Every time an unusually severe business disruption occurs, the definition of a “worst-case scenario” is given new meaning.
While the pandemic serves as thelatest reminder that organizationsshould regularly reevaluate their readiness for the next event, this year’sactive hurricane season or West Coastfires also underscore the importance oforganizations regularly revisiting theirlevel of preparedness.
One reason why many smaller businesses fail to reopen after a catastrophicevent is that few of them have a business continuity plan in place. Othershave such plans, but they are oftenpoorly drafted, outdated, and rarely ifever rehearsed.
The good news for financial firmsis that if they effectively plan for thebusiness impact of a disruptive event,they are more likely to survive it withminimum property damage, minimumemployee and customer impact, andminimum lost revenue and reducedmarket share.
PLANNING IS EVERYTHING
A business continuity plan is a document in which a broad range of information, policies and procedures arecompiled and ready for use when anevent disables the normal delivery ofproducts and services. Each plan isunique, reflecting the business interruption risks and specific mitigation actionson a company-by-company basis.
An advisory firm must address avariety of different events and related business disruptions occurring toeach facility in different regions ofthe country, such as its call centers.
On the other hand, firms in a single
region may confront a more limited
range of disruptions, but the impact of
a particularly long disruption can be
In either case, the business continuityplan anticipates different risks and provides a checklist of mitigation actionsonce a disruptive event occurs.
DEVELOPING THE PLAN
To draft a business continuity plan,it’s best to form a planning committeewhose task is to develop the plan andoversee its execution. It is critical fora member of the senior executive teamto champion the work of the committee to ensure their efforts are notderailed by the team members’ otherresponsibilities.
A business continuity plan generally consists of three basic components — risk assessment and mitigation,emergency response procedures, andbusiness recovery procedures.
In developing the risk assessmentand mitigation component, the planning committee typically contemplatesa series of “what if” disaster scenarios.
Each scenario considers the vulnerabil-
ity of each facility to a disruptive event,
and then posits the potential impact on
the business. A numerical system often
is used to suggest the probability of an
event occurring and its potential impact.
This data helps inform the optimal miti-
For example, a financial firm dependent on an uninterrupted flow of powerand communications to perform normal business operations might rank theimpact of a highly probable event causing an outage lasting more than a weekas a 9 or a 10 out of 10. Armed with thisimpact analysis, the organization candetermine optimal mitigation actions tominimize adverse outcomes.
The emergency response componentof a business continuity plan activateswhen a disruptive event occurs. Anexample is a hurricane that floods thepremises of a firm, endangering employees, customers and business equipmentlike computers. Procedures on how tohandle these hazards will help minimizetheir impact.
Finally, the business recovery component of the plan identifies specificprocedures to be taken to resume critical business functions and operations topre-emergency levels. The use of “whatif” scenarios is helpful in assessing theimpact of an event on different functions and operations, guiding optimalprocedures in their restoration.
It is crucial that the business continuity planning committee updates allplan components to reflect the impactof recent disruptive events, such as thepandemic and natural disasters like hurricanes and fires. In other words, a business continuity plan is a living documentthat continuously changes.
Ben Rockwell is division president, ChubbMiddle Market.
WEALTH & RISK
By Ben Rockwell
Time to Review Your Business Continuity Plan
The pandemic has forced businesses to be prepared for any contingency.