If you live in Australia or New Zealand, you’ll no doubt have witnessed the devastating impact and unpredictability of Mother Nature – with earthquakes, droughts, fire, flood and cyclones all occurring in the past few years. While these natural disasters ravage communities, the impact on local businesses can be equally devastating. But it doesn’t always need to be that way. Why is it that one business can recover from a disaster, whereas another similar business may be forced to close its doors?
It’s time to take a good hard look at your Risk Management Plan … Does it include a Business Continuity Plan and a Disaster Recovery Plan?
What’s the difference, you may well ask – after all, aren’t they one and the same. The answer is ‘no’. Disaster Recovery is the process by which you resume business after a disruptive event. Whether it’s a catastrophic event like the floods we have just experienced in Queensland, a terrorist attack like 9/11 on the World Trade Center or something completely different like an epidemic attack or a computer virus – Disaster Recovery is the plan by which you will recover. Recovery will most likely address software, data, and/or hardware as well as staff, particularly key staff members, and other elements vital to your business.
A Business Continuity Plan must be developed around your business’s circumstances such as:
- Shutdown – how would this impact your business financially and otherwise?
- Prevention – can disaster be avoided by taking prudent steps?
- Recovery – how and what you will need to recover.
- Planning – write your plan and implement the plan elements.
- Training and testing – be sure everyone knows what to do and that the plan works!
- Maintenance – continuously review and update to suit your current situation.
Start by identifying the risks to your business.
- What could cause an impact?
- How serious would that impact be?
- What is the likelihood of this occurring?
- Can it be reduced or eliminated?
For example, if you owned a cafe, your risks might include fire, food poisoning and flood.
Determine which risks would have a greater impact than others.
For example, a café on high ground may not be likely to flood, but in the event that it did, the impact would be very high, potentially destroying equipment and stock leading to loss of trade and revenue; whereas an outbreak of Salmonella would lead to loss of clientele but unlikely to make an impact on equipment.
Compare the likelihood and impact of each risk.
In the cafe example, your prioritised list may be:
- Fire – major risk. The likelihood is high and the potential impact of a fire on the business is very damaging.
- Food poisoning – second priority. Whilst the probability may be assessed as low, the impact on the business would be very high.
- Flood – your third priority risk. The probability is assessed as very low, but again the impact on the business would be very high.
Evaluate the risks and prioritise the resources you are prepared to invest to treat these risks.
Consider the options for treating risks.
Identify the strategies that would relate to your business such as:
- quality control processes;
- staff training;
- government compliance;
- maintenance of facilities, plant and equipment;
- appropriate security devices;
- systems and controls; and
- contingency plans.
As an example, some of the treatment strategies for the risk of flood might include:
- ensuring flooding is covered by your existing insurance policy and the amount of cover is adequate;
- ensuring stock and equipment are stored off the ground where possible; and
- organising off-site storage for stock and equipment when a flood is forecast.
Review your Risk Management Plan.
If you do not have a Risk Management Plan now is the time to develop one, detailing information about:
- risks identified;
- level of risks;
- planned strategy;
- timeframe for implementing the strategy;
- resources required; and
- individuals responsible for implementing the strategy.
The final documentation should include appropriate objectives, a budget and milestones on the way to achieving those objectives.
Review your Current Insurance Cover.
For a small business, adequate insurance cover can mean the difference between a business surviving a crisis or not. It is critical to note that some types of insurance cover are required by law, such as third party car insurance and workcover, but other insurance is voluntary. In deciding which policies, and what level of insurance to take out, a business needs to:
- Decide on the critical areas of cover to remain competitive with other businesses.
- Decide on how much the business can afford to pay for insurance without impacting on profit targets.
- Assess whether the business has adequate back-up for key personnel in the event of injury or other absences. If so, you may not need key person insurance.
- Set a budget for insurance premiums after receiving advice and quotations from brokers or agents.
An insurance broker who is experienced in business insurance may be able to help you undertake a risk assessment to identify the parts of your business that are most vulnerable and critical to your business continuity plan. The cost of insurance cover may be cheaper if you have undertaken a risk assessment and developed a risk management plan.
Securing adequate insurance cover may assist in minimising the impact a crisis has on your business, but it’s not the be all and end all of protecting yourself against potential disaster. Think about your Risk Management Plan, your Disaster Recovery Plan and your Business Continuity Plan. Being prepared gives you greater likelihood of weathering the storm no matter what intensity, shape or size it comes in.
While this may seem overwhelming to think about, it’s important not to place these matters in the “too hard” basket. If you’d like some help or friendly advice on these matters, simply give us a call on 1300 856 477.