Why you need a business continuity plan

From flooding and fire, to computer issues and power outages, there's a range of situations that could have a negative effect on both your business’ day-to-day operations and your brand image and reputation.

While it's impossible to anticipate every eventuality, developing a business continuity or emergency management plan, and making sure you have the right level of business insurance, can help you respond to – and recover from – incidents that could otherwise derail your business.  It may also make a very stressful situation a little bit more manageable.

The other key benefit of making such plans, says Anna Spicer, Senior Business Continuity Management Analyst at the Suncorp Group, is it can help you to build a better understanding of your business.

"Quite often, small business owners have enough time in the day just to get by," she says. "But if you stop and spend the three or four hours needed to create a business continuity plan, you’ll be able to use the data collected to assist your strategic planning and make informed decisions while setting short-term and long-term goals."

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Continuity planning in practice

Prone to bushfires, floods, and severe storms, Australia encounters its share of natural disasters – with the repercussions felt by individuals and businesses alike. The Disaster Recovery Journal (Vol 13, Issue 2) found that after a natural disaster, up to half of small businesses that suffered a major loss will fail within the next two years. And of course it doesn’t take a full-scale natural disaster to have a significant impact on your business. Anyone can lose a roof following high winds, leaving your business exposed to water inundation and other damage.

Anna has seen small businesses respond with varying degrees of success. Planning and understanding your environment is key to a successful outcome. "I have seen a real estate office go underwater but get back on its feet quickly by setting up another location to work from, diverting phones to mobiles and having the right insurance cover. Everything else was just an inconvenience," she recalls. "They knew beforehand that the high-water mark was 10 feet and that their office roof was 12 feet, so they moved everything upstairs. When they came back, their insurance paid for new furniture and flooring and they were able to move on."

Of course, natural disasters aren’t the only source of disruption to businesses. According to the New South Wales Government’s SmallBizConnect site, some of the most common risks to small businesses include breakdown of machinery and equipment; high staff turnover or loss of a key staff member (especially if they have unique skills); security of data and intellectual property; and theft.

Preparing for such events, Anna says, can make your business more resilient, giving you an opportunity to not just survive but also thrive: "Having a clear plan in place can not only save a small business but also put it ahead of competitors and improve goodwill with customers."

How to create a basic business continuity plan

Step 1: Communication

Regardless of the size of your business, communication should be the first consideration in a business continuity plan, Anna says.

"If a business is able to communicate with its staff, suppliers and customers, it will get out of whatever problem it's in, or at least be able to walk away gracefully," she explains. While keeping in touch with the first two groups could be as simple as diverting phones and setting up remote access to databases and key contact details, a social media presence might be the best option for keeping customers informed.

Step 2: Understanding your risks (and having a backup plan)

The second step, Anna explains, is to understand your risks and have a backup plan in place for each. "If the key risk to your business is … the fact you're located in a known flood plain, have a plan," she suggests. "It doesn't have to be extensive, but it should include how you will continue operating, or an acceptable response that works for your situation."

For each threat, Anna recommends addressing the following five categories: people, building, technology, suppliers and reputation. "Ask yourself: What do you need within each of these areas to operate your business? It's all about knowing what you do, and what you need to get that done."

While mapping out all possible scenarios might seem an overwhelming task, Anna points out that a simple flow chart may suffice. "Think about the essential people you need to run your business, such as a receptionist and someone to do payroll; whether you have an alternate office location, which could be as basic as your backyard shed; whether your existing IT equipment will do the job; whether you have an alternative supplier in mind if your business relies on a supply chain; and how you can maintain your brand's reputation. If you break it down like this, you'll have everything covered."

Step 3: Protect your data

The third step is to ensure your data is protected in all eventualities – a consideration that, Anna says, is often overlooked. "Small businesses have to make big decisions when it comes to prioritising expenditure," she says. "But ensuring you have another copy of your data, even if it's a photo taken on a smartphone and stored in a secure location, is key to surviving many scenarios."

Anna believes this is a particularly important factor for businesses that outsource IT work. "Small business operators don't always know to ask where their data is going, who else has access to it, or how they can get to it if something goes wrong."

Step 4: Inform your staff

The fourth and final step is to ensure staff are aware of your business continuity plan, and to review it from time to time. "Monitor your environment and maintain your plans so they reflect change," Anna suggests, "and regularly ensure your team is aware and able to activate the plans. Think of it like Health and Safety - ten minutes thought regularly and you are prepared."

Prioritising the most likely risks is also important, she adds, explaining that you should focus on those that worry you most. "Plan for and mitigate, where you can, the risks that would cause the most impact. Business continuity planning shouldn't be for a ‘one in 100-year event' – it should be to provide you with the comfort that things are going to go to plan. There's business value in that."

For help with emergency management planning, the Australian Government offers an Emergency management template and guide.

Read more:

• Storms guide for business
• Why is correct revenue estimation so important?
• Keen to run a business from home? Here’s how to get things moving.

Insurance is issued by AAI Limited ABN 48 005 297 807 trading as AAMI Business Insurance. Any advice has been prepared without taking into account your particular objectives, financial situation or needs, so you should consider whether it is appropriate for you before acting on it. Please read the relevant Product Disclosure Statement before you make any decision regarding this product. The Target Market Determination is also available.