Dr Bob Hester explains why small businesses need business continuity plans.

US small business survival, given the existence of an ever increasing risk environment and growing interdependence

in the marketplace, has created a resultant need for inclusion of more protective measures in business planning. The

approach most needed is an all inclusive enterprise approach that addresses every element of business operations;

adequately addresses welfare of stakeholders; addresses all reasonable threats; and takes into account emergency

management and loss prevention in addition to continuation of business operations (business continuity). Small

businesses represent a significant portion of our economy; are most at risk; and least

prepared to survive disruptive and destructive events.

The office of Advocacy, US Small Business Administration, defines a small business for research

purposes as an independent business having less than 500 employees. According to Small Business

Administration statistics small businesses in the United States:

* Represent 99.7 percent of all employers.

* Employ half of all private sector employees.

* Pay 44.3 percent of total US private payroll.

* Generated 60 to 80 percent of new jobs annually over the past decade.

* Create more than 50 percent of non-farm private gross domestic product (GDP).

* Supplied over 23 percent of the total the value of federal prime contracts in FY 2003.

* Produce 13 to 14 times more patents per employee than large patent firms. These patents are

twice as likely as large firm patents to be among the one percent most cited.

* Are employers of 39 percent of high tech workers (such as scientists, engineers, and computer

workers).

* Are 53 percent home based and 3 percent franchises.

* Made up 97 percent of all identified exporters and produced 29 percent of the known export

value in FY 2001.

We must be constantly reminded that one goal of terrorism is to destroy our economy, a consumer led economy,

through violence, fear and disruption. Their favorite targets are soft targets. The threat is not going away. Beyond

natural and man-made disasters there are a myriad of other crises that can create serious problems and threaten

businesses. Careful planning directed at these issues can go a long way to lower exposure and lessen impact when

things happen; in some cases prevent problems.

Thinking and acting ahead of time to prepare for unexpected events and emergencies that may threaten safety and

loss to businesses is something we can no longer afford to neglect. It is an ever broadening responsibility. Before

September 11, 2001 emergency management and business continuity planning - being adequately prepared to deal

efficiently and effectively with events that could potentially have disastrous results to businesses and our economy -

were a voluntary luxury for government and most businesses. That is no longer the case. Government agencies and

many industries within the private sector are already mandating this change. It is just a matter of time before all

businesses will be expected to incorporate emergency management, preparedness and business continuity into their

business plan. All businesses have a stake in these changes, especially small businesses and should take the

initiative to ramp up their defenses before it is forced upon them by events, legislation or the marketplace. Delays can

often times prove costly.

Most small businesses (including small business owners that are essentially self-employed individuals)

across the American heartland in fact have less than ten contractors or employees working with them.

This is the segment of small business owners most vulnerable and least prepared because they

have the least access to resources. They operate on small margins; focusing their time, money,

resources and energy on getting work done, products and services out in order to produce income.

Preparing, beyond insurance, to deal with crises and emergencies is not a priority.

When small businesses are impacted during a disastrous event, approximately 40

percent never reopen for business and another 20 percent are gone within two

years. Very often the owners of those businesses knew there was risk in not doing more to prepare ahead of time

for such outcomes but chose instead to let things continue as they are and hope nothing happened. After all they had

insurance. Knowing there are risks and understanding those risks are two very different things.

For example, what business owners and people who are self-employed may not know is

that insurance is not going to “cover” everything. That’s if they have insurance and the coverage is

adequate for their specific needs. When it comes to insurance coverage, one size does not fit all. Something else

small business owners and others who are self-employed may not realize is that insurance companies are not going

to continue assuming all the risks, unconditionally. What that means is if we do not do what we reasonably can do to

lower our own risk exposure, insurance companies (increasingly) are going to exercise their option not to insure us

and if they do, charge higher premiums. Insurance is intended to help with losses beyond our control. We can no

longer assume we are safe because we have insurance.

Legal liability is getting more and more attention because of the heightened risk and interdependent relationships

among businesses and stakeholders. As business owners we all have some amount of responsibility for the safety,

protection and welfare of our employees, customers, clients and business partners. Have we done all we can

reasonably do to insure their protection? This is something we need to consider carefully with regard to emergency

preparedness and business continuity planning.

Lenders are increasingly going to demand demonstration of adequate emergency preparedness and loss prevention

measures as a condition for obtaining business loans. It is both reasonable and logical. The financial industry is one

of those industries using mandatory standards now. Eventually, it is going to ripple down to the rest of us. Again,

recognition of interdependence in the marketplace is key to making this happen.

Regulatory pressure will only increase because of the vital role of small business in our economy and the emphasis

on national and homeland security. Demonstrated compliance and business continuity planning accreditation is going

to become more and more significant. This will be preceded by clarification and national standards. The move is

already underway within the public sector with continuity of operations planning (COOP), considered by many to be

good government and good business. Some states now have legislative mandates; Florida is one example. Not only

will businesses need to have a documented business continuity plan, this will have to be communicated, currently

maintained, and routinely practiced in order to be considered valid and effective. An important element of compliance

will be training.

Business continuity planning is no longer a luxury, it is a business essential.

But keep in mind, preparedness happens over time, not over night. If you are a small business to mid-size business

owner and want to remain competitive, the time to get started is now. Help is available.