Many years ago, I worked for a small insurance company. Like many other companies, we close operations for the Christmas holidays. As it happens, this eventful year, Christmas fell on a Monday. The company also gave its employees time off the previous Friday, thus granting a four-day holiday.
The weather that Christmas season was very cold, as is normal for 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 received a call on Sunday afternoon informing me that there was a serious problem. Apparently a water main had broken on the top floor.
When I got to the building, there were literally huge sheets of ice emanating from all the windows and cascading down the sides of the building. Walking in, I could see how disastrous this broken pipe, left unattended for several days, was going to be. The ceiling tiles on each floor had come loose and fallen into 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, it further aggravated the water problem. Most floors in the building had a foot or more of standing water. The water damage to folders and documents, electronic equipment, furniture, and everything else in the building was devastating.
It took many months to fully recover from what we later simply called “the incident.” Many important insurance documents were permanently lost. Much of the computer equipment and other electronic devices were damaged beyond repair.
Unfortunately, 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 external storage for the microfilm records used to support the paper documents. Most of the microfilm, stored in metal canisters, survived. However, most microfilm readers didn’t, since electronics and water just don’t mix.
The company ultimately 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 complete and utter 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 all about planning for the unforeseen events that may 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 doing a thorough review of your overall business structure and identifying potential weaknesses in that structure. Some of these weak links are internal to your business, while others are external. A good business continuity plan will look at the full range of what-if scenarios that could negatively 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 support, accounting, financial reporting, etc.
Of course, these hypothetical scenarios will be different for each business. It would be impossible for me to account for all possible manifestations in this article. Instead, I will discuss some of the more commonly overlooked things that can go wrong. It will be up to you to extrapolate from 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? That person could be the owner, product developer, 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 stems from the efforts of one person, do you have any way to mitigate the effect of that person no longer being 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 logs 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 to recover from such an event? It amazes me how many people don’t back up their computer or paper files. If your computer’s hard drive were to fail, would you be able to continue your operations?
Do you keep your product inventory in one place? What would happen if you experienced a fire or flood there? 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 were without power and phone service for almost a week. If something like this 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 a local facility (eg library, internet cafe) where you can check your 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 suffers a fire, flood, or closes its store? 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 a source for most of my products. But he also had arrangements with several others that he could use if necessary. These companies had my tax ID, reseller and other information already 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 experiences a fire or flood? Do you have a contingency plan to move operations to an offsite location? If not, do you have a way to quickly move to another hosting service? What happens if they go bankrupt? Do you have backups of your own website (including your shopping cart/order database) that you could move? Can you quickly move your site to another hosting service?
DUE DILIGENCE
As I said, this list is not intended to be exhaustive. A lot 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.
