Business Owner Imperative: Ensure Continuity

As a business owner, your number one priority is to ensure the ongoing existence of the business. This is why you work each day to earn a profit and produce positive cash flow.

A less obvious but very real threat to the survival of your business is catastrophe — the sudden and unforeseen event that puts you out of business or inflicts long-term damage. Fire, flood, data breach or events that damage your public image or reputation. Or the loss of a vital customer, vendor, license, employee or representative.

Just as the business owner must work each day to secure profit and liquidity, he or she must protect the business from loss due to sudden, unforeseen events.

Here’s how:

Step 1: Identify Your Most Critical Assets

Begin by listing the assets you use in the creation and delivery of your goods or services and in the operation of your business. The primary asset categories are facilities, inventory, equipment, personnel, data, network/connectivity, voice, hardware, software, licenses, agreements, relationships and reputation. Add to the list items necessary to prove ownership of valuable assets, rights or interests, such as titles and insurance policies. Rank each asset or asset class from most valuable and/or critical to least valuable and/or critical. Estimate the impact that each asset would have if lost. Gauge the impact in dollars, customer relationships, public perception and contingent liability.

Step 2: List Things That Could Damage Each Critical Asset

Brainstorm about all the things that could damage each critical asset and/or sever you from full access. For an asset such as your website, it could be a failure of your server by fire or flood. For a key employee or vendor agreement, for example, it could be an erosion of a personal relationship or a fire or other natural disaster. For a license, it could simply be non-renewal for unknown reasons. For something such as a patent, it could simply be the passage of time. Whatever it may be, list the things that could cause damage or separation.

Step 3: Develop Mitigation Plans

For each “thing” that could cause loss, develop a mitigation strategy. For example, if a key asset is a relationship with a person or organization, your plan might include:

i. strategy to reduce reliance on the relationship

ii. multi-point strategy for keeping the relationship

iii. development of contractual protections, such as non-compete, non-solicitation or cancellation notice provisions
iv. transfer of risk, such as the purchase of a key-man life insurance policy

If the key asset is, for example, “inventory,” you might work to:

i. reduce the risk of fire by installing a sprinkler system and/or updating the wiring in the facility

ii. ensure full loss coverage with insurance

iii. develop a strategy for quickly sourcing inventory and securing a temporary place for operations (in case of a loss of the facility)

Step 4: Periodic Review of the Plan

Over time, your business will evolve. Your risk exposures will evolve as well. To be sure you’re doing what you can to ensure the continuity of your business, periodically pull out your continuity security worksheets. Go over them thoroughly and update them. Spot new risks and develop and implement strategies for mitigating exposure.

Keep in mind that identifying your critical assets can take some time. List them yourself and then periodically revisit the list. Some key assets/risks can be difficult to spot. Persons of different vantage points and experiences can be of great help, so put some of your employees and advisors on the task. Ditto for the list of risks to each critical asset.

Your most important job, as a business owner, is to ensure the survival of your business. Profitability is essential, but don’t forget about the risk in unforeseen events. Identify your critical assets, the events that could damage them, and then develop a mitigation plan for each.