The reality is that a majority of small businesses do not have a plan. As part of the Wells Fargo Small Business Index, Topline, 3rd Qtr 2011 survey, a sample of small businesses were asked if they “have an emergency plan in place in the event your local area experiences a major disaster, such as a fire, tornado, hurricane, earthquake, major flooding, or other disaster?” While 41% have a plan, 58% do not.
In the not too distant past, natural disasters have exacted an economic toll in the billions of dollars. Recent disruptions where the costs are still being tallied include Hurricane Katrina (2005), BP Gulf oil spill (2010), Hurricane Irene (2011). In all of these examples, there was some type of warning prior to the height of the disruption. Admittedly these events could be considered once, in a life-time situations.
However, there are disruptions that occur with some frequency, that do not have any warning. In 2010, there were 3,419 power outages across the United States (Eaton Corporation’s Blackout Tracker Annual Report for 2010). According to Price Waterhouse, after a power outage disrupts IT systems – “33%+ of companies take more than a day to recover; 10% of companies take more than a week; and 90% of companies that experience a computer disaster and don’t have a survival plan go out of business within 18 months.”
Every business should have a plan that considers the possibility of disruptions directly to its business; or disruptions to the business of its suppliers. The only question – How extensive should the plan be? The program you implement can be as extensive as creating redundant operations; maintaining business interruption insurance to cover the physical loss of the place you conduct operations; and maintaining contingent business interruption insurance to cover the physical loss at key suppliers, which may impact your business. But it does not have to be.
There are simple measures a business can put in place that have little or no cost:
- Maintain records in an electronic form and back-up the data on a set schedule. This last part is critical. Large companies back-up data daily. A small to medium size company should back-up data, at least weekly.
- Review your company’s insurance policy – do you have a specific policy for hazard and flood insurance? Find out what you are covered for, prior to needing the insurance.
- Create a Plan in the event of a disruption –
- How will you communicate with your customers? What type of messaging will you send to them?
- How will you communicate with your employees?
- Where will you work in the interim?
- Share the plan with your employees and maintain the document in a location where they may access it. Update the plan as factors change.
- Maintain a list of key contacts and update it consistently –employees, customer, vendors.
The risk a company assumes by not having any type of plan, far outweighs the cost in time and money of implementing these simple tasks.
What is your experience?© Copyright 2012 Regis Quirin, All rights Reserved. Written For: CFO Tips - What you need to know, to be a CFO TODAY!