Statistics show that, of the small businesses that close because of disaster, at least one in four never reopens.
The reality is probably higher than that, because most statistics just cover the first two years, and some businesses hang on for 2 to 5 years before they give up. A business continuity plan can help small business owners keep their doors open following a natural, man-made or technological disaster, bounce back and recover more quickly.
Diana McClure, business resiliency manager, with The Institute for Business & Home Safety’s (IBHS) says, “in our work across the country with member insurance companies, Chambers of Commerce, other business associations, and the public and nonprofit sectors, IBHS defines a disaster for a small to midsized business as that point in time after the ‘cause’ when you cannot provide your customers or clients with the minimum level of goods and services they need and expect, or an event that shuts down or severely disrupts delivery of product and service essential to the business and its clients.”
She adds, “that event can be a natural disaster, an intentional or unintentional human-caused incident, a technological failure, pandemic flu or high absenteeism (no matter what the cause), or something as simple as a burst water pipe or disruptive as a power outage, a computer hard drive crash or sewer main back up. IBHS starts with the premise that a loss is a loss, whatever the cause. The planning process and disaster preparedness methodology are basically the same.”
She offers these tips when it comes to disaster planning for small businesses.
1. Vulnerability Assessment: Think about what might threaten the business - whether a natural, man-made or technological incident - and what the consequences might be.
McClure says, “once you have determined what risks you face and what your vulnerabilities are (e.g., loss of data, damage to your building because you are in a floodplain), you need to look at what you do as a business. What are your most critical business functions, and In what order (priority) do they need to be restored? What do you need to perform them? What can you do before disaster strikes to lesson your exposure? Be sure to take into account the information or data you will need, and include your IT Department in the planning process.”
2. Mitigation: Determine what the company can do ahead of time to minimize or eliminate the damage or disruption that could occur as a result of an event – to people, property (building, contents, inventory) and business operations.
3. Emergency Response: Create procedures for effective response, i.e. planning the action steps to get through the chaos immediately following an event, including methods of communication.
4. Disaster Recovery: Have procedures in place for recovery of IT systems and data.
5. Business Continuity: Plan for resumption of critical business functions and processes.
1. Do not plan in a vacuum: Build a team within the organization representing different departments/functions and take into account external factors (dependence on infrastructure, suppliers, customer base).
McClure adds, “don’t ignore the importance of getting senior management buy-in for risk management and disaster preparedness. Not only might your business continuity plan make the difference between survival and closure when disaster strikes, but successful implementation could also enhance your business’ reputation and competitive advantage following a disaster. In addition, businesses that go through the process of risk identification, analysis of their core business functions and what it takes to perform them, often identify ways to improve efficiencies or eliminate redundancies in their daily operations. This has a positive impact on the bottom line.”
2. Do not keep critical information and data in only one place: Regularly back up critical information and data and store them off-site or online.
3. Do not forget that employees are the company's most important asset: Without employees who are able, and willing, to work at the recovery location (e.g., a branch office, rental space or at home), the company will not be able to survive, remain viable and ultimately recover. Know ahead of time how the company will handle payroll and benefits; cross-train employees so they can do more than one job; provide information to employees on disaster preparedness at home.
4. Do not forget the supply chain: The company is dependent on “upstream” suppliers of goods and services and on “downstream” customers who utilize the goods or services produced. The company needs to be sure it will be able to deliver what is needed when it's needed, and/or have alternate suppliers ready to go (at least for the most critical supplies).
5. Do not forget to update and test the plans: A plan on a shelf does no good; employees need to be aware of what is in the plan and their respective roles. Be sure to update the plan as employees and operations change. Through testing the plan, the company will determine what is not working as expected, where gaps are and what needs to be improved.
The Institute for Business & Home Safety’s (IBHS) Open for Business® is a free program which guides small-business owners through the process of developing business continuity and property protection plans to help reduce potential losses and downtime should a disaster strike.
Readers can find Open for Business® at http://www.disastersafety.org/ofb_training/.