Disasters take many forms — tornadoes, hurricanes, fires, floods, acts of terrorism, major IT malfunctions, legal issues, competition, labor issues, etc. While not every business will suffer through a disaster, every business needs to be prepared in the event a disaster occurs, because according to Geary Sikich, principal, Logical Management Systems Corp., 50% of businesses cease operation following a major disruption.
The goal of every business owner should be to have a plan to ensure that the business continues operation in the event of a disaster. Speaking at a recent NationaLease meeting, Sikich defined business continuity as “All initiatives taken to assure the survival, growth and resilience of the enterprise.”
During your planning, you need to ask yourself six key questions, Sikich says:
- What are we committed to?
- How will we fulfill these commitments?
- Do we have an organization that serves our needs?
- How will we manage resources?
- What skills do we expect from our organization?
- How will we optimize authority, decision-making, workflow and information sharing?
During a risk assessment, many business owners focus on the probability of a risk and its impact without paying attention to the speed at which risks move throughout an organization. For example, with a risk like changing social trends the impact might not be evident for a year. With something like technology risks, the impact would be evident in a quarter. And with risks like new competition and market risks, the impact would be evident in a month. Sikich says, “While 70% of finance executives agree that risk velocity is a core consideration, only 11% have introduced it into their risk assessments.”
Even if you think you have a good disaster plan, ask yourself these questions to determine if your plan is “brittle:”
- Do the organization’s plans stand in silos of excellence?
- Are activation and implementation of plans independent and uncoordinated?
- Does the organization face critical junctures of survival every time an event or certain shock affects it?
- Does analysis of “worst case” scenarios underlay the basis of planning?
- Do the plans reflect the strategy, goals and objectives of the organization?
Sikich also pointed out the pitfalls that can make dealing with extreme events even more challenging:
- Not preparing for low probability events
- Under-appreciation of global connections
- Thinking, “It can’t happen to us”
- Fighting the last war
- Denying risks
- Viewing a “near miss” as “no problem”
- Avoiding high upfront costs
- Fear of becoming non-competitive
A crisis management team can help you not only prepare for disasters but also successfully navigate them.
In my next blog post, I will share Sikich’s thoughts on how to build an effective crisis management team.
