How can I prepare for and deal with a disaster beyond my control?
I read the article ‘13 reasons why businesses fail’ and realised I should have a disaster recovery plan or strategy in case something terrible happens. I run a chain of eight ski shops, but a third of my sales are online. I’ve got basic insurance but don’t think I could survive five weeks of not trading as ASOS had to cope with. Where do I start?
A. Alysoun Stewart of Grant Thornton writes:
Planning for the Armageddon scenario is a challenge for any business. You have already made a start by taking out basic insurances, which will protect you against actual losses suffered: assets and profits. Make sure that the cover is comprehensive in all areas, as it is not worth cutting corners. Insurance can seem a very expensive charge to the profit and loss account each year, but it is infi nitely more expensive if it’s not there when it’s needed.
The next stage is to look at all areas of the business and assess where disaster could strike, the nature of the risks and what impact they would have. Then try to build in safeguards, flexibility and backups that will enable you to minimise the damage and loss suffered.
Start by identifying the worst that could happen. It may be a catastrophe similar to the Buncefi eld oil refi nery explosion that closed online retailer, ASOS, for fi ve weeks. If you hold significant levels of stock in a central warehouse then clearly you are vulnerable to an event which either damages or destroys that stock; although, given you have a chain of eight shops, and therefore your stock holding is decentralised, it is unlikely that the impact would be as severe as it was for ASOS.
It may be the corruption or crashing of your IT systems that is more serious. Make sure your systems are adequately protected, regularly backed-up and your IT resource has put in place a disaster recovery plan
It may be that your people represent your biggest threat. Are you heavily reliant on a small number of key individuals who would damage the business if they left? Could a major flu pandemic hit you hard? Or could it be a market-related threat – even looking at the longer term, such as the effects of global warming. Some businesses engage in scenario planning in order to map out all these various possibilities and their responses to them.
Your risks are mitigated to a degree by not having all your eggs in one basket – you have eight outlets and one-third of your business is from online sales – and it therefore seems unlikely you could be prevented from trading across the whole business for any significant period of time. Nonetheless, a robust risk assessment of all areas, starting with those you consider to be the biggest risk, is something that you should undertake and update annually.