 Murphy’s Law states that whatever can go wrong, will go wrong. While most of us are a bit more optimistic than this, it’s common knowledge that sometimes you need to expect the unexpected.
For a small business, this can be anything from an armed assailant walking into your operation to a power failure or even a personal health crisis. All businesses encounter unexpected curve balls; however, the smaller businesses are generally more vulnerable to the financial losses that can occur due to some kind of emergency. After Hurricane Katrina devastated New Orleans, AT&T commissioned a survey and discovered that one-third of 1,200 companies surveyed had no disaster recovery plan. When it comes to business risk, are you more exposed than you need to be?
A strong risk management strategy does not need to be formal. It does need to have contingency plans in place for whatever surprises might occur. Your plan also needs to account for employee training in how to handle these surprises. What kinds of surprises? It could be the river in town overflowing and flooding your place of business. It could be you having a heart attack. It could be your best supplier closing its doors.
Risk management involves five steps:
1. Identify the risk.
2. Quantify the risk – how much could it hurt your business?
3. Identify ways to limit the risk.
4. Put a plan in place should the risk occur.
5. Continuously monitor the plan.
This may seem like a daunting task but if you set aside a couple of hours, you can probably tackle the biggest issues. Anything is better than nothing. Here are a few areas worth considering to get you started.
Employee Safety
Do you have a health and safety committee that meets regularly? Does your staff have a procedure to follow in case of an armed robbery? Do your delivery vehicles have a regular maintenance schedule and do you document it?
Insurance
Do you have coverage for fire, flood or theft? Keep an off-site list and photos of your equipment to help speed insurance claims. Do you know who’s driving your company vehicles and the insurance implications? That employee you just hired may have a driving record that will shoot your insurance premiums through the roof. If they’re using their own vehicle for delivery does your insurance protect you from any lawsuits that may arise due to serious injury?
Data Recovery
Do you back up your data? What would happen if your hard drive crashed or if someone hacked into your database? Addresses and credit card numbers would be lost as well as accounting information. Store your data securely and back up your system regularly. Back up your computer data and keep the information in a different location, ideally at least 50 km away from your business. You could mail your backup disc each week to a contact in another city. Consider subscribing to a backup service. Some simple backup services like Bell Canada’s Business Backup are geared to small business needs. It’s also a good idea to keep copies of important paper documents like licences or insurance policies outside the office. It won’t be much good to you if there’s a flood and it’s stuck under three feet of water.
Privacy
Are you vulnerable to a complaint under the privacy legislation? Do you have the expressed permission of all the customers you send marketing materials to? If they gave you their address to make a delivery that doesn’t mean you can use it to send notices of store specials or new products. Make sure all sensitive information is held in a secure place and that hard copies are shredded when it’s time to dispose of them.
Business Interruption
What will you do if your business is without power for several days? What if there is a natural disaster or vandalism? Make a list of employees who know first aid or CPR or who have ham radios to communicate with. Get 24-hour contact information for all employees. Set up a phone tree or other plan to keep employees informed. Arrange for two-way radios, pagers or text messaging if the phone system goes down. Some florists have made arrangements with other operators to share facilities in the event there is some unforeseen situation that interrupts the business flow. It may be worth approaching another florist to forge an alliance that both of you can call upon should the need arise.
Succession Planning
Who will run the show when you take vacation? Are you planning to retire in the next 10 years? If so, do you have children who may wish to take over the business? Or a keen employee? Start to identify to whom you will pass the torch and then train them so the transition will be smooth. If you plan on selling the business when you retire, a strong risk management policy will enhance its value.
Supply Chain Integrity
Are your suppliers in good financial shape? What if someone goes under all of a sudden? Make sure you have already identified alternative sources for comparable products. Many of our floral elements come from all over the world and with political unrest becoming more prevalent, consistent supply is a real concern. If you have a vendor qualification and certification process, get that out of the way now so if push comes to shove, you won’t have to scramble to get someone approved.
Import/Trade Issues
Are there any import regulations that may change? Our country imports huge numbers of cut flowers, with more than $50 million in imports from Colombia alone. Most carnations sold in Canada are grown in Colombia and about half the roses sold here are also imported, mostly from Colombia and Ecuador. What pesticides are used in these countries? Are any of them under review? Ask your distributors to keep you apprised of any pending issues. Do you need to revisit any pricing decisions because our strong dollar has created a very price conscious consumer?
Once you’ve had a chance to ponder these possibilities, it’s time to get your plan in motion. One good resource to help you plan for any disaster is a book called Contingency Planning and Disaster Recovery: A Small Business Guide, by Donna Childs and Stefan Dietrich. This book grew out of Childs’ experience shepherding a small business through the World Trade Center tragedy. To kick off the risk management process, get a big binder and label dividers with each of the topics listed here. You’ll likely be able to think of a few more that are specific to your business. In each section, list the five steps mentioned at the beginning of this article and then systematically define a plan for each one.
The first step in planning for disaster is to remember that sometimes plan A is no longer an option and then it’s always good to have a backup. That’s why they call it “plan B.”
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