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This section focuses on the preparedness of small businesses. It discusses the risks particular to small businesses, the values of preparedness, and the various resources that small businesses can use to reduce impacts and financial damages of disruptive or catastrophic events and to return more quickly to normal operations with nominal effect to the revenue stream.
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What’s At Risk With Your Small Business
As our global climate changes, natural disasters, such as hurricanes, coastal storms, floods, droughts and wildfires may become more frequent and more intense.
Given projections related to climate change, combined with demographic and economic trends that suggest population growth in higher risk coastal areas, our nation could face a future of more disasters, resulting in greater loss of life, even greater economic impacts and far greater social disruption.
As populations and communities continue to grow and migrate to urban areas, the likelihood of devastation caused by disasters will increase.
Each year, these disasters take their toll on small businesses and private sector-owned infrastructure in lives and economic losses.
The nation’s capacity to manage catastrophic disasters requires us to foster a common understanding of the risks we face.
As a society, the Whole Community must apply preparedness solutions to strengthen America’s competitiveness in an increasingly global economy.
What’s On The Horizon
As modern society becomes more and more globalized and interdependent, connecting community economies, global supply chains, outsourcing activities, modern just-in-time systems, the internet and electronic economic systems have radically reduced any tolerance for error.
The increasing pace of social change, innovation, and technological advances has combined to create additional vulnerabilities.
Regional and global dependencies may make it difficult for individual business operations or entire industries to tolerate disruptions that may occur on the other side of the globe.
Current inventory and delivery strategies and outsourcing models can result in profitable business but they leave businesses vulnerable to profound technology failure.
Dramatic examples of events that had a global affect on business include:
The Icelandic volcano eruption in 2010 that grounded a large percentage of global air travel and international commerce worldwide dependent on rapid inventory shipments was severely stressed.
The March 11, 2011 Japan 9.0 magnitude earthquakes and tsunami which struck the northeastern coast was the most significant disruption that the global supply chain has experienced in modern times.
Change Begins From The Top Down
Success in developing a business continuity plan and program requires upper management support. The chief executive sets the tone by authorizing program funding and plan development to take place and directing senior management to get involved. When presenting the case for developing a business continuity program and plan, leadership should emphasize the positive aspects of preparedness and avoid dwelling on the negative effects of an emergency (e.g. deaths, fines, criminal prosecution). For example:
It helps companies fulfill their moral responsibility to protect employees, the community, and the environment.
It facilitates compliance with regulatory requirements of federal, state, tribal, territorial and local agencies.
It enhances a company’s ability to recover from financial losses, regulatory fines, loss of market share, damages to equipment or products or business interruption.
It reduces exposure to civil or criminal liability in the event of an incident.
It enhances a company’s image and credibility with employees, customers, suppliers, and the community.
It could potentially reduce your insurance premiums.
What You Can Do
Something can be done. Small businesses and private sector infrastructure owners can limit employee injuries and property damages and return more quickly to normal operations if they plan ahead. As businesses expand and become larger, the pool of resources available to perform these functions grows but so does the amount and complexity of their business. This is where a business continuity plan (BCP) helps you protect your investment. There are a lot of useful self-help small businesses preparedness programs out there (see PS-Prep TM Program Resources page for additional preparedness program information). In order for a small business to get up and running after a disaster, they need to perform a version of these five BCP functions, or steps, that is appropriate for their particular business size long before any impending disaster:
Hazard types and risks of occurrence.
Possible physical damage to the organization and shutdown impacts.
Cost and revenue loss estimates.
Available physical and financial resources.
Recovery estimates and alternative survival.
Termination strategies and tactics.
Decide to continue or terminate business operations based on the above analysis of the projected versus actual post-disaster business situation. This will occur after the disruptive event although it often will occur as part of the BCP process prior to any event. A decision to continue or terminate business operations should be carefully reviewed by all small and medium-sized business owners with any doubts concerning the viability of their firms to:
Obtain information on key reasons for choosing continuation or termination and alternative approaches to doing each. Very small businesses, in particular, should not take deciding to continue operations as a foregone conclusion because of their greater vulnerabilities and risks to the personal assets and savings of their owners.
Other factors in the decision to continue or terminate include:
Has business interruption insurance been purchased to cover physical damage, shutdown and other disaster costs, as well as losses caused by the interruption of revenue?
Have arrangements been made for alternate supply sources and/or potential business operating locations?
Prioritize customers, products, critical operations, suppliers and owner and employee roles.
Organize personnel, facility, equipment, supply and financial resources by goals, objectives and tasks (delegate as necessary). Other factors that affect the decisions during organizing are:
The purchasing of business interruption insurance to cover physical damage,
Shutdown and other disaster costs, as well as revenue losses, plus
Making arrangements for alternate supply sources and/or business operating locations.
Execute an appropriate preplanned business continuation strategy and implementation tactics based upon the actual post-disaster (or emergency) situation and above BCP analysis, continuation decision, prioritization and resource organization for BCP projected post-disaster situation closest to the actual one (improvise as necessary). Three basic alternative types of business continuation strategies, based upon the level of risk the business owner/executive is willing to take, are discussed in this guidance and included in the Execution step of both BCP templates:
Modest success, minimum risk
Moderate success, moderate risk
Maximum success, maximum risk
As noted above, companies may well need to improvise on the appropriate one of these strategies given the near impossibility of exactly predicting the future but putting the structure of these alternative strategies in a plan prior to an actual disaster will greatly aid effective execution of a well-thought-out strategy. It should also be noted that although the second and third strategies are available to both medium-sized and small businesses, choosing to take significant risks is more financially dangerous and threatening to small business owners because such risks can result in the loss of personal savings and/or property.
How We Can Help
The Small Business Preparedness Recognition program and Ready Business will assist businesses in developing a preparedness program by providing tools to create a plan that addresses the impact of many hazards. This website and its tools utilize an “all hazards approach” and follows the program elements within business continuity best practices, guidelines and standards adopted by the PS-Prep™. By using the Business Continuity Planning Suite you can develop the necessary program.