Business continuity is about being prepared to manage any disruption to your business to ensure continuity of services to your customers. It is a continual process that helps a business to anticipate, prepare for, prevent, respond to and recover from disruptions - for example, those caused by fire, flood or storms.
A business continuity plan sets out your arrangements for managing any disruption to your business. It helps you to maintain services to your customers even if there is a major disruption like a computer crash, a fire or someone is away ill.
If you prepare a business continuity plan your business is more likely to survive an emergency or critical disruption. Business continuity planning helps you understand the vulnerabilities of your business.
The time and cost it takes to develop a business continuity plan depends on the size and nature of your business. For a small business it may take only a few hours of your time.
Steps in preparing a plan
Work through these steps in sequence:
- Know your risks
- Conduct a business impact analysis
- Develop continuity strategies
- Identify communication needs
- Be ready to go
- Review your plan
Step 1: Know your risks
Businesses are at risk from many natural disasters, societal hazards and supply chain disruption. The range of risks includes:
- bushfire
- pandemic influenza
- floods
- building fire
- criminal activity
- staff loss
- electrical failure
- fuel supply disruption
- machinery failure
- computer failure
- damage or loss of stock, buildings, equipment IT systems, records, communications or other facilities
- disruption to suppliers or contractors
- damage to reputation.
It is important to understand these risks and, in certain cases, how they will be managed in your community. For example, in a flood how do you get information about expected flood heights and road closures? Knowing this will help you with your contingency response.
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Step 2: Conduct a business impact analysis
If you follow this step you will know what critical inputs you need to put in place if your business is affected by a structural or natural disaster.
This involves:
- identifying your key products and services
- deciding how long you can stop delivering them
- identifying your critical inputs.
Key products and services
It is important to be clear about what key products and services your business offers. You may wish to prioritise them based on the amount of profit they produce.
For each key product and service, identify how long you could stop delivering it before your business would experience difficulties. This is known as the maximum acceptable outage. The length of outage your business can tolerate will vary depending on the time of day, day of the week and time of year. For example, if your busiest trading week of the year makes enough profit to carry you through the quiet periods then you are less able to withstand a sustained outage at this time.
Plan for the duration of outage you can withstand during this period. The maximum acceptable outage may be based on lost income, public disruption or regulation compliance issues.
The answers to this question will be different for every business.
Business continuity means you must find a way to restore your products and services before the maximum acceptable outage is reached. Here are two examples to illustrate this.
Example 1: Small owner-operated florist
Key products and services | Maximum acceptable outage |
|---|
| Flower sales at the shop | 1 day |
| Home-delivery flower sales | 1 day |
| Card sales at the shop | 3 days |
| Gift sales at the shop | 2 weeks |
| Staff payments | 1 week |
| Tax payments | 3 months |
Example 2: Hotel in a country town
Key products and services | Maximum acceptable outage |
|---|
| On-site cold drink sales at bar | 1 day |
| On-site bottle sales from liquor shop | 2 days |
| Fuel sales | 2 hours |
| On-site accommodation | 3 days |
| On-site food sales | 3 days |
| On-site entertainment | 2 weeks |
| Staff payments | 1 week |
| Tax payments | 3 months |
The business could be disrupted because of a total loss of assets resulting from a flood or fire. However, often the disruption is caused by a loss of access to a critical input needed to operate the business.
Identifying your critical inputs
It is important to understand the critical inputs that enable you to provide each of your products and services. These would be essential to restart your business if there were a disruption.
Critical inputs may include specialist and generalist staff, electricity, water, fuel, vehicles, raw materials, equipment, premises, eftpos, computer records, and so on. The table illustrates this using the example of the small owner-operated florist.
Key products and services | Critical inputs |
|---|
Flower sales at the shop | - supplies - 120 bunches delivered twice weekly
- eftpos
- electricity
- florist (x 1) & counter staff (x 2)
- water (200 litres/day)
- shop front facing main street
- cool room (8 sq m)
- accounts
|
Home-delivery flower sales | - vehicle and driver
- fuel (40 litres a day)
- accounts
|
Card sales | - card supplies (400 a month)
- eftpos
- electricity
- shopfront facing main street
- counter staff
- accounts
|
Gift sales | - gift supplies (300 items a month)
- eftpos
- electricity
- shopfront facing main street
- counter staff
- accounts
|
Staff payments | - banking services
- staff hours book
|
Tax payments | - account records
- banking services
|
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Step 3: Develop continuity strategies to operate your business
With some forethought you can develop continuity strategies to keep your business operating after a disruption.
The range of strategies you might consider include:
- cross-training staff and skill-sharing
- hiring equipment
- borrowing equipment from another business
- having back-up equipment
- retaining old equipment when it is replaced
- practising manual processes to replace computer systems
- identifying alternative suppliers
- having records and forms stored off-site
- keeping computer back-ups off-site
- contracting out
- having insurance policies, contracts and other important documents copied and kept off-site
- succession planning.
For each product or service, develop a continuity strategy to restore business before the maximum acceptable outage is reached. Continuing the example of a small owner-operated florist:
Product or service | Continuity strategy |
Flower sales at the shop | - Operate from home, share space at chemist shop, or rent vacant shop.
- Manually process eftpos using machine stored at home or use eftpos in shop next door until replaced.
- Rent cool-room trailer from hire company.
- Hire 6-kva generator to power cool room.
- Daily accounts back-up kept at home.
- Lease new computer.
|
Home- delivery flower sales | - Use an alternative driver when regular driver is on leave to build their understanding of the business.
- Consider using a local taxi.
|
Card sales | - Restock with new supplies - if supplier closes, possibly use Fred Bloggs card shop in Adelaide.
|
Gift sales | - Restock with new supplies - if supplier closes, possibly use Jane Doe gift shop in Adelaide.
|
Florist skills | - Use Mrs Smith, a retired florist, and use counter staff (need to build their skills).
|
Counter staff | - Use a number of casuals to ensure flexibility.
|
Staff payments | - Through goodwill, staff will wait an extra week for pay.
|
Tax payments | - Keep a copy of all financial records at home and originals at work in case one set is destroyed.
|
Once strategies are developed
Once you have developed your continuity strategies, you need to ensure the training, equipment, relationships and so on are in place.
If your strategies depend on staff performing tasks they don't usually do, you need to arrange regular practice for them. The plan should also set out clear accountabilities so staff know who is responsible for each action.
You will also need to ensure staff members know the triggers for activating the business continuity plan. The triggers must allow adequate time to implement your contingency strategies before you reach the maximum acceptable outage.
If you store items that deteriorate, such as fuel, you need a process to ensure they are replaced as required.
Once you have decided on the best contingency strategy option, write it in your plan.
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Step 4: Identify communication needs
The success of your business continuity plan may depend on ensuring the right people and organisations are contacted quickly. This will ensure you get the help and support you need to maintain your business.
Key contacts you need include:
- staff
- key customers
- insurance company
- financial institution
- supplier
- alternative suppliers
- contractors
- regulator
- hire companies
- equipment maintenance companies.
Your staff will want to know whether they still have a job and how they can help.
Your customers will want to know if you will meet existing orders and to be reassured you will continue to operate.
Your suppliers will want to know if you still need orders that have already been placed, and what they can do to help.
You may also need to place an advertisement in the local media telling your customers and suppliers of the status of your business.
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Step 5: Be ready to go
Your contingency strategies will be most successful if you practise them regularly.
Staff will need to be clear on when your continuity plan is to be deployed and know the triggers to start using it. They are most likely to be able to continue working effectively with your contingency strategies if they have practised them.
It may be helpful to conduct some business continuity exercises. An exercise can be as simple as a discussion about what people would do if a range of situations occurred, such as:
- the electricity supply is disrupted for two days
- the computer system fails and will be out of service for a number of days
- a key supplier closes down at short notice
- a number of staff are seriously injured in a car accident and will be off work for months
- your building burns down.
More practical exercises could include actually using your continuity strategies on a quiet business day to ensure they work.
Step 6: Review your plan
As your business grows and changes you will need to revise your business continuity plan. Review it every six months. Most importantly, check telephone numbers.
Remember to keep two copies of your business continuity plan at two different sites in case one is destroyed.
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More information
On this site
Checklists for your continuity plan
Downloads
Free MyBizShield iPad app - provides a template for creating an emergency management and recovery plan for your business - Australian Government's business website.