How to Create an Effective Business Continuity Plan

There’s nothing worse than an unexpected disaster, especially if you’re a busy business owner. No matter how much insurance you have, a severe disaster can (literally) destroy your business overnight. Following a disaster, an estimated 90% of smaller companies fail within a year unless they can resume business operations within five days.[1] 

This alarming statistic indicates that if proper precautions aren’t taken ahead of time, an unforeseen event will almost certainly leave you and your team scrambling to get your business up and running—or worse—fighting to stay open.

Therefore, to ensure your business is prepared to handle emergencies, it’s essential to develop an effective business continuity plan, or BCP. In this guide, we’ll cover what exactly a business continuity plan is, the types of disasters that can impact your business, and walk you through how to actually create a continuity plan for your business.

What Is a Business Continuity Plan?

A business continuity plan is a strategy and corresponding documentation that lists all potential threats to your business and outlines the procedures that your business will follow to resume operations in the event of an emergency. A successful business continuity plan will allow you to mitigate damages and identify possible risks to your business ahead of time.

In addition to helping your business stay afloat, there are a few other significant reasons why companies should have a business continuity plan:

  • Uphold reputation 
  • Protect revenue 
  • Maintain customers 
  • Improve business
  • Minimize legal liability

Failing to act quickly in an emergency can negatively affect your business’s bottom line and customer relationships. But, if you’re able to develop a comprehensive business continuity plan and execute it when the time comes, you’ll hopefully be able to mitigate negative impacts to your operations.

What Constitutes a Business Disaster?

Although the chances of a severe disaster, like a hurricane or earthquake, may not be likely, there are several types of emergency events that can put your business in danger. A few examples of what constitutes a business emergency are:

  • Natural disasters: Natural disasters are phenomena that are caused by our natural environment. Think earthquakes, landslides, floods, hurricanes. 
  • Global pandemics: A global pandemic is the spread of an infectious disease that affects the worldwide population. Pandemics can force your business to drastically slow down and drive employees to work from home. In the wake of COVID-19, creating a business continuity plan for a pandemic has become even more important.
  • Cybersecurity breaches: Cybersecurity and data breaches are extremely common among small businesses. Look out for web attacks, phishing, and malware. 
  • Utility failures: Utility failures happen all the time. From power outages to gas leaks, your team should be familiar with what to do in these scenarios. 
  • Human-made disasters: Human-made disasters are exactly that—disasters caused by people. Some examples of human-made disasters are arson, bioterrorism, or nuclear accidents. 

How to Create a Business Continuity Plan

It’s never too late (or too early) to create a robust business continuity plan. Although no plan is perfect—and the details will be unique to every individual business—here are six basic steps you can follow. 

Step 1: Identify Your Business Objectives

Like any good emergency or disaster plan, you need to start your business continuity plan by detailing your primary objectives and benchmarks. You’ll want to figure out the scope of your plan and do some research and analysis on the resources and money you’re willing to spend to create and execute your emergency business continuity plan. When drafting your BCP, some questions you may want to ask are: 

  • What is the scope of the plan? 
  • What areas of the business are particularly vulnerable? 
  • How will you measure the effectiveness of the plan? 
  • How will you track your progress?
  • What are some scenarios that could put us out of business?
  • What are some early warnings for emerging threats?

Step 2: Evaluate Your Risks  

The best way to get ahead of a disaster is to evaluate your risks. You can do this by conducting a risk assessment. A risk assessment involves identifying the potential hazards to your business and imagining what would happen if that hazard occurs.

For example, what would happen if a major earthquake occurs? Aside from harm to your employees (who should be your priority), what equipment, technology, or property are at risk? How could you better protect your assets? You might also think about what areas of your business are most at risk. Areas of vulnerabilities might include: 

  • Protection systems 
  • Construction 
  • Digital security
  • Loss prevention programs 

To help you identify and organize potential risks to your business, you should use a risk assessment template

Step 3: Develop Recovery Strategies 

What happens if your data is compromised, or if your office gets flooded? If you don’t have an answer, you need to develop recovery strategies to prepare to recover from your losses. This will be a crucial part of drafting your BCP—and even more so as you’re planning for more difficult scenarios, like creating a business continuity plan for a pandemic.

To develop a recovery strategy, conduct a resource analysis. By taking all of your existing resources into account, you can identify gaps in your business.

For example, let’s say your primary supplier is unable to deliver the materials you need to build your products. If you don’t have any backup suppliers, you’ll now need to identify a few that you can rely on in the event of an emergency.

Another recovery strategy is to partner with other businesses or contract with third parties. You should have these agreements in writing, and be sure that you document the negotiations.

Finally, it would be best if you had a recovery strategy for any of the information technology that you utilize for your business. It is incredibly important to be able to fully restore your technology during downtime so that your business can continue or even support remote work.

Step 4: Pick a Designated Team 

The next step to creating an effective business continuity plan is picking people on your team to carry out specific roles and functions. As a general rule, your disaster team should be composed of people who work cross-functionally and have a deep understanding of your business operations.

Each member on your business disaster team should have a particular role and be able to coordinate individual emergency processes for each department. It might be worthwhile to consider choosing those who hold leadership roles, as they’ll have an easier time rallying people together during hard times.  

Step 5: Enact Ongoing Testing and Training 

Once you’ve finalized your continuity plan, the work doesn’t end there. You will need to continually test and train your employees to figure out what problems you may have missed in the initial planning phase. All employees should be familiar with protective actions for their safety, such as evacuation, lockdown, and shelter-in-place procedures.

Frequent training and testing can also help your organization become familiar with the exact procedures and responsibilities so that your team will be as prepared as possible in case of emergency. If you want a consultation on your business’s potential hazards, the Occupational Safety and Health Administration (OSHA) offers free, confidential safety and health services to small and medium-sized businesses. 

It’s also worth keeping in mind that you should always update your plan whenever your business undergoes any changes in processes or operations. You don’t want to start accounting for any new changes during an actual emergency event. 

Step 6: Consider Applying for Disaster Loans

This is an optional step, but one that you should definitely consider after a disaster event. It’s important to remember that although a business continuity plan can cover a lot of ground, there may still be some losses that you can’t recover from on your own. The recovery process is often expensive, especially if you have to build your business from the ground up again. In fact, 61% of small businesses have revenue losses ranging from $1,000 to $25,000 following a disaster event.[2]

To help you recover from the aftermath of a disaster, you may want to consider exploring business loans specifically for disasters. An SBA disaster loan, for example, is a low-interest business loan for business owners who need access to affordable working capital after a declared disaster. 

The Bottom Line

There are plenty of tips to prepare your business for a disaster, but business continuity plans are certainly something that you won’t want to forget. Businesses can be affected by disasters at any time, so the sooner you craft your BCP, the better.

As we’ve shown here, there are a lot of moving pieces that go into creating an effective BCP, but by doing so, you significantly increase the likelihood that your business will survive after an unfortunate event. Remember, the actions you take now can turn what could be a devastating situation into a more manageable one.

Article Sources: 

  1. FEMA.gov. “Make Your Business Resilient
  2. Newyorkfed.org. “Small Business Credit Survey

Zoe Weisner

Zoe Weisner is a contributing writer at Fundera. Previously, Zoe worked at BlueVine, a fintech startup that provides working capital to small businesses. At BlueVine, Zoe worked with small business owners to understand their financial needs and wrote content about small business-related topics, including marketing, business operations, and small business financing. Today, Zoe writes articles about personal finance, small business, and banking.

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