Recent economic data has experts, investors, and employers scratching their heads. Despite a series of interest rate hikes designed by the Federal Reserve to slow economic activity, persistent inflation and ongoing supply chain challenges, the US continues to add jobs at a fast clip.
On the face of it, that sounds like good news. But the Fed is likely to see the strong numbers as a harbinger of continued wage pressures and, in turn, inflation. So the rate increases will continue.
Many large businesses are also skeptical of the economic outlook and have begun downsizing. In recent weeks, Amazon, Microsoft, Dell, Goldman Sachs, and several other tech companies have laid off more than 100,000 employees so far this year, with more likely to come.
This has led us to a somewhat paradoxical situation in which we have companies cutting jobs and a labor shortage at the same time. At some point, these opposing forces will find an equilibrium. In the meantime, as companies consider how to downsize, they should proceed with extreme caution, particularly when it comes to their business resilience teams.
In times of economic uncertainty, some companies may be tempted to view their business continuity staff as a cost center. These organizations invested heavily in BC/DR people, software, and outsourcing since the beginning of the pandemic. Now, with COVID behind us and investments in place, this could be viewed as a good time to scale back.
But that could be a mistake, and one that is particularly difficult to undo. Here’s why:
The risk of disruptions is greater than ever. The pace of natural disasters, cyber crime, and social unrest is accelerating. Supply chain issues are likely to continue, and tenuous economic factors put businesses at risk for disruption. We outlined some of these issues in our 2023 Global Resilience Report. So executives should make decisions regarding their enterprise resilience personnel based on a realistic assessment of the threat landscape.
A shortage of experienced BC/DR workers persists. The decision to downsize the team may not be easily reversed. According to ISC2, there is a worldwide shortage of 3.4 million cyber security workers alone. This problem is so acute that even rumors of layoffs or selective downsizing could prompt workers to leave a company for higher pay and greater perceived stability.
An understaffed continuity team often leads to cascading risks and challenges. A report by ISACA concluded that 69% of businesses that suffered a cyber-attack last year were somewhat or significantly understaffed. The report further found that half of data security staff say they are much more likely to quit following a cyberattack, and job candidates are far less likely to want to work for a business that has been attacked. This data is based on a segment of the BC/DR workforce, but we believe it is likely indicative of the market as a whole.
The risk of litigation after an incident is higher. Organizations that have downsized by personnel and stumble after an incident may be at higher risk of litigation from customers and investors. If a company is unable to meet its obligations or its stock price drops significantly, it may be accused by activist investors, for example, of making decisions that exacerbated and prolonged the impact of a disruption.
Job cuts in resilience programs may send the wrong signal to employees, boards of directors, and regulators. Stakeholders today expect organizations to respond effectively to an incident, and return to normal operations quickly. Steps that are perceived as undermining preparedness may indicate to key constituents that resilience is no longer the priority it once was.
In uncertain times, there are few easy choices and laying off any employee can be fraught with risk. But we advise companies that, when making these tough decisions, leaders should not underestimate the long-term impact of downsizing their enterprise resilience teams. They should ask themselves, if a significant disruption would happen tomorrow, how long would it take us to restore normal operations. Or will we be able to at all.
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