone who steps into the process. Considering creating one for your company? Below are a few things you’ll want to remember to cover as you build out your plan:
— Identifying events
Ensure you have an Executive Risk Committee, a group of executives that look at each market you’re involved in consistently to identify potential risks.
— Compiling Data
Ensure that you have the technology/structure in place to extract the data you need from each source (ERPs, TMS, etc.). Gathering data and pulling reports should be a quick and efficient process, taking hours— not days.
Have the ability to pull a snapshot of where you’re at on-demand, enabling you to see trends and effects instantly.
— Set critical priorities
In order to mitigate impacts, what needs to be done first? What’s most crucial to keeping your business’s FX in a healthy place?
— Continual scenario analysis
As ripple effects unfold, you’ll want to know exactly how your corporate is being impacted. Be sure you have the ability to quickly determine what would happen if specific currencies/scenarios played out in order to keep you prepared.
— Information distribution within the team
Ensure that you have an identified Crisis Team and that members have a clear understanding of impacts, mitigation efforts, and what should happen when disaster strikes. Lines of communication should be completely open, questions should be answered and everyone should essentially be on the same page.
If you need to build an infrastructure to support the partial checklist above, keep a few things in mind:
— The right technology is key
Time is one of biggest factors in how hard your corporate is impacted in times of unexpected volatility. Without the right technology (one that allows for automation, data on-demand, scenario analysis, and cloud-based access), processes become exponentially longer, forcing time to be spent on data gathering vs. strategy. Even then, it’s not rare to have error-prone data. Automation means exact numbers on-demand, not a potentially costly educated guess.
— Training is imperative
An effective Disaster Recovery plan is dependent on each team member understanding their roles and knowing how to quickly take action. Ensure that every team member is comfortable with what they’ve been tasked with— in times of crisis, this may be a luxury you won’t have.
— Test your Disaster Recovery plan quarterly
How will you know that the plan you put in place will actually work if you haven’t battle tested it? By preparing and making sure you have a smooth, cohesive process in place, you can turn a huge crisis into a minimal disruption.
Spending the time to ensure that you have a cohesive plan in place— laying out everything from who will be involved in times of increased volatility to how you’ll quickly gather and distribute information— is one of the best ways to ensure that you can easily navigate through even the most surprising of crises.
Looking to create your own Disaster Recovery Plan? Download our Crisis-Ready Checklist as a staring point to help you create a detailed plan for navigating volatile currency events.