Contingency Planning

Creating a Strategic Contingency Plan to Keep Your Company Going in an Emergency

It’s the kind of situation that none of us like to think about–a fire burns the headquarters or a flood damages inventory and shuts down the entire area, but it’s the kind of situation every small business needs to be prepared for. We’ve all seen news stories after disasters showing people who don’t know what to do about their business and if it will survive.

The best way to prepare is to create a strategic contingency plan that will keep your business operating, even if only on a reduced basis, until the damage can be repaired or the business otherwise restored. Such a contingency plan need not be very complicated or involved.

The plan should answer certain key questions:

What are the most important elements to keeping this business operating?
For some businesses, like food or hardware stores, it is a matter of having inventory available as quickly as possible. For other businesses, like professional service firms, it is a matter of being able to get the professionals together to service clients. Whatever the most important elements are for your business, figure out what you would do if a natural disaster interrupted operations. Talk to your suppliers about what they would do, and with your key employees for their car phone numbers or addresses of close relatives.

• Where would we operate?

If your store or office were damaged, you need another place to set up operations. This might be in the owner’s house, or it could be in a warehouse the company owns. The important thing here is to consider the options, and prioritize them if you have more than one choice.

• How would we communicate with each other?

In a natural disaster, especially, electricity and even telephone communications can be knocked out. Make sure you know everyone’s home phone number and all employees’ current addresses. Involve several people in the company in drawing up the contingency plan so that they are alert to the importance of communicating information about new location and hours of operation during an emergency.

• Do we have backup copies of important records?

In order for the business to be able to carry on in an alternative location, it should have access to its records. Consider what would happen if the records were destroyed or damaged by fire or flood. In today’s age of computers, it is reasonably easy to have backup records of customer and supplier lists, provided someone is charged with regularly updating files. Old paper records should be regularly moved to an offsite location; this increases the odds they will be available in an emergency.

• Do we have all the insurance we require?

As just one example, you may want to be sure you have insurance covering you for loss of business time. This could provide critical cash to enable you to re-start operations.

The key issue in putting together such a strategic plan is anticipation. The key questions raised boil down to this:

What do you need to continue operations, and how would you ensure that what you need is readily available?