If you're starting a business, you need to plan for the worst.
A business continuity plan is a vital document that outlines the steps an organization must take to ensure its critical functions continue to operate during and after an unforeseen disruption.
This comprehensive guide will provide a deep dive into the key components of an effective plan, best practices for developing a robust strategy, and the importance of testing and updating the plan to maintain its effectiveness.
Table of Contents
What is a business continuity plan (BCP)?
A business continuity plan (BCP) is a set of processes to ensure that a business can sustain operations during an unexpected event, such as a fire, pandemic, or cyberattack.
Key components of a business continuity plan
A successful business continuity action plan includes the following elements:
- Scope and objectives. A BCP outlines the departments, functions, and locations it will cover. It also highlights the plan’s objectives, like minimizing downtime, protecting assets, and ensuring employee safety.
- Risk assessment and business impact analysis. A thorough risk assessment and business impact analysis (BIA) will identify potential threats and vulnerabilities, as well as the potential consequences of disruptions.
- Recovery strategies. A BCP highlights the recovery strategy for each critical function, focusing on the necessary resources, personnel, and technology to restore operations. It must include a company’s recovery time objective (RTO), or the maximum time IT systems can be down after a failure.
- Incident response plan. A BCP also features a detailed incident response plan that outlines the actions to take during a disruption, including communication protocols, roles and responsibilities, and emergency management procedures. It’s also helpful to include contact information for all important parties.
- Training and awareness. A BCP ensures employees understand their roles and responsibilities within the business continuity action plan, through ongoing training and awareness programs.
A business continuity plan centers on what to do during the disruption—the Plan B for when things go awry. A disaster recovery plan, by contrast, focuses on the “return to normal” from an unexpected event. Disaster recovery is how you get back to Plan A.
How to create an effective business continuity plan
- Determine the goal of the plan
- Establish a team
- Determine risks, assets, functions, and impact
- Set mandatory training timelines
- Identify vulnerabilities and alternatives
- Detail actions for each vulnerability in your plan
- Ask for feedback
1. Determine the goal of the plan
The goal of your business continuity plan could be to protect employees and assets, and prevent financial losses, if or when a crisis occurs.
Some business continuity plans are reactive—created after a small business experiences its first disaster. In these instances, you could focus on preventing a specific type of disaster, while still reflecting on others that could cause a disruption in small business operations.
2. Establish a team
Before picking a team to help execute your business continuity plan, create a set of responsibilities to assign. Responsibilities could include:
- Business continuity steering committee. Brings together six to eight individuals from all areas of the business to catalog all potential risks or assets in the business continuity plan. After you create the plan, this team should meet quarterly to assess the plan for accuracy and ensure company-wide knowledge of it.
- Business continuity manager. Manages the daily responsibilities of the business continuity plan, such as employee training, crisis management, safety assessments, and expectation setting with business leaders and those on the business continuity team.
- Business continuity team members. Execute the instructions provided by the business continuity program manager.
- Business continuity plan owners. Key stakeholders such as human resources, payroll, cybersecurity, health and safety, and other crucial individuals who will work on a business continuity plan for their area, with direction from the business continuity program manager.
- Business continuity planners. Execute instructions directly from the business continuity plan owners to support the rollout of plans.
The number of stakeholders and providers you need varies based on the size of your business. Large enterprises will have more areas of potential risk, which will result in more business continuity plan owners.
Having more than eight members on the business continuity steering committee, however, may slow down the process of shipping a complete business continuity plan.
Backup stakeholders can be helpful for transitory periods, such as an employee exit, change in leadership, or merger.
3. Determine risks, assets, functions, and impact
The most common business risks or threats include:
- Natural disasters, fires, and power outages
- Public-health crises
- Cyberattacks or terrorism
- Data loss
- Economic downturns
- Bankruptcy, bad credit, or cash-flow issues
- Legal disputes, government regulations, and licensing cancellations
- Workplace accidents
- Technology failures, including platform or point-of-sale system crashes
The most at-risk assets include:
- Company property
- Brand trust and customer relationships
- Licensing agreements
- Data centers
- IT infrastructure
- Supply chain
In some cases, you may outsource management of assets. For example, if your inventory is held by a third party because you run a dropshipping business, you lose some control over that asset. Building strong relationships and business processes with your partners can mitigate risks to those assets.
Crucial business functions that are most often impacted include:
- Product manufacturing
- Order fulfillment
- Service operations
- Data protection
- Customer communications
- Finance, including accounts payable or receivable
A business impact analysis—how the business could be affected—determines the biggest risks, assets, and critical business functions for your business.
What might shut down your office for a month? And what would be the impact? If your information technology is disrupted, would your company collapse? If your customer data made it out into the open, would you lose all consumer trust?
4. Set mandatory training timelines
Once you’ve completed your assessment of risks, assets, and business functions, train business continuity stakeholders and employees to ensure alignment. You can train employees when they’re first hired and include drills quarterly thereafter.
By training your entire staff, you ensure that everyone is equipped with the knowledge they need in case a key member of the management team isn’t around when a disaster strikes. Train several stakeholders for areas that impact their work. For example, a cybersecurity employee should know to whom to report a failed data backup solution, even if the head of their department is on vacation.
(While not central to business continuity planning, consider training all employees in fire safety, CPR, and other health and safety risks. The best-case scenario is not needing your continuity plan.)
5. Identify vulnerabilities and alternatives
After creating your plan, note the primary vulnerabilities in your business. For example, an ecommerce business may feel most vulnerable about their dependency on a single third-party manufacturer, overseas shipping delays, or DDOS attacks.
Then determine how likely it is for each item to happen, using a scale from 1 to 10 to rate the likelihood of each vulnerability. Prioritize each item in your business continuity plan based on likelihood, and list potential backup solutions.
For example, if your ad account could be suspended, you may catalog next-best options for marketing (or even realize you should build a more diverse set of marketing channels now). You might have a large email list, run ads on other platforms, or have the potential to create more website content, such as a blog to drive traffic to your website.
6. Detail actions for each vulnerability in your continuity plan
Once you have a list of potential fixes, structure them into if-then statements, with a list of potential solutions. A continuity plan for a server crash might look something like this:
If our server is down during a holiday weekend sale, then we can continue to increase our revenue by:
- Directing our email audience to our online store’s app
- Selling products via social media platforms, such as Instagram
You may also want to start thinking about a recovery plan—how to get back to “normal” or avoid another crisis. Do you need a merchant cash advance or loan to keep operations running? In this example, the outcome may be to upgrade your hosting solution or switch to a platform that includes hosting.
7. Ask for feedback
Asking for feedback from stakeholders throughout the company can ensure there aren’t any missing gaps. The goal is to create a detailed plan that takes into account all potential risks and explains how to continue business operations despite them.
A business continuity plan helps your business survive a disaster. Knowing who your stakeholders are, what risks make your business vulnerable, and how to mitigate those risks protects brand trust, ensures employee safety, and reduces financial losses.
Every missed vulnerability or unworkable solution, on the other hand, risks spawning a much bigger crisis—for which there may be no continuity or recovery plan.
Here’s a business continuity plan template from Ready.gov, an official website of the US Department of Home Security.
Why is a business continuity plan important?
As a business owner, you have so many things to do on a daily basis. It’s easy to neglect something like a business continuity plan, especially if you’re a “what if?” skeptic.
Here are four things you’ll get for your forward-thinking efforts:
- Continued business operations. The main goal of a business continuity plan is to continue business operations when disaster strikes. For example, if you work in an area that’s prone to power outages, you might choose to invest in a backup generator so that a blackout doesn’t stop operations.
- Prevents harm to employees. A continuity plan equips employees with laptops instead of desktops to ensure the continuation of business operations while reducing the risk of serious illness or death to employees.
- Builds brand trust. Cyberattacks can erode brand trust in an instant. Customers expect online businesses to be up all the time (and to protect the data they share with them). If a personal emergency requires you to contact a family member through a messaging app, but the app is down, you’ll lose that customer. A cybersecurity plan, as part of a larger business continuity plan, reduces downtime and data breaches.
- Prevents financial losses. Economic crashes have caused businesses huge financial losses. In moments when customers are dramatically and rapidly more conservative with their spending, businesses need contingency planning to reduce losses or increase revenue streams.
When to develop and implement a business continuity plan
It's crucial to develop and implement a BCP as soon as possible, preferably during the early stages of an organization’s growth.
Key moments to consider developing or updating a BCP include:
- Business expansion: When an organization expands its operations, either by adding new locations or services, it is essential to update the BCP to accommodate these changes.
- Technological advancements: As new technology is introduced or existing technology is upgraded, the BCP should be revised to address potential vulnerabilities and ensure the continuity of operations.
- Changes in leadership or key personnel: When there are significant changes in leadership or key personnel, it is crucial to update the BCP to reflect new roles and responsibilities.
- New regulations or industry standards: If new regulations or industry standards are introduced, the BCP should be reviewed and updated to ensure compliance.
This proactive approach allows for a better understanding of the organization’s risks, vulnerabilities, and critical functions, ensuring that the company is well-prepared for potential disruptions.
Invest in business continuity management
Outside factors can hobble business performance and customer trust. By creating a business plan ahead and thinking through the risks carefully, you can reduce the impact crises have on your business.
With the business continuity planning process above, you can improve risk management and protect your business’s critical systems for years to come.
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Business continuity plan FAQ
What are the 5 components of a business continuity plan?
- Risk assessment: Identifying potential risks to the business and assessing their likelihood and impact.
- Business impact analysis: Determining the effect of each identified risk on the business.
- Disaster recovery plan: Developing a plan for recovering essential systems and processes in the event of a disaster.
- Disaster recovery procedures: Establishing the steps necessary to execute the disaster recovery plan.
- Testing: Regularly testing the plan to ensure it is up to date and effective.