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Small Business

Difference Between Business Continuity vs Disaster Recovery

min read

Every day in business, you have to look out for what’s coming. 

You roll up your sleeves and make sure that sales, operations, and finances are in-sync and humming along so you can grow revenue and boost profits. At ground level, you see to it that your computer systems, offices or other facilities are in tip-top shape and conducive to you and your employees’ productivity.  

When everyone has the tools and resources to do what they do best, it’s a beautiful thing. All is going according to plan, and you can typically react to what doesn’t. So, what will you do if that well-designed plan suddenly rides far off the rails? A disaster, natural or otherwise, can be devastating to your business if not properly prepared for. While you can’t predict a calamity, it’s prudent to have the proper protections in place to assure that your business can recover from a disaster.  

To give you some perspective, the statistics are sobering.  

More than 40% of businesses won’t reopen their doors after a disaster, according to the Federal Emergency Management Agency (FEMA). Of those that do reopen, only 29% are still in business two years later. As for computer system failures, companies that suffer downtime or data loss for more than nine days often go bankrupt. 

Needless to say, you need to…

Expect the Unexpected 

Don’t ever think it can’t happen to your business—that’s mistake number one. 

If you need evidence, just look at hurricanes that have ravaged regions of the Atlantic Coast or floods that have occurred in many low-lying areas. Consider cyber-attackers that cripple computer networks and demand ransom from business owners.  

These are catastrophic events that you can’t forecast but just like you plan for your business success, you must plan for its survival in the event of a disaster. In what follows, we’ll examine the similarities and differences between business continuity and disaster recovery.  

Business Continuity Planning  

To help you make it through a catastrophic event with the best chance of returning to normal operations, you’ll need to employ both business continuity planning and disaster recovery. A key piece of that strategy involves business continuity planning. 

Business continuity plan or disaster recovery should be part of your overall small business risk assessment. This allows you to have your bills paid and payroll maintained even if you can’t operate at peak capacity.  

To implement such a plan, you’ll need to examine all potential what-ifs, even though the odds of some of those possibilities might be slim.  

There’s a chance that your offices or facilities could be severely damaged by a fire, flood or storm. In that scenario, you’ll need to make financial contingency plans to ensure that you can still generate revenue while also covering costs.  

You’ll need to answer several questions. Among the more critical ones are: 

  1. Can you maintain sales and revenue in the event of a disaster?  
  2. If not, will you still be able to pay existing overhead?   
  3. What will be the cost of a temporary relocation?  
  4. Do you have the assets to fund the relocation? 
  5. Can you remain profitable through the ordeal?  

Essentially, a business continuity plan centers around preparedness. If you feel you have a financial “Plan B” firmly in place, that’s a good first step. But, unless you have coffers of cash to resume business as usual, it’s crucial to integrate an insurance program that addresses business interruption.  

Disaster Recovery Planning 

While business continuity largely looks at the financial aspect of bouncing back from a catastrophic event, disaster recovery is related but mostly entails planning the logistics in such a situation.  

Together with all stakeholders, you’ll need to develop a plan to run your business from another location if your office or warehouse is heavily damagedor your computer system gets hacked.  

From the physical standpoint, you’ll need to ask some more questions: 

  1. Do you have a second location where you can consolidate operations? 
  2. How much business can be done remotely?  
  3. Can you assemble a skeleton crew until you can repair or rebuild?  

Hurricanes and earthquakes are one thing. Cyber-attacks are another.  

Data loss and downtime from hackers or the inadvertent spread of a malicious computer virus can be equally as crippling as a weather-related event. So, make sure you can answer these questions as well: 

  1. Are your computer servers located on the premises or do you operate in the cloud? 
  2. Is your data properly backed-up and recoverable?  
  3. Do you have security measures in place to prevent unauthorized systems access?  

The Difference Between Business Continuity and Disaster Recovery 

As you might have determined, a small business disaster recovery plan involves resuming your business after a calamity with the least possible amount of disruption. There is a relationship between the two concepts in that you must be able to rebound in order to keep your business afloat.  

Assume you’re a construction company with 10 employees and a warehouse where your vehicles are parked, and your tools are stored. A storm causes extensive damage to your structure, destroys some building materials, and renders some vehicles undrivable.  

Until your building can be restored, you’ll need to store equipment elsewhere and get your trucks back on the road. Preparing for this possibility and executing the strategy presents a simplistic version of a disaster recovery plan. 

You can plan for recovery but you’ll also need to finish jobs and perform work as if the storm never happened. Business insurance will cover the damage to your buildings and business property. Commercial auto insurance will cover the cost to repair your fleet, yet it will take some time before you’re made whole.  

In the meantime, employees and suppliers need to get paid, and fees on temporary space and rental vehicles will require a considerable cash outlay. This is where business income or business interruption insurance aids in business continuity. These policies provide coverage for the cost of mortgages, rents, salaries, and even taxes. It also covers the amount of profit you would have received had the disaster not struck.  

Final Thoughts 

Essentially, business continuity and disaster recovery plans are components of a comprehensive business plan. 

When looking at a business continuity plan vs. a disaster recovery plan, you’ll need to understand how both are related and how both are crucial for the survival of your organization when the unexpected happens. At Next Insurance, you can find assistance to navigate choppy waters when a figurative or literal storm threatens your livelihood.

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