*Business Continuity - A Primer*
Copyright 2004
By: Paul Martin
22 November 2004

Any re-use of this material without the express written consent of the author is unauthorized. Any legal discussions in this article are purely for informational purposes only and do not constitute legal advice. Contact the author at www.paultmartin.com for more information.

Introduction

Business Continuity (BC) planning is disaster planning for a business. Each year, thousands of businesses experience varying degrees of damage or catastrophes - fires, severe weather, computer crashes and viruses, workplace violence - which require millions of dollars to remedy.

This article will examine the following topics:

Potential Risks Faced By Businesses Today

Even in a post 9/11 environment, the number and type of risks to businesses today has not changed dramatically. Consider the following risks businesses can face:

Itís safe to say more businesses in America are hurt by fire, severe weather and disgruntled employees every year than are directly hurt by terrorism. Nonetheless, the effects of a catastrophic fire or weather event can be just as damaging as terrorism.

As businesses become more reliant on technology to transact business, damage to that technology or the infrastructure can amplify the financial impact to a business. For example, forty years ago it was common for cash registers to operate mechanically. Nowadays, they all run on AC power and are often tied into a inventory tracking software program. If the power goes out to a store, even if the store is not damaged, it cannot transact business due to its increased use of technology in day to day operations.

A good BC plan will factor in all of the potential risks faced by the business and present the decision makers with a clear choice of options in a coherent fashion.

 

Legal problems ensuing from a disaster

Business continuity is a growing area of law. Legal reasons for creating a BC plan can fall into one or more of the following categories:

Simply put, a customer or vendor may sue you for failing to live up to your legal obligations by not implementing plans to continue your business after a disaster. Often times, contracts contain "force majeure" clauses which allow businesses feeling the wrath of a disaster a way to get out of their obligations. However, as business continuity technology advances, courts (in my opinion) will be more reluctant to allow a business to utilize their force majeure clause to get out of their obligations to someone else.

 

Reasons for resistance to BC planning

People fail or refuse to plan for disasters for a number of reasons. Businesses are no exception.

While business owners can offer a wide array of explanations when asked why they do not have a BC plan, most responses can be categorized in one of the following four reasons:

The cost of implementing and testing a BC plan is too high. Generally, this response comes from small business owners who think BC plans are only for large corporations with strong capitalization. However, BC planning need not be costly.

I donít really care if I have a BC plan or not; itís just not that important. Apathy kills people. It can also kill businesses. This response is more likely to come from an employee of the business, rather than someone who has an ownership interest in it.

Maybe if we donít talk about it, it wonít happen. I call this "denial caused by fear." To most of us who believe in preparedness, this is perhaps the hardest mindset for us to understand. Thatís because the person is genuinely worried about the prospect of a disaster, but wants to avoid worrying about it by not planning for it.

Even if something bad does happen, my business wonít be affected by it. I refer to this as "denial caused by naivete." Many entrepreneurs are eternal optimists and risk takers. Theyíve gotten this far by not having a plan for disasters, so why have one now?

Working through these attitudes can be difficult. However, there are some "talking points" you can utilize to help you communicate the need for a BC plan:

 

 

What problems can businesses face during and after a crisis?

The number and types of problems your business can face after a crisis are limited only by your imagination. Most people can foresee some of the problems their business might face if an emergency occurs, but getting a good perspective on the potential problems requires looking at your business from every conceivable aspect.

Here are a list of some things that might go wrong for your business after a disaster. It is not meant to be an inclusive list, but rather to give you an idea of what you might be facing:

Employees with special medical needs will be taxed more than others. As an employer or manager, you will need to consider the possibility your workforce will not be at 100% capacity. Many experts suggest designating someone in the organization post-disaster who does nothing but attend to the immediate needs of the employees. Good will gestures like this help motivate other employees devote extra time and effort to help their employer.

 

In addition to having the appropriate liability insurance coverages for personal injury, make sure your legal counsel has reviewed all of your agreements to ensure they contain language allowing you to escape contractual obligations during periods of downtime due to disasters. To the extent these obligations cannot be avoided, make sure you have enough cash in reserve or adequate business interruption insurance to cover those obligations.

 

 

These businesses have the option of using a field office as their backup main office while the real main office is off line. The decision on which field office to anoint as the backup office should not be taken lightly. In the end, if the home office tanks, which field office has the talent and assets to run the show in an emergency situation?

 

What can you do to minimize the risk?

Having discussed what bad things might happen and the resulting problems, we can now focus on ways to prevent those risks. The best way to do that is to:

Formulating the BC Plan: If you have carefully considered the potential hazards and the problems for your business those hazards can create, you are half way done. There is no one right way to formulate a BC plan. One template you might choose to follow looks like this:

Executing hazard mitigation tasks: In formulating the plan, you may discover procedures and devices that, if implemented and purchased, will reduce the impact of any disaster. For example, emergency backup lighting which turns on during a blackout is a good way to see your way around during a power outage.

Testing the BC plan. The plan is like the human body. To get maximum performance from it, it has to be exercised on a regular basis.

Testing a BC plan doesnít necessarily mean taking the entire operation off the grid, locking out a few machines, and seeing if your people can operate in a simulated failure of critical infrastructure. It can be as simple as "table top" exercises, where someone creates a hypothetical and the BC team talks their way through the problem.

The best testing methods include a variety of exercises, including table top exercises, partial system shutdowns, as well as detailed analysis during and after any minor emergencies to see how well the plan was implemented and executed.

Conclusion

As courts and lawmakers put more legal duties on businesses to live up to their contractual obligations to customers and shareholders, BC planning will become more important in the future. Having a BC plan in place which is regularly tested may even give your company a competitive advantage over others in times of crisis.
Paul Martin



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