Business Continuity for SMBs

insurance and business continuity

Insurance will not provide the true protection your business needs for business continuity purposes.

As natural disasters such as Hurricanes Sandy, Katrina and Rita have shown, it’s extremely important to have a business continuity plan. Business continuity can be broken into two components – what happens when typical access to the business’ information or physical assets is drastically reduced or eliminated and what happens when the owner/management team is unable to work due to death, disability or serious illness.

 Addressing the risk of losing access to business assets

Regarding the first component, for small businesses, the key question to ask is, would I still have access to the assets (physical or digital) that I need to run my business if a fire, flood, etc. struck the main building? If the answer is no, you need to take immediate action to correct this. Because you can’t do everything at once, you need to develop, then implement the plan. If you write down what you need to do, but you never do it, you have accomplished nothing.

Ask a series of questions

To develop the plan, you must ask a series of questions: What do I and my employees need to run the business? How can I access this away from the main building? What are my options? What type of security do I need for my digital assets? Do I need to store information on back up devices or servers housed in a data center or other location or should I store information in the cloud? Do I have sufficient insurance coverage for my physical assets? Do I have a separate warehouse or another site where I can house these assets or do I have ready access to substitutes through a vendor/distributor/partner, etc.?


Cemetery denoting owner's passing

What will happen to your business if you or your CEO passes?

Addressing the risk of losing the owner, co-founder or other “key man”

Regarding the second component, for small businesses, key man’s insurance is critical to protect the business and allow time to find a buyer, a general manager or CEO or other person or entity to take over running the business. Hiring a professional manager (CEO, COO, GM) in advance would significantly mitigate the likelihood of the business failing because both the owner and the manager would know how to run the business. If something happened to one, the other could take over and have more time to identify options. If there is no succession plan and an owner with no family passes, the manager can run the business and help whomever inherits the business sell or unwind. With no succession plan and no professional manager, key man’s insurance provides the sole protection.