The Ocado fire – when disaster recovery becomes real

The recent fire at Ocado has been a devastating blow to the company and the local community. Hundreds of firefighters were involved in tackling the blaze; the smoke billowed for more than 48 hours, darkening the Hampshire sky; surrounding homes and businesses were evacuated due to the risk of explosion, and those further afield advised to keep windows and doors shut; and some firefighters needed treatment for smoke inhalation.

On top of that, Ocado’s business operations took a hit. Not only was its robotic warehouse devastated, but the news that its deliveries would be compromised resulted in the group’s share value plunging. Although share prices showed signs of recovery within a couple of days, more than £1 billion was wiped off the stock market value of the firm, as investors worried that retailers may be less keen to buy into the automated warehouse technology having seen that there is a potential vulnerability.*

Business continuity management

BCM (business continuity management) is a form of risk management that deals with the threat of business activities or processes being interrupted. It involves defining and implementing policies and procedures to ensure an effective response in the event of a major disruption so that you can continue to provide an acceptable level of service.

In addition to enabling an organisation to operate despite a disaster, effective BCM can help protect corporate reputation and revenue during troubled times.

BCM can be applied to any form of disruption, including natural disasters such as flood and fire, and more modern threats like cyber attacks.

Any downtime can be unacceptable given the pace of modern life, so it is essential for organisations to plan for disaster.

Business continuity planning and disaster recovery planning

Although there is awareness of the risk posed by cyber attacks, extreme weather or outages, planning for the event can often be overlooked due to conflicting priorities, time pressure, budgetary control, insufficient understanding, over-confidence, or any combination thereof. However, no organisation can afford to think it is safe, and ought to make plans for both business continuity and disaster recovery.

These two terms are often used together, but there are nuances between them:

  • Business continuity planning focuses on the processes and procedures needed to ensure an organisation can continue operating during a disaster.
  • Disaster recovery planning prioritises fully recovering and returning to full functionality after a disaster has occurred.

Despite their differences, there is a clear overlap and disaster recovery should sit within a business continuity framework.

The ISO 22301 international business continuity standard

Incidents can disrupt any organisation at any time. This was recognised by the International Organization for Standardisation (ISO), which started developing ISO 22301 in 2006. Now, in 2019, it is the internationally recognised standard for BCM, helping organisations of all sizes prepare for and handle business disruptions.

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What will happen next for Ocado?

The full effects of the fire have yet to reveal themselves. What we know at this point:

  • There was a significant impact on the company’s ability to provide its delivery service, and that this will continue in the short term. The Hampshire warehouse was responsible for 10% of the company’s service, but the organisation will no doubt be looking at how to increase capacity from its other warehouses.
  • There will be an extensive investigation, which will take time and will, inevitably, divert resources from other areas of the business.
  • Although share prices stabilised after the initial fall, there could be further volatility depending on the outcome of the investigation, and the potential impact the fire could have on the company’s US expansion plans.

There could be further impacts, too, but hopefully an organisation as sizeable and established as Ocado will have a fully implemented BCMS to help it get back to normal as quickly as possible.

* It should be stated, that – at the time of writing – the cause of the fire hasn’t been identified and it will take time for investigators to confirm whether or not the cause of the fire can be linked to a technological design flaw.