Having a business continuity plan is more important than ever. All you have to do is look at the day’s headlines to identify potential risks for business interruption. In recent years, the pandemic, supply chain challenges, data breaches and extreme weather have been top stories. Still, a 2020 survey found that 51% of companies faced the pandemic without a business continuity plan in place.
Small and mid-size companies are less likely to have a business continuity plan. The Federal Emergency Management Association (FEMA) estimates that 75% of small businesses lack a plan for navigating a disruption. While most business owners agree that business continuity planning is a good idea, small and mid-size companies cite time, budget and resource constraints as the reasons they don’t have one.
Putting off continuity planning comes with risk. One in four businesses doesn’t reopen after a disaster, and 90% fail within a year if their operations are shut down for more than five days. So, how can you help ensure your firm is prepared for a disruption in operations? Start with the answers to three key questions:
- Why does your company need a comprehensive — and up-to-date — business continuity plan?
- What is a business continuity plan?
- How do you build the continuity plan that your business needs?
Why does your company need a comprehensive business continuity plan?
Outside of the pandemic, 91% of businesses have experienced at least one disruption within the last two years. Most said the disruption had a medium-to-high impact on their operations, defined as a disruption to critical processes and services that resulted in financial or reputational issues. For commercial property owners and investors, even a minor disruption can impact the ability to maintain a building. Major disruption events can significantly affect the property’s operations and the business’ finances.
Operational disruptions can have a variety of causes, including the following list from the government’s disasters and emergencies webpage:
- Natural disasters, such as floods, earthquakes, hurricanes, tornadoes and winter weather
- Cyberattacks
- Chemical and hazardous material incidents
- Power outages
- Mass attacks and terrorism, including active-shooter scenarios
- Pandemics
In addition, operational risk can also result from property damage caused by a fire or burst pipes, supply chain breakdowns, system or machinery failures, the death or illness of a key employee, and scandal.
Business continuity planning enables companies to identify potential risks and vulnerabilities and map out a plan to mitigate them. In the commercial real estate industry, business continuity extends beyond the physical structures to include the safety of tenants. Having a plan that recognizes the different types of risks is essential to help your firm take immediate action and minimize downtime.
What is a business continuity plan?
Many terms related to emergency preparedness are used interchangeably. However, each has a distinct definition.
According to the Disaster Recovery Institute International, business continuity planning is the “process of developing prior arrangements and procedures that enable an organization to respond to an event in such a manner that critical business functions can continue within planned levels of disruption. The end result of the planning process is the BC Plan."
Disaster recovery plans are a component of business continuity planning and focus on specific plans for responding after an event occurs. These plans answer the question: How do we restore operations to full functionality?
Both types of plans fall under the umbrella of business resiliency. Resiliency is the strategy that enables an organization to adapt to change, bounce back and, ultimately, thrive. A business continuity plan is the framework for resiliency.
How do you build the continuity plan that your business needs?
With the wide range of potential risks, business continuity planning can feel daunting for busy business executives. The best advice is to focus on developing and refining your continuity plan one step at a time.
Conducting a risk assessment is a good first step. It will help you identify potential risks and vulnerabilities. As a starting point, consider risks in three main areas: information technology risk, facility risk and people-related risk. Keep in mind that there may be risks you aren’t aware of, so involving trained risk assessment and business continuity experts is helpful.
The next critical information-gathering step is a business impact analysis. Through this analysis, you identify your critical business processes and assess the potential impact if these processes are disrupted. Based on the analysis, you can prioritize your resources to ensure that essential functions can be recovered quickly.
Insurance is a core element of business continuity planning. Engage your insurance advisors to help you identify insurable risks and identify any gaps in your coverage. Regular reviews of your property and casualty insurance are paramount, especially the coverage and exclusions related to weather events applicable to your region. Beyond insuring your facilities, business interruption insurance protects against monetary losses if your business is unable to operate due to a covered event. Cyber liability insurance helps to protect your company against losses caused by a data breach or cyberattack.
Your organization’s ability to respond to unexpected events is only as good as the detailed plan you put in writing — and keep current. Along with outlining the roles and responsibilities of a core response team, a key part of the plan is identifying the proactive steps you need to take before a disruption occurs. This includes identifying and collaborating with third-party partners, backing up systems and data, and updating old equipment, software or operating systems.
Next, communicating the plan and training your team are critical steps. Conduct regular tests of the plan using different scenarios to ensure you haven’t overlooked important actions. Testing your plan also helps to build the team’s comfort level and confidence in executing it.
Finally, take an evergreen approach to business continuity planning. Schedule regular reviews — at least yearly — to ensure the information is current. You should also update your plan when there are significant changes to your firm’s staffing, processes, IT infrastructure or vendor relationships.
The business continuity, insurance and commercial real estate industry experts at CBIZ can help you evaluate your company’s risks and build a business continuity plan to fit your needs. Connect with a member of our team and gain access to more resources here.
This article includes input from Mark Phander, Senior Risk Advisor at CBIZ Insurance Services, Inc., and Jennifer Brandt, Managing Director for CBIZ’s Risk Advisory Services team. Business continuity is an important and timely topic for clients at CBIZ. By utilizing Mark and Jennifer’s expertise and partnership, our team can help you strategize, build and implement a preparedness plan specifically for you.
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