The COVID-19 pandemic, and the way companies have had to react to it, has re-emphasized the importance of a strategic business continuity plan (BCP).
But the supply chain disruptions, economic uncertainty and public health crisis caused by the pandemic only scratch the surface of the risks facing small businesses. Severe weather incidents and increased exposure to cyberattacks also plague organizations and individuals.
A BCP can be an important tool in helping small businesses successfully navigate the downturns caused by a disaster or emergency scenario. While many owners and executives have drafted plans for their companies, many small businesses across the country do not have one of these crucial plans in place.
A strategic business continuity plan will help ensure the company’s resilience in the face of disaster and its reliability for customers today and long into the future.
Small-business owners without a BCP should take time to learn the benefits of why this plan is instrumental in countering the costly and time-consuming operational and financial impacts of disruptions and disasters, and then strongly consider putting a BCP in place.
What is the goal of a business continuity plan?
The main goal of a business continuity plan should be to protect a business against any of the identifiable risks that can potentially cause damages or disruptions to normal operations.
These disasters and high-risk events can cost money, discourage customers or even potentially force a closure if a business continuity plan is not in place. The risks and exposures to these will vary from one business to the next and from one industry to another, but the goal remains the same.
What does a business continuity plan typically include?
A business continuity plan should include:
- A business impact analysis (BIA).
- Cash flow solutions.
- An emergency contact list of alternate supply chain vendors and distributors.
- A cybersecurity and information technology (IT) recovery plan.
These components represent just the bare minimum of factors to include in a company’s BCP. They also serve as a good starting point for building a plan that best suits the business’s risk exposure. Along the way, owners and managers can identify other components they need to identify and address in the plan.
A business impact analysis
A BIA, as defined by Ready.gov, is an essential component of a strategic BCP. This analysis assists in identifying potential fallout from the loss of a company’s functions and processes due to a disaster.
These business impacts may include:
- Lost sales and income.
- Delayed sales or income.
- Delay of new business plans.
- Regulatory fines.
- Broken contractual obligations.
- Greater expenses, e.g. overtime labor, outside contracting, expediting fees, etc.
- Loss of current customers or clients.
- Hesitancy on the part of potential customers or clients.
Conducting a BIA will require ownership or business executives to work with both managers and crews to identify any and all risks, chance of exposure and potential impacts on the company.
Envisioning potential business disruptions can be a good way to begin this process. For example, this might include how the company would react to physical damage to a building, a machine breakdown, supply chain interruption or even employee absenteeism or absent-mindedness.
Cash flow solutions
In the event of a disaster, businesses prepared financially will be the best suited to withstand major disruptions.
A BCP should include scenarios that identify potential cash flow issues, such as network downtime or supply chain chokepoints, and then draft solutions for if and when that particular disaster strikes.
Robust business insurance packages could provide monetary relief under the specified terms of the policy. In addition, business interruption insurance may offer additional coverage if a company needs to close its doors due to an emergency.
While liability insurance can provide coverage in the event of some disasters, not every risk is covered by insurance. For times when insurance coverage does not suffice, businesses need to have a financial partner they can rely on during tough times.
From small business loans, lines of credit and import and export financing, small businesses thankfully have lending options that can help create a strategic cash flow solution to include in a BCP.
Supply chain vendor alternatives
For many companies, their supply chain remains the lifeblood of success. Without goods and raw materials arriving, employees are unable to manufacture finished products to sell.
However, full visibility into every aspect of a supply chain is often a difficult task for small businesses in particular. Any issues downstream in the supply chain can cause significant bottlenecks upstream, leading to delays, missed shipments and canceled orders.
As part of a BCP, small businesses should nurture relationships with alternative vendors, and create a contact line for contractors and vendors that can be called upon in an emergency. Additionally, it can be a wise move to inquire with key suppliers to find out if they also have a recovery plan or BCP in place.
Cybersecurity and IT recovery plan
Information technology (IT) plays a vital role for most small businesses. This includes many different types of components, including all desktop and laptop computers, networks, servers and wireless devices. This also makes cybersecurity and an IT recovery plan absolutely critical for any BCP.
If a company’s IT infrastructure gets damaged or corrupted from power outages, fried hard drives or some other calamity, it can become a major problem for basic business operations. This can put a halt to machinery, stop financial transactions or even completely shut down employee work.
Additionally, scammers’ and criminals’ use of computer viruses, malware and ransomware poses risks for corporate IT networks. These cyberattacks can wreak havoc on a company’s IT infrastructure by causing data breaches of customers’ sensitive personal information or locking digital networks to make them unusable until the company pays a ransom.
It remains imperative for companies to develop disaster recovery strategies to ensure smooth digital operations during a disaster, or a quick restoration if systems go down.
At the same time, owners should consider creating manual workarounds as a component of the IT recovery strategy. While adopting non-digital means to maintain smooth operations might make work slightly less efficient, this method can also ensure business does not come to a complete standstill.
How to measure business continuity
Like any aspect of running a business, it is important to compare a BCP against predetermined metrics to ensure it accomplishes its goals and generates a return on the time and money invested into drafting it. Without regularly measuring the BCP’s efficacy, there is no way to know whether it will stand a chance when disaster strikes.
Depending on the BCP’s contents, different metrics might need to be covered, but consider a few of these core examples:
- Recovery time objectives.
- Recover point objectives.
- The number of total business processes with risk exposure.
- The number of plans in place for each of these critical business processes.
- How each plan update iterations has changed.
- The actual business process recovery time and the difference between the target time.
These should serve as a starting point, as each small business will have their own specific processes and objectives.
Reach out to Comerica Bank to learn more about how having a trusted banking partner plays a key role in a strategic business continuity plan.
