The uptick in the number of hurricanes is a harsh reminder of the importance of having a business continuity plan, according to the Institute for Business & Home Safety (IBHS), an independent, nonprofit, scientific and educational organization supported by the property insurance industry. As meteorologists predicted, this year's Atlantic Hurricane Season is producing a high number of hurricanes and tropical storms. Recently, Hurricane Earl, which grew to a Category 4 status, brushed up the U.S. East Coast. The center of the storm remained approximately 100 miles offshore, coming closest to North Carolina's Outer Banks. Nevertheless Earl's winds impacted east coast states from North Carolina up to Maine.
"Small businesses are particularly vulnerable during disasters," said Diana McClure, IBHS business resiliency manager. "Statistics show that, of the small businesses that are forced to close due to a disaster, at least one in four never reopens. The reality is probably higher than that, because most statistics just cover the first two years, and some businesses hang on for two to five years before they give up."
IBHS defines a disaster for a small to mid-sized business as that point in time after the 'cause' when a small business cannot provide its customers or clients with the minimum level of goods and services they need and expect, or an event that shuts down or severely disrupts delivery of products and services essential to the business and its clients. "That event can be a natural disaster, an intentional or unintentional human-caused incident, a technological failure, pandemic flu or high absenteeism (no matter what the cause), or a product recall," McClure said. "A loss is a loss, whatever the cause. The business continuity planning process and disaster preparedness methodology are basically the same no matter what the cause of the interruption."
The IBHS offers Open for Business®, a suite of business continuity tools designed to help a small to mid-sized business reduce the potential for loss, should disaster strike, and prepare in advance to reopen quickly should it be forced to close.
The IBHS offers the following tips to small businesses during the business continuity planning process:
Do the following:
1. Vulnerability Assessment: Think about what might threaten your business - whether a natural, man-made or technological incident - and what the consequences might be.
2. Mitigation: Determine what you can do ahead of time to minimize or eliminate the damage or disruption that could occur as a result of an event to people, property (building, contents, inventory) and business operations.
3. Emergency Response: Create procedures for effective response, i.e., plan your action steps to get through the chaos immediately following an event, including your methods of communication.
4. Disaster Recovery: Have procedures in place for recovery of IT systems and data.
5. Business Continuity: Plan for resumption of your critical business functions and processes.
Don't do the following:
1. Do not plan in a vacuum: Build a team within the organization representing different departments/functions and take into account external factors (dependence on infrastructure, suppliers, customer base).
2. Do not keep critical information and data in only one place: Regularly back up critical information and data and store it off-site or online.
3. Do not forget your employees are your most important asset: Without employees who are able and willing to work at your recovery location (e.g., a branch office, rental space or at home), you will not be able to survive, remain viable, and ultimately recover. Know ahead of time how you will handle payroll and benefits; cross-train employees so they can do more than one job; provide information to employees on disaster preparedness at home.
4. Do not forget your supply chain: You are dependent on your upstream suppliers of goods and services and on your downstream customers who utilize the goods or services you produce. You need to be sure they will be able to deliver what you need when you need it, and/or have alternate suppliers ready to go (at least for your most critical supplies).
5. Do not forget to update and test your plans: A plan on a shelf does no good; employees need to be aware of what is in the plan and their respective roles. Be sure to update your plan as employees and operations change. Through testing the plan, you will determine what is not working as expected, where gaps are, and what needs to be improved.
"Owning or managing a business leaves little time to devote to planning ahead for a disaster that may never happen," McClure said. "But anything that disrupts operations can mean big trouble for the bottom line or competitive advantage, particularly for small and mid-sized businesses."