If you’ve ever applied for a loan or business insurance, you should check a box that asks if you have a business continuity plan. Many applicants tend to mindlessly check yes, even if they have no actual plan.
This is not a good idea. There’s a reason these institutions want a business continuity plan. And not to annoy you or burden you with unnecessary work. They seek to minimize risk to you and their institution. Many are required by law to have a business continuity plan in place themselves.
A business continuity plan is a contingency plan that provides guidance on how to keep the business operating if something unexpected happens. Loan and insurance applications aside, having a plan is part of a solid business strategy, especially during times of uncertainty.
Research shows that nearly 90% of businesses with a business continuity plan report reduced disruptions, improved resilience and faster recovery from disruptions. So there are a number of statistically proven benefits to having a business continuity plan.
Discontinuities can be natural or man-made. Some of the most common disruptions – unexpected death, divorce, distress, disability or disagreement – will affect 1 in 2 businesses. Any one of these can have a devastating impact, especially on a smaller business.
How devastating? The average outage will cost a business about $81,000. And yet 25% of businesses will close completely. This is quite detrimental to a business without the resources to buffer the impact.
Business interruption insurance can help, but only in cases where “a covered event causes physical damage that results in losses.” Because of this, many of the most common disruptions will not be eligible for business interruption payments, as many found out during the pandemic. Check the policy or talk to your broker.
The responsibility to protect the company’s people, profits and growth from unplanned events is an inside job. This type of risk management and risk mitigation cannot be outsourced or delegated.
Business continuity plans typically include information about:
- Who to contact inside and outside the organization. This of course includes employees, but also customers, suppliers and key stakeholders, etc.
- Key documents. It is important to write down where to find documents such as leases, mortgages, key contracts, along with the person(s) with access.
- Financial matters. This is usually important because even during a downturn the business needs to be able to continue paying and getting paid. The basics include information about the location of the accounts and the names of the account signatories – ie. who has access.
- Operational decisions. What are the key tasks that sustain the business? How are they being performed now and how can they continue to be performed if the current way of working is for some reason affected? There is a lot of talk about cyber security and cyber threats. If something happens that prevents the business from operating as usual, what solutions will allow it to continue?
Thinking about and documenting this information ahead of time minimizes response time during an outage. This level of foresight also reduces the number of decisions that need to be made during a downturn, when emotions are high and the business could be losing money.
Continuity planning allows business leaders to focus on making the right strategic decisions to address the disruption, rather than expending energy on day-to-day operational decisions in the heat of the moment.
Documenting these areas ensures that relevant information is at the business’s fingertips during an outage, when the most important thing you need is readily available information. Once this information is documented, it is essential that responders are informed and trained.
Running a business involves inherent risks. Business leaders who embrace this risk own it by taking steps to proactively insulate their growth and operations from unpredictable and unplanned events. Having a business continuity plan is one of those steps.