In an environment of uncertainty, many businesses are finding that managing risk is not an option. But a key component of a solid business strategy if you are to survive and grow continuously.
Mention the word disruption and the recent pandemic, severe weather events and cyber attacks quickly come to mind, but personal events can also negatively impact business.
Especially for small businesses and entrepreneurs, there’s rarely a clear line between personal and professional. In fact, the opposite usually wins.
For example, the case of a successful couple – owners of a retail store for 13 years. When the epidemic hits, they both get sick. Their business has come to a standstill, resulting in lost payments to creditors. With no plan and no one with the guidance or skills to run the business without them, the couple missed out on several payments that threatened the business’s financial condition. Although the couple recovered, their business did not.
Without the right safeguards in place, any major disruption to a business owner’s personal life can have a significant impact on their performance and business. The impact of monitoring on the network of people who rely on the business – employees, customers and other key stakeholders – goes without saying.
For a struggling business owner, the stress and lack of control that uncertainty brings can be both personally and professionally crippling.
The importance of time
However, proper and timely preparation can minimize the negative impact of unplanned interruptions on a business and allow it to grow continuously. Whether the disruption is a cyber attack, severe weather or an unexpected illness, having the right emergency plan in place can prevent a business from going sideways.
Being proactive about unexpected events and creating a response plan can be a critical step in protecting people, jobs, and profits in the event of a disruption.
This type of business contingency plan usually takes the form of a Business Continuity Plan (BCP).
Business continuity plans prepare businesses to respond to a variety of disruptions – from cyber attacks to natural disasters to employee issues (such as the sudden departure of a key employee).
Studies show that business continuity plans work. The 2022 Annual Business Continuity Study by the Journal of Disaster Recovery found that organizations with a BCP were able to recover from disruptions an average of 25 percent faster than those without a plan.
Business continuity plans minimize disruption, improve resilience and improve recovery times after a disruption. Some institutions, such as banks and hospitals, are required to have business continuity plans. There is a reason for this.
In the midst of turmoil, when emotions are running high, it’s not the best time to plan or think about the minute details of running a business.
Sometimes the survival of the business depends on the speed of the appropriate response. The best time to make those types of decisions is before any potentially disruptive event.
Regardless of the size of the business, once there are people relying on the business income, business continuity planning is a smart and strategic approach.
In the case of a small business, this emergency plan can be shared with a spouse, family member, office manager, and often provides peace of mind that businesses can continue in a crisis.
The one in the business continuity plan
A sound Business Continuity Plan documents the directions and processes in one place so that the business can respond confidently and recover quickly from a critical incident. It provides details on how to proceed or continue the business.
While not exhaustive, a sound business continuity plan should address:
- Government: Who to contact in case of crisis. This covers key stakeholders including business continuity team members and how to contact them;
- Access and documentation: where to find critical information in a hurry. This includes the location of key documents, assets and partners;
- Operations: How to keep it running. This includes business impact analysis followed by critical activities and their risks. communication plan; Training approach and useful information to maintain key relationships.
No discussion of risk is complete without addressing the role of insurance. Insurance also plays an important role in reducing risk. While a key component of a business risk management strategy, it should not be the only component.
Insurance pays out only if certain conditions are met that ensure it is eligible to pay the claim. It is important for businesses of all sizes to have the right types of insurance in the right amount for coverage to be effective.
As the frequency and severity of unplanned disruptions increase, mitigating risk is no longer an option for businesses. By preparing for the unexpected, combined with business continuity plans and the right types and amounts of insurance, businesses are increasing their chances of survival.
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