The Importance of a Business Continuity Plan for Your Business

A Business Continuity plan helps your organization maintain essential functions and return to normal as quickly as possible, after a disaster.  During the Covid-19 Pandemic businesses worldwide were forced to pivot their business model amongst supply chain disruptions, changing customer demand, and threats to the health and well-being of their workers. In March of this year Forbes.com stated, “With a jolt and scarce previous experience, 2020 brought the sharp need to manage a pandemic and its potential impact of large-scale global business disruption.” (1)  The crisis brought to light the importance of planning for the unexpected with risk management processes, including a business continuity plan for your business. 

What is Business Continuity?  

Business Continuity is the ability of a business to continue functioning during and after, a disaster or catastrophic event.  Business continuity planning is “the process of creating systems of prevention and recovery to deal with potential threats to a company. In addition to prevention, the goal is to enable ongoing operations before and during execution of disaster recovery.” (2)  

It’s important for all businesses to create a business continuity plan, as no business is completely immune from a possible disaster. Regardless of the type, size, or amount of revenue generated by a business, it’s important to create a plan for business continuity. The complexity of your continuity plan depends upon the unique needs of your individual business. 

Majority of Businesses Unprepared for Unexpected 

Wildfires, earthquakes, floods, hurricanes and other natural disasters can cause significant damage to businesses. These events can result in power failures, water damage from broken pipes, loss of computer data including client data, and more. But it’s not just natural phenomena that can disrupt or halt a business’ operations. Operational disasters where a company loses a significant manager or director, workplace violence, and even pandemics all have the potential for adversely impacting your business services and functions.  

Most business owners would agree that it’s a good idea to do some form of planning for unexpected events. Yet research shows most businesses have not created a business continuity plan.  After the start of the Coronavirus, investment consulting firm Mercer released it’s Business Responses to COVID-19 Outbreak Survey which found that,  

“51% of organizations around the world do not have a business continuity plan in case of emergencies or disasters.” (3) 

The COVID-19 pandemic brought to light the need for businesses to have a backup plan in place. A business continuity strategy to help manage risk is key to helping organizations survive. According to the Federal Emergency Management Agency (FEMA), “40% of businesses do not reopen after a disaster and another 25% fail within one year. “(4) But it’s important to plan for both smaller events in addition to catastrophes, as it doesn’t take a major event to close down a business.  

Business Continuity Plan Misconceptions 

There may be many reasons why a business hasn’t developed a BCP including the following:  

  1. Assuming Employees Know How To Handle Emergencies: The owner of the business may assume employees will know what to do and how to react when the unexpected happens. However, catastrophic events such as fires and floods can be traumatic and stressful. Leaving each employee to respond in their own way could add to the turmoil during an already stressful situation. Having an established continuity plan in place, ensures that your employees know how to respond in the safest most organized way.   
  2. Too Busy: Business owners face an endless array of responsibilities daily and may feel they don’t have the time to invest in continuity planning. However, if a catastrophe forces a business to close, the fixed costs associated with that business continue. Having a plan in place allows a business to recover more quickly and begin to recoup any losses. Therefore, taking the time to create a continuity plan is a significant investment in the company.  
  3. Business Insurance Will Help Me After a Loss: Having the proper levels of Business Insurance in place is a big part of a business being able to recover after a loss, but insurance alone isn’t sufficient.  

Is Business Continuity the Same as a Disaster Recovery Plan?  

Business continuity plans and disaster recovery plans are similar but are not exactly alike. Simply put, the purpose of a business continuity plan is to allow the business to continue operating during a disaster. A BCP is developed proactively and helps a business “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.”(5)

disaster recovery plan is a reactive plan for responding after a catastrophic event has occurred. “It deals with the safety and restoration of critical personnel, locations, and operational procedures after a disaster.” (5) Similar to having business insurance in place, a disaster recovery plan is an important component of a comprehensive business continuity plan.  

Steps for Creating a Business Continuity Plan for Your Business 

  1. Create a Mission Statement: Any good plan begins by defining your objectives and setting a target date for completion. Define the plan’s budget and any training needed. 
  2. Create a BCP Team: Create a team of employees to serve as a business continuity plan team. Designate the responsibilities of each team member and appoint a leader to manage the team.  
  3. Identify Potential Risks: Examine the organizations’ vulnerabilities. Identify threats to the business that include weather-related hazards, pandemics, climate disasters, supply chain disruptions, and possible cybersecurity attacks. A member of the McSweeney & Ricci Commercial Insurance Team can help you identify any potential risks to your business and work with you to help minimize them.  
  4. Identify Critical Business Functions: It may not be necessary for all business functions to continue during a crisis. Identify and document the business functions that must be performed in order to keep your operation running.  
  5. Establish Policies & Procedures: Establish and document the various procedures that will be implemented during each crisis. Be sure to include specific directions and use photographs, diagrams and illustrations whenever possible. Include which member of personnel is responsible for each procedure. Prioritize the well-being of employees in every circumstance.  
  6. Training & Testing: Train employees on the plan procedures and conduct regular testing to ensure familiarity with the plan. Document the results of each test or training activity. 
  7. Keep Your BCP Current: Review your continuity plan annually to keep all areas up to date. Be sure to account for new locations, business mergers, new equipment or additional resources.  

Contact the Commercial Insurance Team at McSweeney & Ricci  

Feeling overwhelmed at the thought of devising a business continuity plan for your business? Call the business insurance professionals in McSweeney & Ricci’s Commercial Insurance Division. Our team has over fifty years of experience helping businesses of all sizes and types, throughout Massachusetts, New England and beyond. McSweeney & Ricci can help create a tailored business continuity plan and sound risk management plan to keep your business prepared and protected. We partner with you to ensure you have the proper levels of protection for your individual needs and budget. In addition to business insurance, McSweeney & Ricci provides home insurance, auto insurance, cyber liability insurance and more to thousands of individuals and businesses throughout Massachusetts and the U.S.  

For more information on creating a business continuity plan or questions about protecting your business, contact us at (844) 501-1359, or submit for a complimentary quote on our website.  

Sources:  
1) Business Continuity Management Lessons From The Pandemic (forbes.com) 
2) Business continuity planning – Wikipedia 
3) 51% of Organizations Have No Business Continuity Plan to Combat Coronavirus (solutionsreview.com) 
4) When disaster strikes: Preparation, response and recovery | III 
5) Why is Business Continuity Important? | Travelers Insurance 
6) Business Continuity & Disaster Recovery Planning | The Hartford 

 

 

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