Many years ago, I worked for a small insurance company. Just like many other businesses, we shut down operations for the Christmas holiday. As it happens, this one eventful year Christmas fell on a Monday. The company also gave their employees the preceding Friday off, thereby granting a fourday holiday.
The weather that Christmas season was bitterly cold, as it often is in that part of Virginia. The maintenance staff turned off the heat in our 7-story building to save on costs. Unfortunately, they neglected to turn off the water. I received a call Sunday afternoon informing me there was a serious problem. Apparently, a major water pipe had ruptured on one of the upper floors.
When I arrived at the building there were literally large sheets of ice emanating from all the windows down the sides of the building. Upon entering, I could see just how disastrous this ruptured pipe, unattended for several days, was going to be. The ceiling tiles on every floor had broken away and fallen into the work areas. All the desks, file cabinets, computer equipment and so on were covered in debris, ice and water.
We obviously had no choice but to turn the heat back on in order to melt the ice. As the ice melted it just further compounded the water problem. Most floors in the building had a foot or more of standing water. The water damage to file folders and documents, electronic equipment, furniture and everything else in the building was devastating.
It took many months to completely recover from what we later referred to simply as the incident”. Many important insurance documents were permanently lost. Much of the computer equipment and other electronics were damaged beyond repair.
Amazingly, the company had made no plans for such a disaster. There was no way to quickly move data processing requirements to a backup location. There was no offsite storage for the microfilm records used to back up the paper documents. Most of the microfilm, stored in metal canisters, survived. The majority of microfilm readers did not since electronics and water just don’t mix.
The company survived, but just by a bare thread. We were unable to process premium payments for many weeks, and people who were expecting insurance payments did not receive them in a timely manner. There were a number of lawsuits. It was, to put it bluntly, a total mess.
Business Continuity is one of those topics that just doesn’t receive the level of discussion it requires. Too many business owners completely ignore it altogether. That can be a fatal mistake.
Business Continuity is all about planning for the unforeseen events that can occur. Many people also call it disaster planning or contingency planning. No one likes to think about such eventualities, but as the saying goes, stuff happens”.
Developing a business continuity plan involves making a thorough review of your overall business structure and identifying potential weak links in that structure. Some of these weak links are internal to your business, while some are external. A good business continuity plan will examine all of the what if” scenarios that could adversely affect your business, and then identify possible contingencies.
Every aspect of your business needs to be considered: ownership, product or raw material sources, sales mechanisms (web site, storefront, et cetera), distribution chains, customer support, accounting, financial reporting, and so on.
These what if” possibilities will be different for every business. It would be impossible for me to account for every possible manifestation in this article. Instead, I will discuss some of the more commonly overlooked things that can happen. It will be up to you to extrapolate from that discussion in order to identify potential fatal links within your own business environment, and develop appropriate contingency plans. I can only ask the questions.
Is your business dependent on a single key person? Such a person could be the owner, product developer, web site manager and so on. In such a case, that person represents a single point of failure. What happens to your business if something happens to that person? For instance, if your product derives from the efforts of one person, do you have a way to mitigate the effect of that person no longer being available? It can happen.
Do you keep all your accounting and financial records in a one place? Do you have backup records in an offsite 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 in place to recover from such an event? It amazes me the number of people who don’t back up their computer or paper records. If the hard drive on your computer failed, could you continue your operations?
Do you keep your inventory of products in a single place? What would happen if you experienced a fire or flood in that location? Would you have a way to quickly replenish your stock? Would you be able to continue to fulfill orders in a timely fashion? If the answer is no, you have yet another single point of failure.
In the Mobile, Alabama area where my wife and I live, we are at the mercy of hurricanes each year. In the case of Hurricane Ivan and Hurricane Katrina, we lost our power and phone service for nearly a week. If something like that happened to you, do your customers have a secondary way to contact you, or you to contact them? Do you provide your customers with a cell phone number where they can reach you? Is there some local facility (e.g., library, Internet caf) where you could go to check your email?
If you purchase your product or raw materials from a wholesaler, is that company your only source? What happens to your business if that company has a fire, flood, or folds its tent? Do you have a secondary source you can quickly switch to? With the company I ran many years ago, I primarily used three distributors as the source for most of my products. But I also had arrangements with several others I could utilize if necessary. These companies had my TaxID, reseller, and other information already on file. If I had to make a switch, that switch would have been seamless from the perspective of my customers.
Are you dependent on a single carrier for your product delivery? What happens to your ability to deliver your product if members of that carrier go on strike? It happens. Just as with your suppliers, do you have a contingency plan for moving to a backup carrier if needed?
What about the company that hosts your web site? This is a very crucial consideration if your primary sales vehicle is via online means. What happens to your business if that hosting company has a fire or flood? Do they have a contingency plan in place to move operations to an offsite location? If they don’t, do you have a way to quickly move to another hosting service? What happens if they go out of business? Do you have backups of your own web site (including your shopping cart/order database) that you could move?
As I said, this list is not meant to be all-inclusive. Much depends on your particular business operations. But you do need to consider the possibilities, and their potential 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) Potential disaster scenario,
2) Potential impact on your business (you can use a 1-5 rating system for this 1 being low impact, 5 being catastrophic)
3) Contingency Plan
Obviously, the higher the impact rating, the more important it is to define a contingency plan. But don’t just ignore it. Your business can survive many disaster situations, but only if you plan ahead.