In an environment of increased uncertainty, more businesses are finding that managing risk is no longer an option; but a key part of a robust business strategy if they are looking to survive and grow uninterrupted.
Mention the word disruption and the recent pandemic, severe weather incidents and cyber attacks quickly come to mind, but personal events can also have an adverse impact on a business’ operations.
Particularly for smaller businesses and entrepreneurs, there is seldom ever a clear line between personal and professional. In fact, the opposite typically prevails.
Take for example, the case of a successful couple – owners of a retail store for 13 years. Hit hard during the pandemic, both ended up ill; their business operations halted, resulting in missed payments to creditors. With no plan in place and no one with the instructions or ability to run the business without them, the couple missed multiple payments jeopardizing the business’s financial standing. Even though the couple recovered, their business did not.
Without the right safeguards, any major disruption in a business owner’s personal life can have a tremendous impact on their performance and operation of the business. The follow-on impact on the network of people who rely on the business – employees, customers and other key stakeholders goes without saying.
For a business owner in the throes of a disruption, the anxiety and lack of control that the uncertainty brings could be crippling, both personally and for the business.
The Importance of Timing
However, the right, timely preparation can minimize the negative impact of unplanned disruptions on a business, allowing it to grow uninterrupted. Whether the disruption is a cyber attack, severe weather or unexpected illness; having the right contingency plan in place can prevent a business from getting sidelined.
Proactively anticipating unforeseen events and creating a plan to respond, can be the critical action that safeguards and protects people, operations, and profits when disruption hits.
This type of contingency planning for the business usually takes the form of a Business Continuity Plan (BCP).
Business continuity plans prepare businesses to respond to a broad range of disruptions – from cyber attacks to natural disasters to staff issues within the business (eg sudden exit of a key employee).
Studies indicate that business continuity plans work. The 2022 annual Business Continuity study by the Disaster Recovery Journal found that organizations with a BCP in place were able to recover from disruptions an average of 25% faster than those without a plan.
Business continuity plans reduce disruptions, improve resilience and improve post-disruption recovery times. Some institutions like banks and hospitals are required to have business continuity plans in place. There is a reason for this.
The middle of a disruption, when emotions are running high, is usually not the best time to be thinking about putting a plan in place or figuring out the minute details of keeping the business in operation.
Sometimes, the very survival of the business depends on the speed of an appropriate response. The best time to make those types of decisions is usually well in advance of any potentially disruptive event.
Regardless of the size of the business, once there are people relying on the income of that business, having a business continuity plan is both a prudent and strategically sound approach.
In the case of a small business, this contingency plan should be shared with a spouse, family member, office manager and usually provides peace of mind that the business operations can continue in a crisis.
What’s in a Business Continuity Plan
A sound business continuity plan has the directions and procedures documented in one place to guide the business in responding confidently and recovering quickly from a disruptive event. It provides detail on how to continue or resume the business’ operations.
While not exhaustive, a sound business continuity plan should address:
- GOVERNANCE: whom to contact when crisis hits. This covers key stakeholders including members of the business continuity team and how to contact them;
- ACCESS AND DOCUMENTATION: where to find critical information in a hurry. This includes the location of key documents, assets and partners;
- OPERATIONS: how to continue operating. This includes a critical functions and their workarounds following a Business Impact Analysis; communication plan; training approach and helpful information to maintain key relationships.
No conversation about risk would be complete without addressing the role of insurance. Insurance also plays a major role in mitigating risk. While it is a key component of a business’ risk management strategy, it should not be the only component.
Insurance provides a payout only if certain factors are met that prove the eligibility for payment of a claim. It’s important for businesses of all sizes to have the right types of insurance in the right amounts for coverage to be effective.
With the increase in frequency and severity of unplanned disruptions, risk mitigation is no longer an option for businesses. By preparing for uncertainty with a business continuity plans combined with the right types and amounts of insurance, businesses are increasing their odds of survival.
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