What if disaster strikes your business? An estimated 25% of businesses don’t reopen after a major disaster strikes.1 Having a business continuity plan can help improve your odds of recovering.
Here in the Midwest we have recently been stricken with some major weather including flooding, a multitude of tornadoes and other factors outside our control that have the potential to devastate a community including the businesses.
As auditors, part of our process is to analyze risk exposure within a Company. This includes having a plan in place in case of a disaster that would cripple the business if proper steps were not implemented in a timely fashion.
Business continuity plans can be simple and efficient or complex and costly depending on the type of organization. Below we provide an overview of how a continuity plan works and why there should be one in place.
The Basic Plan
The strategy behind a business continuity (or disaster recovery) plan is straightforward: Identify the various risks that could disrupt your business, look at how each operation could be affected, and identify appropriate recovery actions.
Make sure you have a list of employees ready with phone numbers, email addresses, and emergency family contacts for communication purposes. If any of your employees can work from home, include that information in your personnel list. You’ll need a similar list of customers, suppliers, and other vendors. Social networking tools may be especially helpful for keeping in touch during and after a disaster.
Having the proper insurance is key to protecting your business — at all times. In addition to property and casualty insurance, most small businesses carry disability, key-person life insurance, and business interruption insurance. And make sure your buy-sell agreement is up to date, including the life insurance policies that fund it. Meet with your financial professional for a complete review.
If your building has to be evacuated or destroyed, you’ll need an alternative site. Talk with other business owners in your vicinity about locating and equipping a facility that can be shared in case of an emergency. You may be able to limit physical damage by taking some preemptive steps (e.g., having a generator and a pump on hand).
This aspect is critical to ensure you continue to operate or get back up and running quickly. There are different tiers of disaster recover that can be utilized as part of your business continuity plan.
You’ll want to analyze the business impact to identify functions and resources that are time-sensitive. You will review what critical business functions must be recovered and what steps to take. You should consider having a continuity team in place to help devise and manage this plan. Finally, ensure the team is well-trained and worked through all procedures.
A disaster could damage or destroy your computer equipment and wipe out your data, so take precautions. This could include a natural disaster or a malicious attack on your organization to get into secure data. Invest in surge protectors and arrange for secure storage by transmitting data to a remote server or backing up daily to storage media that can be kept off site. With today’s technology, work with your IT consultants to plan around protecting your data in the most efficient way possible.
Protecting Your Business
If you think your business is too small to need a plan or that it will take too long to create one, just think about how much you stand to lose by not having one. Meet with your BGMF CPA for a full review and begin mapping out a plan that makes sense for your situation and budget.
1Source: U.S. Small Business Administration, www.sba.gov/content/disaster-planning.