Always be prepared Featured

7:00pm EDT December 26, 2007

Have you thought about what your business would do if it were wiped out by a fire or flood? What if someone broke into the office and stole all your computers? What if your entire sales department was hit with the flu — all at the same time? Would your business be able to survive any of these disasters?

“Organizations that have thought through these scenarios and have created contingency plans are better able to cope with these events than businesses that are not prepared for the worst,” says Jim Parks, chief operations officer and chief information officer for ViewPoint Bank of Plano, Texas. “Insurance isn’t enough as it doesn’t provide a method to deal with the disaster.”

Smart Business spoke with Parks about how business owners and managers can create contingency plans that prepare their organization for disasters.

What are the risks of not having a contingency plan in place?

It’s expected that leaders in an organization would take charge in the event of a disaster. However, with no contingency plan, they might make decisions in the heat of the moment, which may not be in the best interest of the company or provide for the quickest recovery. Such quick decisions could result in the loss of customers and the company’s reputation because it can’t deliver its products or services on time. This loss of confidence could result in an erosion of business over time that is hard to recoup.

Don’t many businesses already have contingency plans in case of a fire or theft?

Yes, but these plans are often simplistic and only exist on paper. The question is: Has the business owner and staff done a walk-through or drill of these scenarios? Have owners also thought of other events that would be disastrous to their particular business? This is the step that many companies neglect to do. If you spend an hour around the table talking about the consequences of a fire, theft or loss of electricity for a day, you will discover that your on-paper contingency plans may have many holes.

How can a business go through an existing contingency plan and make it stronger?

There needs to be an initial risk assessment where the business owner and other key personnel brainstorm all the potential disasters. You can break down the potential disasters into three major categories: 1. Those that affect only the business, such as fire, theft, break-ins, loss of power, loss of phone service, loss of Internet service, the loss of a major supplier, etc. 2. Disasters that affect employees, such as an outbreak of an illness 3. Disasters to a community, such as a flood, hurricane, earthquake or a threat to security

The next step is to figure out the probability of these events occurring. For example, here in Texas, we are not likely to experience an earthquake. But the likelihood that we could get hit by a tornado is very real. More attention needs to be dedicated to the events that are more likely to occur and would have the most negative impact on the business.

Once you have a list — and the probabilities — what’s next?

The most important part of this exercise is to do a walk-through of the high-risk disasters for your particular company. This should be done in a meeting with the business owner and other principals of the company so as not to disrupt your day-today operations. For example, walk through the scenario of what would happen if one day your supplier could not provide you with a critical raw component to make your product.

The next step in this process is remediation. After walking through a scenario, you need to make plans on what to do to lessen the impact to your business. In the previous example, you’d probably want to have more than one supplier for that critical component.

What scenario would be the most disruptive to a company?

Anything that wipes out what your employees are working on that day. The most critical elements of what’s happening in a business are also the most exposed — they’re generally found on top of an employee’s desk at the end of the day. Things that happened three months ago are usually filed safely away. What an employee is working on at the moment is what needs to be protected — from theft, from fire, from disappearing. What would you do tomorrow if all your current papers, files, contacts, phone numbers and calendars disappeared? Or a fire wiped out everything on your sales staff’s desks? What’s your backup plan? That answer is the heart of a good contingency plan.

JIM PARKS is the chief operations officer and chief information officer for ViewPoint Bank, www.viewpointbank.com, headquartered in Plano, Texas. Reach him at (972) 801-5861 or jim.parks@viewpointbank.com.