Opinion Column

Maintaining business when the sky is falling

By Larry Schruder, The Delfi Group

Most of us in business are stressed enough keeping our operations successful in ordinary everyday times without worrying too much about how we would keep things afloat if the sky were to begin to fall.
 
Bad things happen from time to time, even to businesses, when it really does seem like the sky is falling. Suddenly there is a significant flood that shuts down our office. A flash fire destroys part of our production line. A flu epidemic decimates our staff for two full weeks. One of our major suppliers goes bankrupt. An organization-wide computer crash destroys all of our client lists and financial records. The power grid slips into failure mode for a prolonged period of time. Any one of these things, and a host of other unimaginable but possible events, would significantly damage our business operations, even to the point where no successful recovery is possible.
 
In life, most of us carry personal insurance to help us deal with such potential devastation to life or property. Business disruption insurance is available at a cost – but most clients go elsewhere while the doors are closed – crisis or not. The insurance may not be significant enough to cover the losses.
 
Business Continuity Planning (BCP) is the term used when businesses engage in scenario planning to deal with catastrophic events that could cause significant harm. Often described as ‘just common sense’, it is owners and management taking responsibility for the business and making sure that it has the ability to stay on course regardless of the storms arise. It is about “keeping calm and carrying on”, even when the sky is falling! It is about identifying potential catastrophic business scenarios and making preliminary plans about how to reduce the potential impact of such occurrences.
 
BCP got a lot of attention as the world raced toward the year 2000 – when no one knew for sure whether the world’s computers could handle a two-digit year starting with a “0”. The world survived that potential crisis without incident – and for most, it ended up being a costly process without obvious benefit. But Y2K it certainly did get the larger corporations to pay more attention to the potential impact of widespread system failure - and how it could affect their business operations.
 
Today, many small business owners have not yet recognized this need for managing potential risk. Every business needs to assess, build and improve its resilience and capability to deal with the unexpected. The critical question to be asked is “What steps can I take now to increase my ability to continue the delivery of my critical products and services under circumstances that would potentially devastate others in my field of speciality?”
 
As consultants we are often asked where to start. First, identify the key products and services that are core to business success and understand the most critical activities or inputs that determine the organization’s ability to produce and deliver these. Then, brainstorm the types of ‘sky-falling’ occurrences that would disrupt or destroy this ability to produce and deliver. This list might include loss of availability of critical raw materials to make the product. It might include the loss of a critical employee that holds the intellectual and practical ‘keys to the kingdom’ when it comes to your operations. It might include the loss of key equipment central to your production or service delivery to clients.
 
With the list of potential risks made, simply assess and score each risk on a scale of one to three (with three being high) one/two separate dimensions: probability of occurrence and degree of business impact if it did occur. Now multiply the two ratings for each risk to give it business risk score (will be somewhere between one and nine). Circle the highest scores and go to work on brainstorming a list of actions that could be taken on how to reduce the score by reducing either the probability of occurrence – or the impact of the occurrence, or both.
 
Here is a simple example using one of the most common risks. Most businesses today are moving into a level of computer reliance where the electronic movement of data is as critical to the business as blood and the central nervous system is for the human body. Many business owners have limited understanding of the technology or the gadgetry involved – and keep as far away from it as possible, relying on the technical geeks for their expertise. The success of many of our clients these days is
 
almost totally reliant their IT infrastructure – something that they are always asked for $$ to improve – but almost always struggle to give enough budget priority. An honest rating using the suggestion above scores above usually places this risk in or close to the high/high category (nine).
 
Is your critical data backed-up and where? If it is backed up to another server or memory device on site, what happens in a flood or fire? Where are the weakest links in the components of your computer technology that could shut your system down? Do you have the most critical replacement parts on site ready to install? Is all of this information in someone’s head, or is it written down? Do you have access to internal or external expertise? Do you have access to a back-up power supply – and for how long? When is the last time you had a professional assessment of your IT system? And finally, what steps can you take now to get to the best possible answers to each of these questions?
 
Yes, business continuity planning does seem like common sense – but too many times, this awareness comes after the crisis hits, rather than before. There are enough risks in everyday business to occupy our time. But we all sleep a little better with an appropriate insurance plan in place to deal with our nine’s.
 
Larry Schruder is president and co-owner of The Delfi Group, Pembroke and can be reached at larry. schruder@thedelfigroup.com.