Why invest in business continuity?

The question, “Why invest in business continuity?” might seem redundant to the layperson. Isn’t everything a business does, and every investment it makes, geared towards its own continuance? In the timeline of the present it is, but there are deeper and not-so-obvious implications of what business continuity is all about–and there are potentially dire consequences to neglecting formal business continuity planning.

It’s about the unknown future

Businesses mostly run in the present. The future is about budgets, growth projections, marketing, etc., which are all part of a plan prepared in the past. However, unforeseen disruptive losses–accidents, natural disaster, and so on–can stop the present in its tracks and pave the rocky way to a bleak future.

Business continuity planning is the plan beyond the insurance policy, which can mean the difference between survival and total shutdown. It also has the benefits of steely-eyed analysis that separates the vital from the nice-to-have.

In its basic sense, having a well-tested plan in place and ready to execute meets the first tier in your business’s hierarchy of needs: survival. Once those needs are met, everything good follows.

Your survival needs

Imagine some event totally beyond your control that cuts you off from your supply stream or business data. Natural disasters happen, but human error and malfeasance can also separate you from your customers. You would need, as a minimum, to have a business continuity plan, which has already done the following:

• decided which business functions that are critical as opposed to those that can be suspended until full recovery–Do you concentrate on paying customers only, or continue your cold-calling?
• identified and matched your resources to support the aforementioned critical functions–Do you give high priority to acquiring alternative temporary storage and shipping facilities, or do you concentrate on restoring your phones?
• inventoried and identified the new support equipment and stock required to move forward–What was your inventory before the disaster, and would happen if much or all of it were damaged or lost?
• included a plan to replace and recover your IT systems and proprietary business data–Is your network designed for backup and failover? What would it cost, and how long would it take, to replace water-damaged hardware and get back up?
• identified your key staff people–what they must do and when they must do it–For everything that has to be done, is there someone designated and aware they must do it?
• included a plan to maintain contact with your customers to keep them confident, informed and on board–How many customer transactions will be in the pipeline, and what is the plan for reaching out to keep them assured and happy?

Beyond Survival: Government regulations require business continuity planning

There are other factors that drive the need for business continuity planning. Actually, many businesses don’t have a choice when it comes to continuity planning. The healthcare industry, for example, is tightly regulated by HIPAA and FDA requirements. HIPAA requires a data backup, disaster recovery and emergency operation plan.

Likewise, financial enterprises must plan for quick resumption of operations in the event of disaster.

Additionally, there are numerous other government agencies that stir the pot and have a stake in keeping things going after disaster strikes. They run the gamut from utilities to information technology specialists and require everything from contingency planning to training and testing the recovery plan.

(See this Gartner Research Preview for a matrix of laws and regulations governing continuity and disaster planning.)

Regulations aside, there is much more to consider

Yes, it makes sense to plan for survival, and it is good business to stay out of trouble with government regulators. But there are not-so-obvious–and even better–reasons to invest in business continuity:

1. Business continuity planning results in quick decisions that minimize the financial costs of business disruption.

Bad or misinformed decisions following the first hours or few days following a disaster can be costly. The aims of business continuity planning are to:

• provide continuity of customer service at a minimal acceptable level
• ensure critical functions continue to operate during a crisis period
• allow for the remainder to come back on line in a controlled manner

Each of those aims has a significant financial impact. Get them wrong, and further financial loss will occur. An effective business continuity plan promotes the right decisions quickly by keeping the critical functions going with less chance of having to spend additional time and money without the risk of future profitability.

2. Business continuity planning covers what business insurance does not.

Most business insurance policies cover only loss or damage to your equipment and inventory. They typically do not cover loss of profits. To get business interruption coverage, the insured must document the business’s current net income. The coverage, typically capped at $30,000 per incident, could be far below the amount the insurer needs to carry on.

Having a business continuity plan in place could be the basis of getting better terms from the insurer, and in some cases could be an absolute precondition.  Besides that, there are other nontangible losses no amount of insurance will cover; to name a few:

• delayed or aborted new products and services–Your business plan has been frozen in time.
• loss of business opportunities in an expanding market–There is more of a demand for your product or service, but you must pass up those opportunities.
• loss of your business reputation and erosion of the value of your brand–It is the old “what have you done for me lately” phenomenon.
• the incalculable cost of losing customers. Your customers, as will be discussed later, are undoubtedly loyal and understanding, but if they must go elsewhere to survive, how will you ever get them back?

All the above translates into decreased chances for long-term survivability, because, without a viable business continuity plan, those intangibles can become crippling.

3. Business continuity planning enhances your competitive advantage.

A tried and tested business continuity plan provides a significant competitive advantage. It shows evidence to potential and existing customers that as a supplier or service provider you are a strong link in their own continuity planning. If you want someone’s business, you need to have a plan to keep your customers in business.

See this report by the Business Continuity Institute, which highlights the importance of business continuity plans as one factor in winning business. As the report demonstrates, business continuity details are becoming a “standard inclusion” in business pitches.

And last, but never least, there is the competition in the marketplace to obtain and retain customers. A business continuity plan is what ensures the continued flow of supplies and services to customers, who, despite years of loyalty, would go elsewhere never to return.

4. Business continuity planning leads to a deeper understanding of the business, what it does, and what is most important.

A key development tool for any business continuity plan is the business impact analysis.  The process involves examining how every component of the organization relies on every other component. However, some components are more crucial than others and must receive more attention–i.e., time and money–after disaster strikes.

The resulting self-knowledge leads to a deep understanding of your business processes for a keener focus on its principal mission, aims and objectives.  Non-critical or peripheral functions can either be jettisoned or set aside to get business moving again. In any case, doing the analysis is a good idea to begin with, and the process can take on a life of its own.

The foregoing process also results in an understanding of the organization’s supply chain–and where the supply chain meshes into critical and non-critical components of the business. This understanding enables the organization to focus on the critical supply functions to ensure that business continues.

5. Business continuity planning is an integral part of the governance and survivability of any business, regardless of size.

Regulated or not, big corporation or small to medium-sized, no business should be without a business continuity plan. In fact, smaller businesses are more vulnerable to failure following a disaster. Large corporations, of course, must demonstrate to their investors, customers, auditors and regulators its commitment to good governance and an ability to quickly return to normal.

A simple conclusion…

This article began with the assertion that the question “Why invest in business continuity?” was no redundancy. Let’s end it with the further assertion that the answer to the question is also a tautology: Invest in business continuity to make sure your business continues–and that bears repeating.

We make business continuity planning easier

We’ve pretty much covered the “why” of business continuity planning.

Learn more about our approach to Business Continuity in our Ultimate Guide to Business Continuity and then contact us today.