What is Business Continuity Risk ?
Business continuity risk refers to threats that disrupt the functioning of a business. These threats maybe any untoward incidents or disasters that negatively impact an organization.
There are a number of business continuity risks that make organizations suffer, such as cyber attacks, data breaches, security incidents, fire, flood, transport disruption, and terrorism.
Perhaps the best example of business continuity risk is the effect of the Covid 19 pandemic on businesses all over the world. As shops closed down indefinitely and consumers were forced to shelter in place during lockdowns, businesses faced huge losses. A record number of people were laid off, as companies struggled to make payroll or pay rent.
For essential services that were allowed to continue such as health workers and food supply managers, it became a matter of huge concern to protect their health and wellbeing. To ensure complete safety of workers, organizations were required to provide them with PPE lists, hand sanitizers, masks, and strictly observe social distancing measures.
A business continuity plan helps to mitigate such unforeseen risks, and ensure smooth and efficient functioning of the organization.
Types of Business Continuity Risks
Let's take a look at five business continuity risks that a firm must monitor and control:
Cybersecurity attacks area major source of concern for businesses. Network and system damage by hackers not only damages a firm's reputation but can also cause monetary damage.
For example, Software AG, a German tech firm, was attacked by Clop ransomware in October 2020. The cyber-criminal gang demanded more than $20 million ransom. The attack disrupted parts of their internal network.
2. Data breaches
Data breaching refers to releasing or revealing important, private and sensitive information to an untrusted person or environment. In the first half of 2020, there were 540 reported data breaches in the U.S.
Some examples of data breaching include loss of USB drives, mobile or computer devices, laptops, and computer networks. Such breaches can put sensitive information regarding the firm and it's customers in the hands of unscrupulous people and cause severe damages to the business.
When terrorism strikes a country or city, it instill a sense of fear and uncertainty in it's residents and the public at large. Employees and organization security forces might be ill-equipped to handle attacks of terrorism. Property damage and business interruption are the most obvious impacts of terrorism.
Further, even after a terror attack, tourism and day-to-day life in a country remains affected. It takes a few months for businesses to resume their operations as usual.
Fires generally take place suddenly, without any warning signs. They often occur due to faulty firm equipment or misuse of organizational tools and instruments.
Keeping a fire control plan involving fire brigades, fire alarms and fire extinguishers as a precautionary measure to control fires, is quintessential for businesses of all kinds.
5. Supply chain disruption
Disruption in supply chains is also a big concern for organizations. Natural disasters such as floods, hurricanes, earthquakes, tsunamis, storms, often lead to such disruption. As a result, the supply network between companies and suppliers weakens and the supply chain suffers.
4 Major Risks of Not Having A Business Continuity Plan
Not having a business continuity plan might be more dangerous for a business than you think.
Here are four major risks of not having a well-defined plan to handle business continuity disruptions:
1. Death and Injury
When organizations suffer from natural disasters and other threatening events, it leads to loss of life and brutal injuries to workers, clients, and other individuals associated with the business.
This can be prevented by keeping premises under regular inspection, maintaining tools and equipment, and posting warning signs, if combustible or dangerous equipment is being used.
2. Business Failure
Disasters and unexpected incidents also affect and damage business property and goods. After suffering such damage, organizations are generally unable to recover.
For example, due to Covid 19, more than 100,000 restaurants have permanently closed this year, according to the National Restaurant Association. Business continuity plans provide better alternatives for businesses to survive even after a disaster.
3. Reputational Risk
Disasters also affect a company's reputation in a negative way. People’s lose trust in a company and start to view it with a healthy dose of scepticism.
For example, a fire may damage a firm’s internal property as well as injure people, which might make the public think the firm is not secure and doesn't take necessary precautions to safeguard it's personnel and premises. This might discourage future clients and employees from associating with them.
Likewise, a firm's reputation can also be damaged by data breaches. People's trust towards a firm decreases due to the spread of sensitive data.
4. Loss of data
Loss of essential data not only disrupts business activities but also puts the company's future in jeopardy.
Mitigate Business Continuity Risk: 4 Steps to Create a Business Continuity Plan
To develop resilience as a business and future-proof it's functioning against unexpected disasters and events, businesses must prepare a business continuity plan.
Here's a four-step guide to mitigate business continuity risk:
1. Scope and Teamwork
The first step involves putting together a team for implementing a business continuity plan. Management buy-in and commitment to the BCP process should also be established in this step.
The firm must clearly explain the key reasons for having a BCP, namely, to protect employees, suppliers, and customers as well as the business operations themselves.
2. Business Impact Analysis
Business impact analysis helps determine the potential impacts of a disruption to critical business operations. The BIA can be facilitated by asking the following questions:
- Which activities are critical to the core operations of the business?
- What resources need to be obtained to resume these prioritized activities? This includes both internal and external resources such as vehicles, inventory, human resources, and electricity supply.
- What is the maximum period of time for which a business might be able to withstand temporary disruption? This identifies the time frame for the prioritized activities to be resumed.
Post this, a firm should assess external risks which may affect a business. This helps establish the types of disasters which an enterprise may face.
It's essential to account for all possible disasters a business might face, be it natural, data-based, corporations-based. To get a more accurate assessment, firms should also look at past events and disasters that similar businesses may have faced.
3. Develop Strategies
Information gathered from the business impact analysis should be utilized to develop strategies which help an enterprise tackle an emergency and resume operations efficiently.
Strategies must include different types of plans to figure out how the enterprise will function during the time of emergency. Some basic questions your strategy might answer include:
- How will customers contact the organization during that time?
- How will the organization gain access to electricity and food?
- Will the organization be relocated elsewhere?
The business continuity management team is responsible to ensure these strategies are implemented should a disaster strike.
4. Plan Testing
The final step of this plan consists of testing your plan to improve your ability to successfully recover from various unexpected scenarios.
BCP testing should be exercised to experiment the effectiveness of your plan.
A few pointers to effectively test your business continuity plan:
- Review plan strategies and ensure each disaster or scenario has been accounted for.
- Ensure each employee is aware of the significant sections of the plan and their roles in a disaster or scenario. Carry out BCP simulation tests. These tests include actual recovery actions such as restoring backups and live testing of superfluous systems.
- Involve vendor partners in your testing process. This will help you attain accuracy in your tests and receive feedback from the vendors on the effectiveness of your plan.
- Document the results of your testing and implement processes by following up on the results, to improve your BCP.
Business continuity plans help organizations safeguard their existence as well as retain the trust of their customers and employees. The lack of a well-documented business continuity plan can disrupt the functioning of a business, affect it's employees' physical and monetary health, and in some cases, cause complete business failure.
While it's difficult to anticipate when the next pandemic might strike, or when businesses will fully recover from the current one, one thing is clear: failing to plan is planning to fail.
VComply Editorial Team
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