Preparing to Survive a Catastrophic Event
What will you do when disaster strikes your business?
Everyone expects life to return to normal, but for many business owners, the reality is much more devastating. According to the U.S. Department of Labor, it is estimated that over 40% of businesses never reopen following a catastrophic event. Of those that remain, approximately 25% will close within 2 years.
But having a written disaster plan can give you direction and increase your chance of survival. According to a study by Touche Ross, companies without a recovery plan have a survival rate of less than 10%. Yet it is estimated only 35% of small businesses have a written disaster recovery plan.
How prepared are you for a disaster? What are your critical functions? Are the critical parts of your business able to function in the event of a catastrophe? How will they be restored? A written Business Continuity Plan (BCP) that answers these and other important questions will help ensure you are prepared to survive during unexpected interruptions to your business.
A BCP is a comprehensive plan for the continuation of critical business operations after a disaster. Critical means essential. The purpose of the plan is to minimize decision-making during an incident and makes recovery more effective.
Following are the five phases of developing and maintaining a BCP:
Phase 1 Initiation
Pull together a team of people who are aware of the different operational aspects of your business to evaluate what potential events create the greatest threats to your organization. Here in Florida, it is easy to fall into thinking of disasters as natural events like a hurricane or flood. But hazards also include technological events such as cyber-attack, utility outage, or a fire.
Phase 2 Business Impact Analysis (BIA)
BIA is a systematic process of gathering and analyzing information about critical business functions to determine the most important elements of your business with the greatest risk potential. Don’t waste time or resources if there is little or no impact on business operations. Remember that key employees and management succession are important subjects of a BCP (Does your business have a policy that prevents key employees from traveling together? What happens if a key leader is incapacitated and not able to respond in the event of a disaster?).
The essential part of the BIA phase is that you ask the right questions. Creating a BCP may seem overwhelming. But there are a number of tools available to assist in the process. Find a good checklist and use it. Contact us if you are looking for resources to help you with this process. We can direct you to some good online tools.
Phase 3 Develop Recovery Strategies
Communication is king during and after a disaster. In an effective BCP, people come first. It is essential to have a functional means of communication with employees, vendors, and customers.
Determine the business impact of a function or process first, and then develop recovery capability for it. Your objective in this phase is to identify the people, facilities, and assets that are required to achieve the four “R’s” which are: Response, Resumption, Recovery, and Restoration.
Phase 4 Implementation
To be effective, the BCP must be written and effectively communicated to all employees on an ongoing basis.
Phase 5 Test and Monitor
Risk is not static. Personnel changes, potential threats, and critical business functions will change over time. A BCP must be validated through testing or practical application and must be kept up to date.
The BCP and Insurance
Properly placed and managed insurance coverage with the right insurance companies through an experience advisor is an important component of recovering from a disaster. But don’t fall into the trap of thinking all insurance policies are created equal. You must be proactive with your insurance advisor in evaluating your exposure and designing an insurance program that meets your needs before you need it.
Remember, it is always better to be intentional rather than random. That is how you achieve business success. The same is true for business survival following a catastrophe. One of the greatest risks you face in this or any other area of your business is complacency. Never forget that others are depending on your survival and continued success after a catastrophe. Employees. Their families. Your customers. Suppliers and vendors. The community. Now is the time to prepare. Will you be ready?