If you’ve ever applied for credit or business insurance, you had to tick a box asking if you had a business continuity plan in place. Many applicants tend to thoughtlessly tick “yes” even when they have no real plan.
That’s not a good idea. There’s a reason these institutions require a business continuity plan. And it shouldn’t annoy you or cause you unnecessary work. They strive to minimize the risk for you and for your institution. Many are required by law to have a business continuity plan themselves.
A business continuity plan is a contingency plan that provides instructions on how to keep the business running should something unexpected happen. Loan and insurance applications aside, a plan is part of a sound business strategy, especially in uncertain times.
Research shows that nearly 90% of organizations with a business continuity plan report fewer disruptions, improved resiliency, and faster recovery from disruptions. So there are a number of statistically proven benefits of a business continuity plan.
Disorders can be natural or man-made. Some of the most common disruptions—an unexpected death, divorce, hardship, disability, or disagreement—affect 1 in 2 businesses. All of this can have devastating effects, especially for a smaller business.
How devastating? The average disruption costs the company about $81,000. And still 25% of companies will shut down completely. That’s pretty devastating for a company without the resources to cushion the impact.
Business interruption insurance can help, but only in cases where “an insured event causes property damage resulting in losses.” Many of the most common disruptions would therefore not be eligible for a business interruption payout, as many found out during the pandemic. Check the policy or speak to your agent.
Responsibility for protecting people, profits and business growth from unplanned events is an internal responsibility. This type of risk management and risk mitigation cannot be outsourced or delegated.
Business continuity plans typically include information on:
- Who to contact inside and outside the organization. Of course, this includes employees, but also customers, suppliers and important stakeholders, etc.
- key documents. It is important to record where to find documents such as leases, mortgages, key contracts and the person(s) with access.
- money matters. This is usually important as the business must continue to pay and be paid even during a disruption. The basics include information about the location of the accounts and the names of the signers of the accounts – ie who has access.
- Operational workarounds. What are the key tasks that keep the business running? How are they carried out now and how can they continue to be carried out if for some reason the current way of working would now be affected? There is a lot of talk about cyber security and cyber threats. If something should happen that prevents the store from working as usual, what workarounds will allow it to continue?
Thinking through and documenting this information at an early stage minimizes response times during a disruption. This level of foresight also reduces the number of decisions that would need to be made during a hiatus when emotions run high and the company may lose money.
Business continuity planning allows business leaders to focus on making the right strategic decisions to navigate the disruption, rather than expend energy on day-to-day operational decisions in the heat of the moment.
Documenting these areas ensures that the relevant information is at hand during a disruption, when the most important thing that is needed is easily accessible information. Once this information is documented, it is important that those tasked with responding are informed and trained.
Running a business comes with inherent risks. Leaders who take this risk own that risk by taking steps to proactively protect their growth and operations from unforeseen and unplanned events. A business continuity plan is one of those steps.