If you’ve ever applied for credit or business insurance, you must have checked a box asking if you have a business continuity plan. Many applicants tick yes without thinking, even if they don’t have the actual plan.
Continuity plan reviews are part of loan and insurance applications
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 want to minimize the risk to you and your facility. Many people 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 if something unexpected happens. 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, better resilience, and faster recovery from disruptions. So there are many 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, crisis, disability, or disagreement—will affect 1 in 2 businesses. All of this can have devastating effects, especially for a small business.
Business continuity planning helps organizations respond to unplanned events with confidence.
How devastating? The average disruption would cost the company about $81,000. And still 25% of companies will shut down completely. This is very disastrous for a company without the resources to cushion the impact.
Business interruption insurance can help, but only in cases where “an insured event causes personal injury resulting in a loss.” So many of the most common disruptions would be ineligible for business interruption payments, as noted during the pandemic. Check the policy or speak to your agent.
The responsibility to protect the people, profits and growth of the company from unplanned events is an internal task. This type of risk management and risk mitigation cannot be outsourced or delegated.
Business continuity plans typically include the following information:
- Who to contact inside and outside the organization. This certainly includes employees, but also customers, suppliers and important stakeholders, etc.
- main document. Required is where to find the person(s) with access and documents such as lease, mortgage, main contract.
- financial matter. This is usually important because business needs to continue and payments need to be made even during a disruption. The basics include information about the location of the accounts and the names of the signers of the accounts – who has access.
- Operational Workaround. What are the main functions that keep the business running? How are they running now and how can they continue to run if for some reason the current way of working is now disrupted? There is a lot of talk about cyber security and cyber threats. If something happens that prevents the business from operating normally, what operations allow it to continue?
Thinking ahead and documenting this information reduces response times during an interruption. This level of foresight also reduces the number of decisions that need to be made during a disruption, when emotions run high and the company may be short of cash.
Business continuity planning allows business leaders to focus on making the right strategic decisions to manage disruptions, rather than expend energy on day-to-day operational decisions in the heat of this time.
Documenting these areas ensures that relevant information is available to the business during a disruption, when it is most important to have 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 take this risk by taking steps to proactively protect their development and operations from unforeseen and unplanned events. Creating a business continuity plan is one of those steps.