Why Is Business Continuity Important?
Companies today face an unprecedented number of exposures. The frequency and severity of weather-related events seem to be increasing and reliance on a complex network of technology and supply chains is expanding. Both trends leave businesses susceptible to a variety of existing and emerging risks. Managing these risks by developing a business continuity strategy is key to the survival of any organization.
Why business continuity?
Business continuity planning is one of the most critical components of any recovery strategy. Unfortunately, not every company develops a continuity plan. Here are a few misconceptions and realities about business continuity planning.
Misconception #1: "Our people will know what to do in an emergency."
Even the best employees cannot be expected to know what to do when disaster strikes. Leaving each to respond in his or her own way only adds to the confusion of an event. Having a well-documented business continuity plan in advance, and training your employees to follow it, gets everyone on the same page – helping to ensure an organized, safe and timely recovery.
Misconception #2: "We have insurance to cover our losses."
Insurance alone is NOT a business continuity strategy. Proper coverage is a significant and important part of the plan. But it may not fully cover some of the peripheral damages from an event, like loss of customers, loss of market share, or setbacks in development or release of a new product. Consult with your insurance agent to understand what is and is not covered under your policy.
Misconception #3: "We do not have the time to develop a business continuity plan."
Time spent developing and maintaining a business continuity plan is an investment in your company. Your fixed costs will continue after an event, whether or not you are open for business. The faster you can return your operations to normal, the more likely you will recover from the event successfully. With so much at stake, your company cannot afford to NOT have a plan.
Misconception #4: "Business continuity and disaster recovery planning are the same."
Business continuity is a proactive plan to avoid and mitigate risks associated with a disruption of operations. It details steps to be taken before, during and after an event to maintain the financial viability of an organization.
Disaster recovery is a reactive plan for responding after an event. It deals with the safety and restoration of critical personnel, locations and operational procedures after a disaster and is a part of business continuity planning.
A good investment
From Hurricane Sandy and 9/11 to the tornadoes in Oklahoma, companies that proactively consider how to respond to events are the first to get back to business, often at the expense of competitors. A predefined business continuity plan combined with the proper insurance coverage maximizes the chance of a successful recovery by eliminating hasty decision-making under stressful conditions. It details how to get businesses back on track after a disruption – in the most thoughtful way possible.
Think your business can withstand a disaster? Think again.
Twenty-five percent of businesses do not reopen following a major event.¹ It does not take a major catastrophe to shut down a business. In fact, seemingly minor disruptions can often cause significant damage – power failures, broken water pipes or loss of computer data.
A Travelers study found that 48% of small businesses are operating without any type of business continuity plan, yet 95% indicated they felt they were prepared.
- Is your business continuity plan predominantly an insurance policy?
- Is it predominantly an emergency response or evacuation plan?
- Is it predominantly an IT or data recovery plan?
- Is it something you developed that sits in a binder on a shelf?
If you answered yes to any of these questions, then your business continuity plan may be giving you a false sense of security.
Natural disasters becoming more common – and costly
In 2012, nine of the 10 most expensive worldwide natural disasters happened in the United States. With $77 billion in insured losses worldwide, 2012 was the third costliest year on record. The first was 2011, when $126 billion in insured losses was reported.²
Business continuity planning for a competitive advantage
An alarming 48% of business owners surveyed by Travelers in 2012 said they have no plan in place. That means business continuity planning is more than smart business – it helps your company remain better positioned to recover from the business interruption, property damage, financial impact and loss of life that a natural disaster or man-made event may cause.
Start your business continuity planning
Planning for a disruption or catastrophic event should happen when business is going well, not when disaster strikes. Having a predefined, well-documented business continuity plan that clearly communicates how your business will respond during an event can help mitigate risk – and is one of the best investments your company can make.
Sources
1 Insurance Institute of Business & Home Safety; http://www.disastersafety.org/
2 Insurance Journal; http://www.insurancejournal.com/news/national/2013/03/27/286235.htm
