Continuity Planning for Small Businesses: How to Prepare for Business Interruptions
Would your company survive a major weather event like a hurricane? A New York Fed survey of small businesses in the region impacted by Hurricane Sandy reported that 33 percent suffered losses. One year after the storm, 90 percent of the affected businesses still needed financing to cover operations or reposition their business. Although developing a continuity plan for a small business takes time, documenting action steps to be followed in the event of a loss of power, facilities, personnel, or access to technology may become a key to survival when disaster strikes. It is important to understand that continuity planning is a program — not a project — and should never be considered “done.” Regular exercises and plan updates will ensure that the continuity plan will be effective when needed. Exercising your plan will also build “muscle memory” into your essential personnel who would play a role in an actual recovery effort. Here are a few important components to include in your continuity planning program.
The first step to creating a continuity plan for a small business revolves around risk assessment. The American Red Cross suggests researching the types of disasters affecting the region in which the business is located. Weather events such as hurricanes, tornadoes, or earthquakes tend to affect certain parts of the country more often than others. Identify risks based on past insurance claims or historical events that have caused issues requiring business continuity plans to be invoked. For example, those in the food services industry may be affected by problems with suppliers, such as poor quality crops due to lack of rain in other areas of the country. For this reason, Supply Chain Business Continuity (BC) planning should be included as part of your overall continuity planning program. Ultimately, a risk assessment should identify the threats that exist to your business and the likelihood for those threats to actually occur.
Data Backup and Accessibility
Data storage and backup is crucial to minimizing losses after a natural or man-made event. Companies must be able to access data from alternate locations rather than relying on one computer in a nonfunctioning “brick-and-mortar” office. Using a cloud-based accounting system will decrease the time needed to get a business back up and running. With cloud storage and automatic system backups, financial data is continually updated and regularly synced. Also, storing data in the cloud means user access isn’t limited to one physical office — businesses can function from virtually any location with an Internet connection. Even with the advantages that cloud computing offers, it is still important to actively participate in your vendor-provided Information Technology (IT) Disaster Recovery (DR) exercises to prove that the recovery strategies meet your business requirements.
Business Process or Business Unit Relocation
A continuity plan for a small business should also identify one or more alternate sites to continue critical business operations. Alternate locations work best when they are far enough away to ensure they are not impacted by the same business interruption event, but close enough that they are easily reachable. Another way to ensure business continuity is to rent work area recovery space for your essential personnel and implement an effective offsite storage policy for your important documents (e.g., vital records) and equipment.
For example, a landscaping company in a coastal town may choose to store equipment far enough inland to escape most of the risk of flooding should a major storm hit the region, but still close enough to be accessible when needed. Some small businesses opt to work with partners, vendors, or other small businesses to determine an alternate work location. Reciprocal agreements may be drawn up to stipulate how office space will be shared in the event of disaster. The most important aspect of these types of arrangements is to make sure they are in place before an actual business interruption event. At time of disaster (ATOD) arrangements are cheap but rarely work.
Employee Action Plan
Crisis communication is essential in the midst of a major event impacting the business. Employees will need to be informed about their roles and responsibilities in support of any recovery effort. Document the intended methods of communication with workers in the event of an emergency — via text message, phone, or email. Written instructions included in a small business continuity plan should categorize additional job responsibilities and updated policies and procedures to guide employees until conditions return to a “business as usual” environment. As with all of the other continuity planning program components, the crisis communication strategies need to be in place, socialized and exercised before a disaster strikes.
Taking the initiative to update customers on your continuity planning program demonstrates a proactive and committed approach on the part of your small business. Customer loss can have a lasting impact on any organization that has inadequately prepared for lengthy business disruptions. In the New York Fed survey, decreased customer demand was the greatest source of financial loss for businesses affected by Hurricane Sandy. To maintain business relationships through a crisis, a small company can communicate with customers in a variety of ways — by updating website information, utilizing social networking platforms, or by phone. Alternate methods of communication should be supplied to customers, prior to a business interruption event, to enable them to reach your business in case of an emergency.
An extended work stoppage resulting from a loss of power or limited access to a workplace can result in financial losses for small companies. Customers may be left with no choice but to move their business elsewhere. Business Continuity plans, even if never used, provide peace of mind and encourage companies to assess the impact of potential crisis situations.