7 Steps to Developing an Effective Business Emergency Plan
- Develop the outline and guidelines of your business emergency plan.
- Assess risks and threats to your business.
- Conduct a business impact analysis.
- Write your business emergency plan.
- Review and test your plan.
- Identify areas of improvement and refine your plan.
- Work through your business recovery strategies.
Whether natural or manmade, large or small, disasters and emergencies can have a dramatic impact on your company’s infrastructure, profitability, and ultimately, your ability to continue to run and grow your business.
In fact, according to the Institute for Business and Home Safety, approximately 25% of businesses don’t open again after a major disaster. Therefore, although it may not be the first task that comes to mind when starting a business, it’s important to have a business emergency plan in place to ensure that you’re equipped to survive and recover from a disaster or emergency.
In this guide, we’ll break down seven steps that you can follow to create and implement a disaster preparedness plan for your business. In addition, we’ll discuss business disaster recovery strategies, as well as provide a list of government resources that may be helpful to prepare your business for an emergency or disaster.
Looking for resources specific to the coronavirus pandemic? Consult our small business coronavirus relief hub here for up-to-date information and advice.
Creating an Emergency Preparedness Plan for Your Business
By definition, developing a business emergency preparedness plan is difficult. After all, there are a variety of disasters and emergencies that your business could experience and it’s nearly impossible to create a plan that encompasses all possibilities.
Plus, every business is unique—your business may be more greatly impacted by a specific disaster or emergency than other businesses—and factors that contribute to your business emergency plan may not necessarily play a role in the plans of other businesses.
Nevertheless, although it may seem impossible to try and prepare for every potential disaster, a business emergency plan can be an essential tool in case the unexpected does occur.
This being said, there’s no doubt that creating an emergency preparedness plan for your business can be a daunting task. Therefore, we’ve broken down the process into seven digestible steps, following the Department of Homeland Security (DHS) and Federal Emergency Management Agency (FEMA)’s concept of a standard, “all-hazards approach.”
Step 1. Develop the outline and guidelines of your business emergency plan.
First, before you can actually write out your emergency preparedness plan, you need to organize your business’s objectives and guidelines for the plan. Of course, at a high-level, the goal of your plan will be to mitigate the impact of the disaster or emergency on your business, protect your staff, assets, and operations, and ensure that you can get back to business as soon as possible.
This being said, however, there are specific requirements for your plan that you’ll need to consider as well. These requirements will not only consist of factors that are unique to your individual business, but also those that are dictated by federal or local laws.
To begin, some aspects of your small business emergency response plan will be dictated by local, state, or federal law. The U.S. Occupational Health and Safety Administration (OSHA), in particular, details required emergency response guidelines for any business with more than 10 employees.
Fortunately, OSHA offers extensive online tools that can help you follow their standardized guidelines, including fire safety requirements, evacuation plan regulations, and expectations for emergency preparedness kits for your facility.
In addition to OSHA guidelines, industry-specific regulatory agencies might have additional requirements for the handling of hazardous waste, heavy equipment, or other business-specific materials or processes. If you were required to apply for an industry-specific business license or permit when you started your company, you’ll want to contact the permit-issuing agency for more information about specific requirements that may apply to your business.
Public Emergency Services
Next, local public services such as your city fire department and police force are committed to helping businesses craft a disaster preparedness plan.
In addition, these organizations may have requirements regarding how to evacuate your office, call for help, and other guidelines that will be important to understand as you create your business emergency plan. Therefore, you might reach out to these entities for their advice, or review their online resources to ensure that you’re meeting any local requirements as you develop your plan.
Although the guidance of regulatory bodies or emergency service personnel will go a long way toward helping you develop your business’s emergency response plan, certain preparedness needs will be unique to your individual business and facility.
Therefore, as you consider the goals and guidelines of your plan, you’ll want to incorporate what you know about your building, team, and operations in order to create the most effective strategy. As an example, you’ll want to think about things like the layout of your office, the work schedules of various employees, and the communication channels available throughout your business.
Step 2: Assess risks and threats to your business.
Once you have a better idea of the federal, local, and business-specific requirements that will play a role in the development of your emergency preparedness plan, your next step will be to assess the risks and threats to your business. Of course, it will be impossible to identify and plan for all risks and threats, however, by identifying those that are more likely to affect your business, you can create a more impactful and relevant procedure.
This being said, you’ll likely want to start by thinking about the most common situations that could pose a risk to your business. These situations may include fires, floods, earthquakes, and other major weather events.
In addition, you’ll want to consider other less obvious threats as well—cybersecurity threats, active shooters, global pandemics, etc. Depending on the business you run, you’ll also want to consider risks that are more unique to your business—as an example, a manufacturing plant will want to plan for threats of bodily injury or contamination that could be posed by its supplies or equipment.
To this end, you might use a checklist (like the one above) to conduct an official business risk assessment.
Step 3: Conduct a business impact analysis.
Next, you’ll want to use the information you identified in your risk assessment to inform your business impact analysis. Your business impact analysis will try and predict the consequences of business disruption as the result of an emergency or disaster and therefore, will help in the development of your recovery strategy.
Once again, it will be impossible to predict exactly how a potential disaster or emergency will impact your business—however, you can use the threats and risks you established in step two to determine what disasters are most likely to affect your business and what that effect looks like.
As an example, if your business is located on the coast of Florida, some of your biggest risks might be flood or hurricane damage to your physical location. Therefore, in your business impact analysis, you’d consider how these scenarios might disrupt your business—a flood may cause damage to the physical structure of your business that would need to be repaired, or it may ruin inventory that would need to be replaced, etc.
Overall, these are seven of the most common business impacts that you might think about as conduct your analysis:
- Lost sales and income: If your business is closed due to a disaster, the most immediate consequence will be the loss of sales you could have been generating during that time. You can calculate your business’s average daily sales volume times the number of days that you can expect to be closed for any given type of disaster to give you an idea of the immediate financial impact.
- Delayed sales or income: In the case your business is closed due to an emergency or disaster, once you reopen, the availability of personnel or disrupted supply chain might impact how quickly your sales return to pre-disaster levels.
- Increased expenses: In the process of disaster recovery, you might incur additional costs from new equipment or materials, the replacement of damaged inventory, overtime labor for your employees, etc.
- Regulatory fines: In certain situations, your business might face fines or penalties from industry and government regulators for noncompliance— particularly if such noncompliance directly contributed to creating the disaster. If your business operates in a heavily regulated industry, you’ll want to consider in advance how compliance issues might impact your business emergency response plan.
- Contractual penalties: Does your business carry major contracts as a vendor or supplier? You might carry a penalty or face the loss of a bonus because of a delay in providing your product or service. In the wake of a disaster, delays are inevitable—but you’ll want to factor in how those delays could affect your contracted revenue.
- Customer dissatisfaction or loss: Although this might not necessarily be the case, sometimes customers can’t wait to obtain the product or service you typically provide. In this case, you’ll want to consider that a disaster or emergency may result in a loss of customers, and therefore, loss of sales.
- Delay of new business plans: Finally, if you’ve started a new endeavor or project, a disaster will seriously impact those plans. You’ll want to consider the impact of needing to put these kinds of opportunities on hold while you recover.
Step 4: Write your business emergency plan.
At this point, you’ve accomplished a significant part of the task—the planning. After completing these first three steps, you should have a sense of the potential risks your business faces, as well as their impact, and therefore, what type of information your emergency preparedness plan should include.
Now, it’s time to actually create and write out the plan itself.
As you might expect, this will be a time-consuming process, especially since you’ll want to work with other company leaders, your business’s HR department, and even local and governmental resources.
With this in mind, although the contents of your business emergency and disaster plan will be unique to your small business, it may be helpful to include the following eight elements DHS outlines in their all-hazards approach to emergency preparedness:
- Resource management: This part of the plan should include the resources that you’ll need to be able to respond to a disaster or emergency, as well as those you’ll need to continue operations and communications during and after the incident.
- Emergency response: This will consist of your actual response procedures, in other words, how you’ll protect your staff, operations, and property, in the case of specific disasters or emergencies. This might include evacuation procedures, shelter in place procedures, lockdown procedures, etc.
- Crisis communications: Here, you’ll want to detail a procedure for communicating with leadership, staff, customers, and the general public in the case of a disaster or emergency.
- Business continuity: In this portion of your business emergency plan, you’ll detail your recovery strategies, using the information from your business impact analysis. Your goal will be to use these recovery strategies to avoid some of the negative business impacts of any disaster or emergency—here, you might also break down financial recovery options, such as SBA disaster loans or other options for emergency financing.
- Information technology: Here, you’ll want to have a procedure for saving, recovering, or replacing computer hardware, software, and other important technology or data.
- Employee assistance: This part of the plan should detail how you’ll work with your employees in the case of a disaster or emergency.
- Incident management: This should define who is responsible for what parts of your emergency preparedness plan and how those individuals should respond before, during, and after an emergency or disaster.
- Training: Finally, you should describe how you’ll train your employees on this plan. You should also include training details for any individual that has a key role in the implementation of the plan, such as a specific role in incident management.
Ultimately, you’ll want the actual business emergency plan that you create to be clear, actionable, and well-organized. This plan should provide as much detail as possible, while also allowing personnel to quickly access the information they need in any given scenario.
For additional guidance on writing your small business disaster preparedness plan, you might consult a detailed template, such as the one offered by FEMA (part of which is shown above) here.
Step 5: Review and test your plan.
You can arrange a meeting to discuss emergency preparedness, walk through the plan with business leaders, allow for discussion, and record feedback. Once you’ve taken this initial step, you can take a more hands-on approach by conducting drills, tests, and seeing how your business emergency plan functions in these planned out scenarios. During this time, you might also introduce the plan to your staff, start the training process, and gather their feedback and how the plan works and what could be improved.
Then, after you’ve conducted these conversations and tests, you’ll want to regroup with your team leaders to discuss how the process went. You might also ask for written feedback, in the form of a survey, for example, from staff, to gather any and all information you might need to revise the plan.
From your meeting with business leaders, you should come away with areas in which your emergency preparedness plan could be improved. At this stage, you’ll want to determine how you can adapt the plan to fix these areas of improvement and refine the document you’ve created as necessary.
Along these lines, it’s important to note that your business emergency plan should be a “living” document. As your business changes and evolves, your emergency and disaster plan will likely change as well. Therefore, although you’ll want to train your staff thoroughly after the document has been created, you’ll want to ensure that you update them (and the document) as processes evolve.
Step 7: Work through your business recovery strategies.
At this point, you should have created and started to implement your business emergency plan. With this in mind, however, there is one final piece of your disaster preparedness that you might want to revisit in more detail: recovery strategies.
Although the actions you take before and during a disaster or emergency are essential, it’s also important to determine how your business will function and recover after one of these events. As we mentioned above, part of actually writing your business emergency plan should be detailing business continuity—in other words, how your business will work to mitigate the negative effects you identified in your business impact analysis.
This being said, due to the importance of this part of business emergency preparedness, you might decide to create a separate or more expansive document specifically detailing your business recovery strategies. To this end, you’ll want to be thinking past short-term survival and reactions after a disaster or emergency and focusing on the long-term survival of your business.
In this way, your business continuity plan (sometimes called a business contingency plan) might consider elements such as:
- People: If your business needs to operate with a reduced staff, you’ll want to think about which individuals or roles are the most critical to business operations. You might make a list of your most critical personnel, as well as backup team members who have the skill set to fill each role if the need arises.
- Facilities: If you lose access to your primary facility for doing business, what kind of facility would your team need to function? Could you work from an alternate location or resume operations using only a part of your existing facility? Could certain team members work remotely until your main office or facility is back to normal operations?
- Systems: Connectivity to outside utilities or systems such as electricity, water, heating and cooling, and internet or phone service are just a few of the systems that might be necessary for your business to function normally. What contingency plans could you put in place in the event that one or multiple of these systems were non-functioning?
- Equipment: From computers to company vehicles and major manufacturing machinery, what pieces of equipment are most critical to your business’s core operations? In a worst-case scenario, what is the minimum equipment needed in order for your business to continue serving customers?
- Materials and supplies: Particularly when a major natural disaster occurs, your individual business might not be the only entity facing delays to normal operations. How might disruptions to your supply line of materials, supplies, and inventory impact your business’s ability to function? How much stock, inventory or materials do you maintain on hand, and how long could your business continue operating in the wake of a shipment delay?
- Data and Information Technology As our businesses rely more and more on electronic records and accessibility, data security is more critical than ever to restoring the normal functions of a business after a disaster. How often is your business’s informational data backed up? Are electronic records stored locally, or through off-site “cloud” storage solutions? What protocols do employees follow for password protection and other security measures? How can you save or retrieve the data you need to continue to run your business in the event of a disaster?
By breaking down your recovery strategy in more detail (on top of your business emergency plan), you’ll put your business in the best place possible to survive an unexpected disaster or emergency.
Top Resources for Small Business Disaster Preparedness
As we’ve mentioned, developing a business emergency preparedness plan is an involved process. Luckily, in addition to this guide, there are a variety of government and other resources available online that you might find helpful as you create your own plan.
Below, we’ve listed some of the top resources that you might consult as you develop and implement your business emergency plan:
- Ready.gov: Managed by DHS, the Ready.gov website is wholly devoted to helping businesses (as well as individuals) prepare for potential emergencies and disasters.
- SBA.gov: Of the numerous resources the SBA provides to small businesses, their “Business Guide” portion of the website includes advice on emergency preparedness, as well as checklists and safety tips broken down by type of disaster.
- DHS.gov and FEMA.gov: In addition to Ready.gov, both the DHS and FEMA websites offer helpful information on emergency and disaster preparedness for businesses.
- IRS.gov: The IRS provides a wealth of tax and financial information for businesses, as well as a specific guide to preparing for disasters as a business and as a taxpayer.
- Fundera.com: As we briefly mentioned above, there are options–including emergency business loans and SBA disaster loans—if your business is looking for financing in the wake of a disaster or emergency. Learn more about emergency business loans here—and SBA disaster loans here.
The Bottom Line
At the end of the day, preparing for an emergency or disaster is a time-consuming, yet necessary part of owning a business. Although, hopefully, you never have to use it, taking the time and effort to create and implement a business emergency plan from the beginning will put your business in the best possible place to survive in the long-term.
Plus, even though this process requires significant planning, research, and collaboration, it can be made much more manageable by following our seven steps, consulting other top resources, and working with your fellow leaders, staff, and advisors.
Randa Kriss is a senior staff writer at Fundera.
At Fundera, Randa specializes in reviewing small business products, software, and services. Randa has written hundreds of reviews across a wide swath of business topics including ecommerce, merchant services, accounting, credit cards, bank accounts, loan products, and payroll and human resources solutions.