Unplanned events can have a devastating effect on small businesses. Crises such as fire, damage to stock, illness of key staff or IT system failure could all make it difficult or even impossible to carry out your normal day-to-day activities.
At worst, this could see you losing important customers - and even going out of business altogether.
But with good planning you can take steps to minimise the potential impact of a disaster - and ideally prevent it happening in the first place.
This guide will help you to identify potential risks, make preparations for emergencies and test how your business is likely to cope in a disaster.
Why you need to plan for possible crises
It's essential to plan thoroughly to protect yourself from the impact of potential crises - from fire, flood or theft to IT system failure, restricted access to premises or illness of key staff.
This planning is very important for small businesses since they often lack the resources to cope easily in a crisis.
Failure to plan could be disastrous. At best you risk losing customers while you're getting your business back on its feet. At worst your business may never recover and may ultimately cease trading.
As part of the planning process you should:
- identify potential crises that might affect you
- determine how you intend to minimise the risks of these disasters occurring
- set out how you'll react if a disaster occurs in a business continuity plan
- test the plan regularly
For example, if you're reliant on computer information, you should put a back-up system in place so you have a copy of key data in the event of a system failure.
Benefits of a business continuity plan
A carefully thought-out business continuity plan will make coping in a crisis easier and enable you to minimise disruption to the business and its customers.
It will also prove to customers, insurers and investors that your business is robust enough to cope with anything that might be thrown at you - possibly giving you the edge over your competitors.
Crises that could affect your business
Depending on your business' specific circumstances, there are many possible events that might constitute a crisis:
- Natural disasters - for example, flooding caused by burst water pipes or heavy rain, or wind damage following storms.
- Theft or vandalism - theft of computer equipment, for instance, could prove devastating. Similarly, vandalism of machinery or vehicles could not only be costly but also pose health and safety risks.
- Fire - few other situations have such potential to physically destroy a business.
- Power cut - loss of power could have serious consequences. What would you do if you couldn't use IT or telecoms systems or operate other key machinery or equipment?
- IT system failure - computer viruses, attacks by hackers or system failures could affect employees' ability to work effectively.
- Restricted access to premises - how would your business function if you couldn't access your workplace - for example, due to a gas leak?
- Loss or illness of key staff - if any of your staff is central to the running of your business, consider how you would cope if they were to leave or be incapacitated by illness.
- Outbreak of disease or infection - depending on your type of business an outbreak of an infectious disease among your staff, in your premises or among livestock could present serious health and safety risks.
- Terrorist attack - consider the risks to your employees and your business operations if there is a terrorist strike, either where your business is based or in locations to which you and your employees travel. Also consider whether an attack may have a longer-term effect on your particular market or sector.
- Crises affecting suppliers - how would you source alternative supplies?
- Crises affecting customers - will insurance or customer guarantees offset a client's inability to take your goods or services?
- Crises affecting your business' reputation - how would you cope, for example, in the event of a product recall?
Though some of these scenarios may seem unlikely, it's prudent to give them consideration.
Assess the possible impact of risks on your business
You need to analyse the probability and consequences of crises that could affect your business. This involves:
- assessing the likelihood of a particular crisis occurring - and its possible frequency
- determining its possible impact on your operations
This kind of analysis should help you to identify which business functions are essential to day-to-day business operations. You're likely to conclude that certain roles within the business - while necessary in normal circumstances - aren't absolutely critical in a disaster scenario.
Likelihood of risks occurring
It can help to grade the probability of a particular crisis occurring, perhaps on a numerical scale or as high, medium or low.
This will help you to decide your business' attitude towards each risk. You may decide to do nothing about a low-probability crisis - although remember that it could still be highly damaging to your business if it occurred, e.g. a terrorist attack.
Potential impact of a crisis
To determine the possible impact of a crisis on your business, it can be helpful to think of some of the worst possible scenarios and how they might prove debilitating for the business.
For instance, how could you access data on your customers and suppliers if computer equipment was stolen or damaged by a flood? Where would the business operate from if your premises were destroyed by fire?
It's essential to look at risks from the perspective of your customers. Consider how they'd be affected by each potential crisis. Would they be likely to look for alternative suppliers?
Consider whether you would be able to keep to service-level agreements (SLAs) if a particular crisis occurred - and what the consequences might be if you couldn't.
Minimise the potential impact of crises
Once you've identified the key risks your business faces, you need to take steps to protect your business functions against them.
Good electrical and gas safety could help protect premises against fire. Installing fire and burglar alarms also makes sense.
Think what you would do in an emergency if your premises couldn't be used. For example, you might suggest an arrangement with another local business to share premises temporarily if a crisis affected either of you.
If you use vital pieces of equipment, you may want to cover them with maintenance plans guaranteeing a fast emergency call-out.
IT and communications
Installing anti-virus software, backing up data and ensuring the right maintenance agreements are in place can all help protect your IT systems. You might also consider paying an IT company to regularly back up your data offsite on a secure server.
Printing out copies of your customer database can be a good way of ensuring you can still contact customers if your IT system fails.
Try to ensure you're not dependent on a few staff for key skills by getting them to train other people.
Consider whether you could get temporary cover from a recruitment agency if illness left you without several key members of staff. And take health and safety seriously to reduce the risk of staff injuries.
Insurance forms a central part of an effective risk-management strategy.
Plan how you'll deal with an emergency
You should draw up a business continuity plan setting out in writing how you will cope if a crisis does occur.
It should detail:
- the key business functions you need to get operating as quickly as possible and the resources you'll need to do so
- the roles of individuals in the emergency
Making the most of the first hour after an emergency occurs is essential in minimising the impact. As a result, your plan needs to explain the immediate actions to be taken.
Consider whether you'll need to give staff specific training to enable them to fulfil their responsibilities in an emergency situation. Ensure all employees are aware of what they have to do.
Arranging the plan in the form of checklists can be a good way to make sure that key steps are followed.
Include contact details for those you're likely to have to notify in an emergency such as the emergency services, insurers, municipal services, customers, suppliers, utility companies and neighbouring businesses.
It's also worth including details of service-providers such as glaziers, locksmiths, plumbers, electricians, and IT specialists. Include maps of your premises' layout to help emergency services, showing fire escapes, sprinklers and other safety equipment.
Set out how you'll deal with possible media interest in an incident. Appoint a single company spokesperson to handle questions and try to be positive in any statements you issue. Ensure staff, customers and suppliers are informed before they find out in the media.
Finally, make sure hard copies of your business continuity plan are lodged at your home and at with your bank and at the homes of other key members of staff.
Test your business continuity plan
Once your plan is in place, you'll need to test how well it's likely to perform in the event of an emergency.
Although by their nature crises are hard to simulate in a rehearsal, you can assess your plan against a number of possible scenarios in a paper-based exercise.
Think about the things that would cause most disruption and that are most likely to happen to your business. Then make sure that your plan covers each of the risks. Ask yourself the following key questions:
- Does it set out each employee's role in the event of each emergency?
- Have you set out the right steps to take?
- Is the order of the plan correct so that priority actions to minimise damage will take place immediately after the incident?
Make some telephone calls to check that the key contacts and phone numbers that you have given are correct. Having to find the right number after a crisis could use up valuable time.
Keep your plan updated
Remember to update your plan regularly to take into account your business' changing circumstances.
If you move into new premises, for example, you could face an entirely new set of risks. You'd need to draw up new maps for the emergency services and amend any contact numbers necessary.
You should test your plan regularly, even if your business hasn't undergone significant changes.
You can also consult the following guides:
Original document, Crisis management and business continuity planning, © Crown copyright 2009
Source: Business Link UK (now GOV.UK/Business)
Adapted for Québec by Info entrepreneurs