Many years ago I worked for a small insurance company. Like many other companies, we closed operations over the Christmas holidays. As it happens, this eventful year Christmas fell on a Monday. The company also gave its employees the previous Friday off, thus granting a four-day holiday.
The weather that Christmas season was terribly cold, as is normal in that part of Virginia. Building maintenance staff turned off the heat in our 7-story building to save costs. Unfortunately, they forgot to turn off the water. I got a call on Sunday afternoon informing me that there was a serious problem. Apparently a major water pipe had broken upstairs.
When I got to the building, there were literally huge layers of ice emanating from all the windows and cascading down the sides of the building. Upon entering, I could see how disastrous this broken pipe was going to be, unattended for several days. The ceiling tiles on each floor had been broken and fallen off in the work areas. All desks, filing cabinets, computer equipment, furniture, etc. they were covered in debris, ice and water.
Obviously, we had no choice but to relight the fire to melt the ice. As the ice melted, the water problem got even worse. Most of the building’s floors had a foot or more of standing water. The water damage to file and document folders, electronic equipment, furniture and everything else in the building was devastating.
It took many months to fully recover from what we later called simply “the incident.” Many important insurance documents were permanently lost. Much of the computer equipment and other electronic components suffered irreparable damage.
Unfortunately, the company had not made plans for such a disaster. There was no way to quickly move the data processing requirements to a backup location. There was no off-site storage for the microfilm records used to support the paper documents. Most of the microfilm, stored in metal cans, survived. However, most microfilm readers didn’t, as electronics and water just don’t mix.
The company eventually survived, but only by a thread. We were unable to process premium payments for weeks and many people who were expecting insurance payments did not receive them in a timely manner. It was, to put it bluntly, a total and complete disaster.
Business continuity is one of those topics that just doesn’t get the level of discussion it requires. Too many business owners ignore it completely. That can be a fatal mistake, as it almost was for the company I once worked for.
Business continuity is about planning for the unforeseen events that may occur. Many people also call it disaster planning or contingency planning. Nobody likes to think about such eventualities, but as the saying goes, “things happen.”
Developing a business continuity plan involves conducting a thorough review of the overall business structure and identifying potential weak links in that structure. Some of these weak links are internal to your company, while others are external. A good business continuity plan will examine the full range of what-if scenarios that could adversely affect your business and then identify potential contingencies.
All aspects of your business should be considered: ownership, sources of products or raw materials, sales mechanisms (website, storefront, etc.), distribution chains, customer service, accounting, financial reports, etc.
Of course, these hypothetical scenarios will be different for each business. It would be impossible for me to account for all the possible manifestations in this article. Instead, I will discuss some of the things that can happen most often. It will be up to you to extrapolate that discussion to identify potential fatal links within your own business environment and develop appropriate contingency plans. I can only ask the questions.
INTERNAL CONSIDERATIONS
Does your business depend on a single key person? Such person could be the owner, the product developer, the website administrator, etc. In such a case, that person represents a single point of failure. What happens to your business if something happens to that person? For example, if your product is derived from the efforts of one person, do you have a way to mitigate the effect of that person being no longer available? Can you overcome such a fatal flaw?
Do you keep all your accounting, customer and financial records in one place? Do you have backup records in an off-site location? What would happen to your business if there were a fire, flood, earthquake, or other circumstance that destroyed those records? Do you have a plan to recover from such an event? I’m amazed at how many people don’t back up their computer or paper records. If your computer’s hard drive fails, could you continue with your operations?
Do you keep your product inventory in one place? What if you experience a fire or flood at that location? Would you have a way to quickly replenish your stock? Would you be able to continue fulfilling orders in a timely manner? If the answer is no, you have another single point of failure.
In the US Gulf Coast area where my wife and I live, we are at the mercy of hurricanes every year. In the case of Hurricane Ivan and Hurricane Katrina, we lost our electrical and telephone service for almost a week. If something like this happened to you, do your clients have a secondary way of communicating with you or you to communicate with them? Do you provide your customers with a cell phone number where they can reach you? Is there a local facility (eg library, cyber cafe) that I can go to to check email?
EXTERNAL CONSIDERATIONS
If you buy your product or raw materials from a wholesaler, is that company your only source? What happens to your business if that business has a fire, flood, or collapses your tent? Have a secondary source that you can quickly switch to? With the company that I ran many years ago, I used mainly three distributors as the source for most of my products. But he also had arrangements with various others that he could use if necessary. These companies already had my tax identification number, my distributor, and other information on file. If I had to make a change, that change would have been pretty much perfect from my clients’ perspective.
Do you depend on a single carrier for the delivery of your product? What happens to your ability to deliver your product if members of that carrier go on strike? Happens. As with your suppliers, do you have a contingency plan to move to a backup carrier if necessary?
What about the company that hosts your website? This is a critical consideration if your primary sales vehicle is through online media. What happens to your business if that hosting company suffers a fire or flood? Do you have a contingency plan to move operations to an off-site location? If not, do you have a way to quickly switch to another hosting service? What happens if they close? Do you have backup copies of your own website (including your shopping cart / order database) that you can move? Can you quickly move your site to another hosting service?
DUE DILEGENCE
As I said, this list is not intended to be exhaustive. Much depends on your particular business operations. But you must consider the possibilities and their possible adverse impact. Consider all the possibilities.
My recommendation would be to develop a document to define your plans and courses of action for business continuity. It doesn’t have to be complicated; three columns is all you need:
1) Possible disaster scenarios (internal and external),
2) Potential impact on your business (you can use a 1-5 rating system for this: 1 is low impact, 5 is catastrophic)
3) Contingency plan
Obviously, the higher the impact rating, the more important it is to define a contingency plan. But don’t ignore it. Your business can survive many disaster situations, but only if you plan ahead.