January 19, 2018
January 2018 Construction News Brief – Disaster Recovery Plan
Lessons from 2017: Disaster Recovery and Business Continuity Planning
With hurricanes, floods, wildfires and other natural disasters, the past year has offered plenty of lessons about the importance of being prepared for unexpected business disruptions.
Despite frequent reminders, many businesses remain unprepared for the unexpected. According to one major insurance company, 40 percent of businesses that don’t have a disaster plan go out of business after a major loss such as a fire, break-in or storm.
For contractors and other construction-related businesses, disaster planning and preparation can be particularly challenging. You must consider not only your own facilities – trailers, shops, offices and IT systems – but also worksites where you share responsibility.
It’s impossible to prepare for every possible type of business disruption. But it’s important to have an effective disaster recovery and business continuity plan in place to help you minimize the financial damage and get back to business quickly.
There may also be legal reasons for developing such a plan. In many cases, a disaster recovery plan is required by a statute, contract or common law.
Identify the Risks and Their Effects
To develop or evaluate your disaster recovery or business continuity plans, begin with a business impact analysis to identify the risks your company might encounter. These can include natural disasters, accidents, power outages, equipment or system failures, work stoppages, and so forth.
Next, identify your critical business operations and systems and quantify the potential effect that each of these disruptions would have on them. Your goal is to develop a matrix that compares both the likelihood of certain events occurring and the amount of damage each event could cause.
Choose Your Strategies
Once your risks have been identified and prioritized, you’re ready to choose from among the four traditional strategies for managing risk: avoid it, reduce it, transfer it or accept it.
In the case of natural disasters and similar threats, avoiding the risk altogether is generally not possible since it would probably require either moving or closing down completely. Accepting the risk is viable only for risks that are either highly unlikely (like a meteor strike) or relatively easy to recover from (like a traffic jam or minor rainstorm).
This leaves the remaining two strategies – reducing the risk through planning and preparation, or transferring some of the risk by insuring against damage or losses. For most threats, your strategy will be a combination of these two approaches, with a heavy emphasis on reducing the risk.
Protect People, Equipment and Data
With the strategies confirmed, it’s time to examine your emergency procedures and identify the personnel and other resources you would need to restore critical systems. This can provide you with a list of action steps for launching or improving your recovery plan. (See page 3 for more details.)
Your objective is to protect three critical elements of your business:
Your people – This should be your highest priority. Much of your recovery plan will focus on keeping your employees safe, informed and prepared. Recognizing this, some contractors have begun providing all employees with emergency supply kits to keep in their cars.
Your equipment – This represents a sizable investment in most construction businesses. Review insurance binders and policy details on a regular basis (at least annually) to be sure they are current and reflect all current inventory.[spacer height=”5px”]
Your business data – This is especially critical in today’s technology-driven construction industry. Bear in mind that natural disasters are only one category of risk that must be addressed. The loss of financial or project data due to power outages, system failures, viruses or cyber attacks can be almost as devastating as a physical loss.