We recently received the latest edition (Fall 2009) of Disaster Recovery Journal and was intrigued by the article “The Need for Small Business, Business Continuity” by Mark R. Lupo. We asked for and received permission from DRJ to reprint it here on the Business Know-How site for our valuable readers.
The Need for Small Business, Business Continuity
I have been asked recently, “Why does a small business need a business continuity/emergency preparedness plan? Isn’t that really just for big businesses?”
For anyone who has owned or operated a small business in their career, there is an understanding that day-to-day survival is one of the primary goals. Making payroll, covering rent, paying vendors/suppliers, finding that next customer. All of these fall into the high priority column of tasks to be done on a day-to-day/week-to-week basis. The concept of planning for disasters, whether they are man-made or natural, just doesn’t come that high up on the radar during normal operations.
The thought that a small business, one that has an owner operator and two or three employees, maybe even up to 10 or 20 even, should have a business continuity plan, sometimes comes across as a bunch of work or expense for an owner with little or no perceived value. Eric Holdeman, EMA director for Seattle’s King County, in a Time Magazine article dated August 20th, 2006 titled, “Why We Don’t Prepare for Disasters,” sums it up this way: “There are (basically) four stages of denial (when it comes to disasters). One is, it won’t happen. Two is, if it does happen, it won’t happen to me. Three, if it does happen to me, it won’t be that bad. And four, if it happens to me and it’s bad, there’s nothing I can do to stop it anyway.”
So, why should a small business have a business continuity plan? Several reasons emerge. First, usually the small business is the lively-hood for that business owner. If there is no business happening, then there is no income and if there is no income, then the business cannot pay the owner who then loses his or her ability to earn money. Bills get behind, vendors are not paid, and employees have to be let go. Statistically, 25 percent to 40 percent of businesses that undergo a major disaster event do not reopen and of those that do reopen, a number of those do not survive the next 12 months. A business continuity plan can help lay the framework for surviving those major, and minor, disaster events.
Second, government is taking on more of a regulatory role in insuring continuity of the private sector. Did you know that approximately 85 percent of the critical infrastructure of this country is owned by the private sector (electrical companies, gas companies, dams, nuclear energy, transportation, etc.)? When the next major event happens, such as a Hurricane Katrina or a major terrorist attack, the private sector is going to be a major player in getting this country back on its feet. In order to assist businesses in developing their plans, OSHA has gotten into the game and now has a mandate that a small business will have developed a written emergency plan in house to guide the actions of the employees and management in the event of a disaster. Should a small business not have a plan, then they expose themselves, not only to OSHA, but to the potential liability that ensues if an employee/customer is injured due to a lack of a plan.
Third, in August of 2007, Public Law 110-53 was voted into law. PL110-53 derived its origins from the 9/11 Commission. Title IX of that law deals with the private sector and Section 524 describes a voluntary private sector preparedness accreditation and certification program. Though still in the implementation phase, it is on the horizon. Once activated, this program will begin to stimulate businesses to develop their continuity plans by offering accreditation and certification for having a continuity plan. From voluntary participation, it will potentially move into the regulatory realm, at some point. Should a business want to do business with the Federal government or DOD, say, they may at some point be required to be accredited and certified under Title IX. Though the OSHA and Title IX programs are not broadly considered right now on the small business front, they will begin to take on added importance as we move into the coming years.
So, where does that leave the small business owner, just struggling to make payroll. Well, for one thing, it begins to open up another front for liability if the emergency plan is not in place, is not practiced, and an employee or customer is injured or dies due to the lack of having a plan. The absence of a written plan also reflects the lack of preparation going on within that business and, eventually, if that businesses is upstream to other businesses depending on it for their supplies or products, that business may find themselves losing some of their strong customers as those customers seek out better prepared suppliers. Business continuity thus becomes an integral facet in the strategic plan for businesses of the 21st century and requires the attention of even the smallest business enterprise.
Mark R. Lupo, CBCP, is a business consultant with the University of Georgia Small Business Development Center, located in Columbus, Georgia. He works with small businesses within a nine-county area to develop and grow their business continuity plans and resiliency.