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Business Risk Management: Tips to Plan for the Worst

A big part of running a successful business is thinking and planning ahead. Typically, that means staying a step ahead of your competition. But it also means having a business risk management plan for when disaster strikes. Whether it’s a natural disaster, a financial downturn, or a catastrophic end-of-world style catastrophe, it’s best for a business to always be prepared and create a continuity plan for the future. 

Naturally, planning for the worst means making a commitment and investing resources in the right areas. It’s not as simple as it sounds, which is why we wanted to share some tips on how to help you develop a business risk management plan for worst-case scenarios and potential disasters. 

Anticipate Potential Scenarios

Business Risk ManagementThe first step in developing a business risk management plan for worst-case scenarios is trying to anticipate the different possible disasters that can strike. Of course, there are certain catastrophic global events that nobody will see coming – ahem, COVID-19. However, businesses are more than capable of recognizing what trouble might be on the horizon. For instance, if the business is located in an area prone to hurricanes, high-magnitude earthquakes, or other natural disasters, it’s a safe bet that kind of disaster will happen sooner or later.

With an emphasis on tech security nowadays, any business can anticipate being victimized by a virus or a global-scale cyber attack that infiltrates their network. There are also other disastrous scenarios that might be specific to businesses in certain industries. The bottom line is that businesses need to anticipate potential disasters that could strike and use that as a jumping-off point for their disaster preparations.

Business Risk Management 101: Study Previous Disasters

In addition to anticipating disaster scenarios, company leaders should look back at how other businesses have handled previous disasters. Obviously, countless businesses have had to respond to hurricanes, earthquakes, fires, and other types of catastrophes. Try to learn as much as you can about how those organizations prepared for those situations and responded to them once they struck. Odds are they didn’t handle them perfectly, which means it’s possible to learn from the mistakes of other businesses and apply them to your business risk management preparations. When it comes to planning for the worst-case scenario, there’s nothing wrong with getting outside help and trying to learn from others.

Practice Emergency Response

During any emergency, every business should have an immediate response plan. Say there was a fire inside the workplace or an earthquake in the middle of the day while your staff was working; what would be the immediate response? Does your business have a plan to evacuate the building and ensure everyone’s immediate safety? What would be the response to a sudden power failure or a lockdown situation? Again, this is where it comes in handy to anticipate different disaster scenarios.

When these events strike without warning, a business needs to know how to ensure everyone’s safety and maintain all necessary business functions. Make sure there is a response section in your business risk management plan and that everyone understands what they need to do during an emergency.

Maintain a Contact List

Communication is critical during any black sky disaster. And to secure your ability to communicate, you must build and maintain an updated contact list with information on anybody or any organization you may reach out to for help. Add the contact information of every employee and their family members. And don’t forget that you should also include contact information for your local police, fire stations, and utility companies. There should be digital and hard copies of this contact list that anyone in the company can easily access during an emergency.

Keep Everything Backed Up

Nowadays, it’s more important than ever to back up documents and information critical for your business operations. The good news is that it’s easier than ever to have digitized copies of everything. Just keep in mind that you should save this information on multiple servers and cloud-based platforms. Whether it’s a natural disaster, a technological disaster, or a doomsday scenario, your business needs to secure all critical documents. Otherwise, you’ll be essentially starting from scratch when trying to get normal business operations back online.

Stock Up on Supplies

While protecting digital information is a priority for business risk management and disaster preparedness, having physical supplies can be equally important. Does your company have an adequate amount of safety equipment that can prove useful in an emergency? What about enough supplies to maintain normal business operations if part of your supply chain were suddenly cut off? Is there a backup power source that can keep things running if a natural or artificial disaster causes a power outage? These are all the types of questions that company leaders should be asking themselves when trying to anticipate different disaster scenarios.

To be fully prepared for the worst-case scenario, companies must have enough supplies to survive for several months if they suddenly couldn’t access those materials. In fact, this is one of the most fundamental aspects of being prepared for a disaster.

Create an Emergency Fund

Setting money aside for a rainy day has never been more important, and it could be what saves a business following a worst-case scenario. Ideally, your business will have an emergency fund that has enough to pay for your core business expenses for at least six months. Hopefully, no disaster will force you to lose your cash flow for six months, but in a worst-case scenario, it’s possible.

Of course, a part of being prepared for a disaster is having insurance that can keep you covered if part of your business gets damaged in a fire, hurricane, or another type of predictable natural disaster. But you’re not always going to know what type of worst-case scenario will impact your business. This is why it helps to have money set aside just in case of an emergency. While you hope you never have to use it, your business will be in much better shape if it’s there.

Prioritize Operational Points of Impact

Any disaster or worst-case scenario is bound to interrupt your normal business operations. A big part of handling such a situation is understanding what your business needs to do in order to keep functioning, even if you’re not at full capacity. Do your best to identify the most vulnerable areas of your business when it comes to certain situations, as well as the core areas that must keep running under any circumstances. In other words, what and who are your most essential services and employees? The first step in answering these questions is to list your operational points and determine how to prioritize to keep your business functioning as much as possible should a disaster strike.

Plan to Keep Essential Functions Operating

Business risk management: essential operationsAfter you’ve prioritized your core operations, the next step is figuring out what you need to ensure these services and key operational points can keep functioning in different types of emergencies. This is all about finding a way to keep your business functioning amidst a disaster.

When disaster strikes, you can’t ensure that things will keep operating like normal. But for your business to survive a worst-case scenario, the essential parts of the business need to stay running. So, when developing your business risk management plan, be sure to account for this.

Understand Remote Work Capabilities

As most businesses should have learned during the early stages of the COVID-19 pandemic, remote work is possible and often necessary during an unprecedented emergency. Obviously, there are plenty of other disaster scenarios in which remote work might become necessary again. But don’t wait until a disaster to figure out how to keep your business running with some or all of your staff working remotely from home.

Assess ahead of time what employees and what roles can function, even with a diminished capacity, while working remotely and what roles can’t. Understanding your capabilities as a remote business can aid in putting together a plan for how your business can continue to function as close to normal as possible in various disaster scenarios.

Create a Communication Plan

Business risk management: communicationAs mentioned, communication is of the utmost importance in any worst-case scenario. This means besides having a comprehensive contact list, you must develop a communication plan for how company leaders will communicate with employees if there is a sudden disaster. Not to mention, ensuring your employees know to check in with a supervisor via email or other communication methods in the wake of a disaster is a must.

During a worst-case scenario, you must ensure that there is no break in communication and that everyone is on the same page as to how to move forward in the aftermath. 

Prepare Everyone

Needless to say, a lot of planning goes into preparing for a worst-case scenario. But it’s not just company leaders who need to understand these plans. Everyone in the company needs to be on board and understand what’s going to happen during various types of disasters. This means holding meetings to share these plans with employees. It also means conducting emergency preparedness drills that simulate worst-case scenarios.

If something unexpected happens, everyone will need to know the role they have to play to help the business respond to the situation as best as possible. Whenever there’s a disaster or an emergency, it’ll truly be a team effort to ensure the business survives.

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