The business disaster data suggests yes – emphatically yes.
Organizations underestimate the emergency disaster threat to business viability at their peril. According to the U.S. Federal Emergency Management Agency, anywhere between 40 to 60 percent of small businesses never reopen following a national disaster.
Many small businesses do open after a national disaster, though. They just do so in a financially compromised position, which eventually forces them to cease operations, often within a few years. The extent of financial loss due to downtime goes unremarked, but estimates show up to $2.8 million per hour in downtime business costs in certain industries. That figure totals out to a single day loss of some $67 million.
Don’t have that kind of money in the bank or coverage in your insurance policy? You’re not alone. Thankfully, a lot of our business closure numbers are weighted heavily towards companies who go into major incidents without having first developed a business continuity plan (BCP).
Of course, therein lies the rationale for developing a business continuity plan at your organization. Business continuity plans – collections of resources, actions, procedures, and information, designed to prepare organizations to maintain essential functions in the event of a disaster or other major disruption – are absolutely vital to guaranteeing business survival. More specifically, BCPs mitigate the financial cost (of disaster) by helping organizations return to normal operations more quickly.
How so? Well, there are a lot of reasons. For one, the business continuity planning effort, which involves examining the precise relationship of business resources and assets to critical services, tends to lead to better overall organizational efficiency outcomes. After all, effective business continuity management provides a holistic management process for identifying potential threats to your organization and the operational impacts those threats would pose.
There’s another important consideration when weighing whether to develop a business continuity plan: some variant of that plan might be mandated by law. Indeed, the very utility of business continuity management, especially in critical infrastructure sectors, has led lawmakers and regulators to mandate certain baseline business continuity practices. Those measures often include maintaining a business continuity plan at your organization. Case in point: the ISO (International Organization for Standardization) standard 22301 was developed to provide organizations with a means of complying with regional and national requirements.
Nor is maintaining compliance with statutes the only business benefit of business continuity planning. Customers are looking to work with trustworthy partners. Those customers know that they stand to lose when a partner can’t deliver critical products and services after disruptive incidents. In this respect, business continuity plans act like an insurance policy for these anxious customers. And that’s why developing a plan offers your firm a major competitive advantage in the market, while protecting the brand in the eyes of shareholders and customers when emergency does strike. Need more reasons to get started? Or just looking to develop your own business continuity plan, download our free introductory guide to business continuity planning.
Sources:
Utah Division of Emergency Management: 75% of companies without business plans fail within three years after facing a disaster and or operational disruption
CIR Magazine: The Evolution of Business Continuity Management
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