Government Business

According to recent Government figures, over 80 per cent of UK businesses fail within two years after a major incident such as fire, flooding or terrorism. The vast majority of firms are protected by business interruption insurance cover, and so the reasons for this exceptionally high failure rate are not immediately clear.
    
However, the answer lies in a widespread failure, particularly amongst small businesses, to undertake proper planning to ensure that they are prepared to survive the aftermath of an emergency. Independent research commissioned by the British Insurance Brokers’ Association (BIBA) has revealed that millions of small and medium sized enterprises (SMEs) are failing to plan effectively for unexpected crises.
    
This issue is often referred to as disaster recovery, but in reality a more appropriate label is business continuity – the ability to survive following a major setback. With approximately 4.3 million SMEs in the UK, employing around 12 million people, this sector is vital to the economy. BIBA has been campaigning to encourage all small businesses to plan, in order to protect both their livelihood and their employees.

Evaluating the dangers
There are two elements to developing and establishing a successful business continuity plan.
    
First, SMEs need to identify the general risks such as fire and flooding which could impact their enterprise as well as the specific dangers they are exposed to which could damage a particular business or trade. For example, an IT company will have different business continuity needs to a builders merchant.  
    
Once these exposures have been identified, they must be evaluated fully. Many exposures can be protected with good risk management. Those exposures, which cannot be controlled, can be outsourced, via an insurance broker, to an insurance company or a third party provider.

Preparation is key
The second, and most challenging aspect of a robust business contingency plan, is to put in place a “back-up” solution to preserve the viability of the business. The explosion at the Buncefield oil depot powerfully illustrated the need for businesses to have a plan in place which would allow them to survive the aftermath of a catastrophic, and unexpected, incident.
 
Many firms in the area surrounding the explosion simply had not done so. An East of England Development Agency study revealed that 25 business were seriously affected by the disaster, and 16 have been forced to relocate, moving 1,422 jobs out of the area.
 
It is also important to consider new and increasing threats to businesses, including the threat of terrorism. Research commissioned by BIBA revealed that nearly three quarters of small businesses had no plans to deal with the resulting impact of acts of terrorism.
 
In today’s ultra competitive business environment, even a short period of enforced and unexpected commercial inactivity can be devastating. Long term pauses in trading will lead to closure unless effective management and planning is in place. It is vital that SMEs understand that preparation for both small and major interruptions is vital, and the responsibility lies fairly and squarely in their own hands.

An effective plan
An effective business continuity plan will contain the information, protocols and organisational structures which will take effect immediately following an incident, and will help to limit the extent of the damage caused to the business.
    
Staff must understand what their roles and jobs would be in the event of a disaster. Some will focus internally to help rebuild the business from within, while others may focus on the customer to ensure they understand why the business has been impacted. Large firms will also need to consider the best way of communicating with their employees to ensure they understand the timeline for recovery.
    
Whilst most plans will cover the obvious risks such as loss of stock and damage to premises, it is important to consider the other tools which are essential to business operations. Data stored on computers can be taken for granted but is vital to the majority of modern businesses, storing customer and supplier information as well as logging transactions and employee details. Research has shown that 90 per cent of businesses who lose their data close within two years.
    
SMEs should consider how important these systems are, and whether the information they contain has been backed-up and is protected off-site. Businesses should also consider the effect a major power cut, hacking incident or virus could have on this information, and whether databases are accessible should one be prevented from entering their premises.
    
Planning for the unexpected can also help businesses ensure that they do not forget their most important asset, the customer. It is essential that enterprises continue to communicate with customers and clients following a crises in order to ensure peace of mind, that they will not be affected, and that there is a clear timeline for the business to begin trading again.
    
Finally, regular testing is vital to ensure that a viable and effective plan has been set in place. Disaster plans should be trialled with a dry run to ensure staff know exactly what to do. If this highlights teething problems, good. Problems at the testing stage should not be perceived as failure – rather as an opportunity to improve, to train staff, to review plans, test suppliers and to strengthen the business in all areas.

Planning will enable your business to survive
Sound risk management to reduce the causes of accidents and emergencies is a key part of business life, and it is important to ensure that all steps have been taken to prevent incidents occurring that can place staff and businesses in danger. However, events in recent years, such as the floods at Boscastle, are a stark reminder that even the best preparations cannot prevent the unexpected.
    
The fundamental principle of business continuity is the ability to survive following a major incident that, had the contingency plan not been in place, would have crippled the business. Effective planning and the proper insurance cover will allow the basic activities of any business to carry on, from the payment of salaries and rent, to the settlement of supplier invoices settled for goods delivered, and the maintenance of the client base which will enable the business to get back up and running.
    
BIBA brokers can help advise businesses on the development of a business continuity plan and link this with the appropriate business interruption cover which will help SMEs survive the fall out of an emergency situation.
    
Effective planning to deal with unexpected events makes good business sense. Companies may argue that they cannot afford the cost of a detailed business contingency plan, but the cost of not having one in place will be much greater indeed.
                                             
For more information
www.biba.org.uk