Recently I had the opportunity to speak with an old friend, Anita Foster, about the American Red Cross and small business. You’re probably wondering what does the Red Cross have to do with small business, especially financial planning? Anita is the Dallas-Ft. Worth Communications Officer for the American Red Cross. Whenever you see tornado or flood damage on TV and the Red Cross was called in, you will find Anita in front of the camera. She immediately put it into perspective: Businesses are hit with disasters too.
My article to you today is to make you aware of the need to have a business continuity plan and give basic guidelines for developing a plan.
Our business is not tornado, flood nor fire proof, and is subject to the same perils as our homes. WE carry insurance on our buildings. Some of us may carry business disruption insurance too. But the majority of us do not have a business continuity plan. I have one for my business because I was actually forced to do so by my regulators a couple of years ago. After listening to Anita and really thinking in depth on the issue, I will probably enhance it to cover some other areas that are lacking.
A business continuity plan is simply a back up plan in the event your computers are destroyed, your employee and employee payroll records are destroyed, and you are not able to conduct business in the location where you presently office. It should encompass three categories: human resources, physical resources and business operation.
Some important questions to ask are:
- Do you have enough insurance to cover this type of loss?
- Do you have enough cash on hand to cover purchase of computers, equipment and lease of another location to continue your business?
- Will you be able to meet the short term out of pocket expenses until your insurance claim is paid?
Some important elements in the business continuity plan are:
- List of all employees – up to date contact and payroll information
- Data recovery – an extra hard copy and/or electronic copy stored offsite
- Phone backup plan – how will your employees and clients be able to contact you
- Temporary location for the business – your home, a friend’s extra office space
We have several links to the American Red Cross that will provide you with mountains of information on disaster planning. They of course provide courses on CPR and first aid as well. Also, did I fail to mention, the information is free. We have no excuse to not have a disaster plan or a business continuity plan. We all have seen what happened in New Orleans and more recently in Kansas. If you are like me, your business is your livelihood, and I will bet that 99% of us do not have any sort of disaster plan.
More recently a friend of mine woke up one morning to find his office building burning to the ground. There were four businesses located in this building. They were victims of a robbery and arson. There was nothing to salvage. Luckily, the business community outreach came to there rescue. They were offered office space for free, phone services were immediately transferred to another office building and all calls were being answered. In my friend’s case, he had recently updated his insurance on his business and included business interruption insurance, therefore not incurring any major loss. Meanwhile, his computer was recovered with all of his client data and work still intact. He is in the marketing and advertising business. He did have to go through various channels to get his hard drive back. The computer is being held as evidence. He is deeply grateful to all of the businesses that offered help. I was able to put him in contact with a property manager with office space available. I told her to go to the smoldering building and look for the guy standing there in despair. She found him. He was not able to make a decision at that moment. If there was any good that came out of this, it is the outpour of good will in our community that Jeff found and that now a whole slew of businesses are re-evaluating there disaster plans. So should you.
To give you an additional reference point, the NASD, the National Association of Securities Dealers has a public website www.NASD.com. If you type in the search box, “Business Continuity Plan Template”, you will find the template the NASD required all investment brokerage firms, including mine, to go by. If you cross reference this with the Red Cross material you should be able, with a little time and effort, to begin to address one by one the issues needed to make sure you are prepared for disaster.