Joe Anderson, The Daily Record Newswire
Most businesses are taken by surprise when a disaster hits. Why? Is it because it's a new type of disaster? Not typically. Is it because they never could have anticipated it? Not really. It is a result of a failure to think ahead and plan for the worst-case scenario.
Here are the top nine sources of business disasters, according to the Business Resilience Certification Consortium International, which certifies the professionals who help businesses prepare for the unexpected.
1. Hardware failure: 22 percent
2.Utilities failure: 18 percent
3.Deliberate/malicious actions: 15 percent
4. Building loss, denial, loss of access: 12 percent
5. Software failure: 9 percent
6. Natural disasters: 8 percent
7. Security breaches: 7 percent
8. Human error: 6 percent
9. Personnel loss: 4 percent
Here are a few examples.
- A fire hits a local potato flake processing plant, which then goes down for eight to 10 months to re-build. They could hire another flake processor to produce their product (a competitor), but do not want to share their production and flavoring secrets. They had insurance coverage for the building and equipment, but it will take four to five months to set up a temporary facility and get all of the equipment in there. Meanwhile, the news media is hearing stories about layoffs, and plant moves, and the community is concerned. Will their clients move or stay loyal? Will they be able to pay their workers, and if not, will they move to take other jobs?
- A data breach hits a service business that processes healthcare information for most of the assisted living/nursing facilities in the state. This breach has made it into the media, and the papers have published all of the businesses that used this service. Sales are starting to drop at those facilities, as buyers are starting to move to smaller facilities who manage their own information. How will your "larger facility" handle the move-outs and lower new business?
- A terrorist attacks a petroleum refinery and fuel is in scarce supply for the next three weeks. After that, prices are expected to rise five-fold. You run a delivery business with contracts out to four months. How will you get your product to your clients? How will you pay your gas bill?
Do you know which disasters threaten your business? Have you mapped out their impact, and do you have a tested plan of action to respond quickly and limit the damage?
Many business leaders don't have answers to these questions. And when they don't have those answers, here's what can happen, according to the industry:
- Thirty percent of all businesses that have a major fire go out of business within a year. Seventy percent fail within five years.
- Companies that aren't able to resume operations within ten days of a disaster are not likely to survive.
- At The Hartford, we've found that over 40 percent of businesses that don't have a disaster recovery guide go out of business after a major loss, such as a fire, a break-in, or a storm.
- According to the Institute for Business and Home Safety, an estimated 25 percent of businesses do not reopen following a major disaster.
Depending upon who you choose to "side-up" with above, the numbers are somewhere between 25 percent to 70 percent for businesses that close after a major disaster. Also, there is typically a 10-day maximum window of critical operations recovery in order to stay in business.
Here are some questions worth considering as you develop a plan to stay on top of business after a major disaster:
1. Have I developed an immediate response plan? Have I tested this plan, revised it, and update it regularly?
2. Have I identified my critical business functions, and the potential disaster threats that could take them out?
3. What is the maximum tolerable downtime my business can sustain after a disaster and still recover my operations completely?
4. What is the potential impact of a given disaster on my business, and what resources do I need to recover successfully?
Now that you know what to do, there is no good excuse. Get your plan together, hire a professional to help you, and/or make sure a plan is already in place and up to date.
Your family, friends, co-workers, business, and its clients are depending on you.
Ask for help now ... after the disaster hits, there is significantly less help available.
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Joe Anderson, CPCU, CBRM is vice president - risk management with Bell-Anderson Insurance in Eagle. He is a certified business resiliency manager. Along with overall risk management strategic planning, he helps clients develop disaster recovery and business resiliency plans. He can be reached at joea@bell-anderson.com.
Published: Wed, Nov 26, 2014
