Monday, December 29, 2014

Business Disaster Recovery: Are You Ready?

Disasters tend to be one of two types: natural and human caused.  Do you know the types of disasters that are likely to threaten your business directly or indirectly?  Do you know what your insurance covers and does not cover?  Do you have a disaster recovery plan?

No place on Earth perfectly safe.  Every place can be systematically characterized using the Geographic Systems Model (GSM).  This can help you to identify the natural and human kinds of disasters unique to your business.  The GSM divides the world into 4 basic realms: Air, Land, Water, and Living Organisms.  Each one can be the origin of some kind of disaster.  The forces of nature are such that combinations are possible.  For example.  The realm of Air is the source of storms.  Storms can produce rain, snow, ice, hail, winds, and lightning.  These can all vary in duration and intensity.  Each poses a different kind of threat to your business.  Combined with Land, some sites are prone to flooding, flash flooding, landslides, mudslides or slope failure.  You should be aware of the seasons as well as the frequency and duration of these hazards.  The same hazards can affect your suppliers and vendors whose goods and services you depend on for your business.

After you have identified the type of disaster and its possible frequency, consider the range of impact to your business and its operations.  Here are some of the possible considerations:   

1. Physical Damage / Physical Security: The direct and indirect impacts to your business can result in varying degrees of damage to the building.  A major concern is your business records, especially accounts receivable and payable.  How often do you back up your data and where is the backup kept?  It may seem obvious that the backup should not be stored in the same facility.  If a fire burns out your office, having the data and the backup data in the office won’t help at all.  If the damage in less severe (e.g. broken windows or doors), how quickly can these be repaired or temporarily fixed to secure the premises?  And at what cost?  Who will do the work and how will you pay them?  These considerations should be in your disaster plan.  

2. Direct & Indirect Impacts: Direct impacts of a disaster pertain to your specific business facility.  This means the storm or fire affected your business.  An indirect impact would be a storm that disrupted one of your suppliers.  Without the goods or services you get from them, you cannot produce your goods / services to deliver to your customers.  Without supplies, your production declines.  So storms in other parts of the world can adversely affect your supply chains.  

3. Access Issues: Do you know the main and secondary routes to your business?  Can you and your workers get to your business to assess damage, clean up, and effect repairs to resume business?  What about access to your vendors / suppliers?  Can supplies be delivered and / or can orders be shipped out?  Do you have alternative work sites to resume operations?  What about alternative vendors and suppliers if your primaries are incapacitated by the disaster?  

4. Emergency Notifications: Do you have a way to notify you insurance company, customers, vendors, suppliers, etc. to inform them of you status?  When things are good, others may take your goods and services for granted.  When disaster strikes, they still have their business to run.  Their customers still expect to receive goods and services.  Their vendors, suppliers, and employees still expect to get paid.  If you are no longer operating, it is a good opportunity for your competitors to erode your customer base and erode your market share.  This can seriously reduce or eliminate your ability to recover.  

5. Financial Resilience: Anticipating the hazards, impacts, and costs are just ideas and words.  The reality of being able to pay for the clean-up and recovery can be painful.  If you don’t have financial reserves in place, you should at least have fast access to credit lines for this purpose.  In addition to repairs, you have your bills and employees to pay.  What will it cost to keep operations going under these circumstances?  Do you have a backup plan for telecommunications, data processing, and other critical business functions to get through the crisis?  If you use proprietary data processing software, do you have backup copies and computer equipment capable of running it?  And where is the data (and how up-to-date is it)?
The loss of your business data can expose you to financial risks that can ruin you.  1) Do you have updated Accounts Receivable data?  If not, you stand to lose valuable income needed to keep your business afloat.  2) What about your Accounts Payable?  Falling behind on your payments could result in collection action against you that multiply your liabilities. The Legal Eagles can help with all of these things. We know disaster relief is difficult. Our experienced business consultants are here to help guide you through the process of being prepared for situations that can impact your business. We can also help you after the fact when you need to take action against vendors or clients that didn’t keep their word. 

The Legal Eagles Inc.

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