Business continuity planning is a core aspect of risk management for middle market companies, as the Washington Post notes. You can't predict when problems that are out of your control will materialize, such as natural disasters, accidents, labor actions, Internet service outages and disease epidemics.
Major weather events, such as Hurricane Katrina, can stop business in its tracks for an extended period. Even something as basic as multiple snowstorms can clog streets and shut down mass transit for days, as Boston saw this winter. Health scares, such as the SARS outbreak in 2002–2004, are also capable of putting a crimp in international commerce.
Continuity planning is challenging, as it needs to preemptively occur when you don't know for sure what might happen. Despite the unknowns, a middle market business can efficiently plan by breaking down contingency planning according to the company's major aspects. Look at it through the individual lenses of four key areas: systems and infrastructure, people, processes, and logistics.
Systems and Infrastructure
Company operations depend on physical and virtual infrastructure, and ensuring continuity means creating and finding backups and alternatives. A middle market manufacturer might have multiple factories, so other locations could use extra shifts and additional manufacturing lines to cover for an affected facility. If company-owned alternatives aren't available, then relationships and arrangements should be planned in advance for outsourced manufacturing, all with an aim of keeping your customers properly served.
Also back up your computer and communications systems, and teach your people how to swap in any alternate processes. Sometimes that means something simple, like a set of traditional landlines kept in case of a hardware or Internet outage. Generators for power outages and battery backups to keep computers running are musts. You can even identify potential office space if your building becomes unusable for some reason.
People
Every company should have a telecommuting system in place — after all, infrastructure doesn't matter if no one is there to use it. Even if you don't make this flexibility available normally, you want people to be capable of logging in and working remotely if transportation is impossible. All employees should have instructions for what to do in every circumstance, including when to travel to an alternative location. An emergency succession plan can provide necessary guidance if executives or managers are incapacitated. Contingency planning should also include sources for temporary workers should regular staff be unavailable.
Processes
When operations are disrupted to any degree, business processes should be flexible enough to deal with the unusual circumstances. If lead times between orders and delivery increase, customers need to know so they can plan accordingly. If personnel are dispersed, the company needs alternative processes designed for any set of prearranged changes. Given that processes often depend on technology, consider how backup systems might affect them.
Logistics
This is one of the more complicated areas of planning, and many companies neglect to consider it. You may have control over your company's reaction to different situations, but not over the reactions of the vendors, suppliers, distributors and transportation companies you depend on. A disruption at your location or theirs can inhibit the flow of business. Logistics problems are particularly thorny for retailers, distributors and manufacturers. Although there are advantages to lean supply chains, low inventory levels can put you at a greater risk of continued disruption. In addition to developing alternative sources and routes to your customers, consider inventory levels and capital investment when thinking about risk management.
Has your midmarket firm ever dealt with unforeseen circumstances and had to take advantage of contingency planning? Share your stories with us by commenting below.
Erik Sherman is an NCMM contributor and author whose work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, Newsweek, the Financial Times, Chief Executive, Inc. and Fortune. He also blogs for CBS MoneyWatch. Sherman has extensive experience in corporate communications consulting and is the author or co-author of 10 books. Follow him on Twitter.