Risks and Uncertainties
OPERATIONAL RISKS
Major damage to premises
The Group businesses mostly operate from combined office/ warehouse facilities which are dedicated to the business and not shared with other Group businesses. Major damage to the facility from fire, malicious damage or natural disaster would impact the business for a period until the damage is repaired or alternative facilities have been established.
The businesses have developed plans to prevent incidents including fire and security alarms and regular fire drills. Insurance policies are also in place including property, contents and business interruption cover which would mitigate the financial impact.
However, the priority in such an event is to become operational as quickly as possible to minimise disruption to customers. Plans to ensure a quick and orderly response have been developed by the businesses and are periodically reviewed.
The business where the risk is greatest is Hercules in Clearwater, Florida which is most at risk from an environmental disaster caused by a hurricane or tornado. The building structure has been designed to withstand 150mph winds and a specific disaster plan has been drawn up and is regularly reviewed. This includes:
- Back-up power generator.
- Materials on hand to secure the facility.
- Communications re-route to other branches or interim location.
- IT recovery plan using back up server in separate location.
- Regular building inspection and weather monitoring.
- Plans to drop-ship product from suppliers where needed.
Loss of Information Technology (“IT”) systems
Computer systems are critical to the businesses since their success is built on high levels of customer service and quick response. A complete failure of IT systems with the loss of trading and other records would be more damaging to the businesses than major physical damage to facilities. IT system failure could have a number of causes including power failure, fire and viruses.
Business interruption insurance cover is held across the Group and contingency plans have been drawn up in all businesses. The recovery plans differ by individual business but will include some or all of the following elements:
- Full data back-ups as a matter of routine.
- Back-up tapes stored in fire proof safes.
- Back-up servers identified.
- Communication re-route options identified.
- Service contracts with IT providers with access to replacement servers.
- Uninterruptible power sources and back-up generators where required.
- Virus checkers and firewalls.
Disruption by service providers
All the operating businesses use third party carriers to physically transport products. Disruption to this service is most critical in businesses such as Hercules where the business model requires rapid, often next day delivery of products. Most businesses will have a principal carrier that is used, but they will monitor and maintain accounts with alternative carriers.