Small firms lack disaster planning

Management - News

Wednesday, 02 April 2008

Small companies are seriously underestimating how much it would cost their business if it was disrupted by a major incident like a flood or a fire.

Last summer’s floods and big fires like Camden Town and Buncefield hit the headlines and affected many small businesses.

They failed to make an impact on the business continuity plans of their peers, however, with only four per cent saying that the flooding last year made them think about it more seriously.

One in three, incredibly, thinks that there will be no cost to their business if they are put out of action because of a disaster.

Even the wildly optimistic one in ten who estimate it might cost them up to £5,000 are way off the mark. The real cost, according to government figures, is likely to be £8,000 to £17,000.

BT Business, who commissioned the survey, believes that the unrealistic figures are an indication that SMEs are not giving business continuity planning, which would enable them to continue functioning after - and ideally during - a disaster, the priority that they should.

The company has launched a new free guide to the topic, Understanding how to use IT and communication technology to stay in business every day, that small businesses can download at www.bt.com/insight.

Financial impact of a major incident

Bill Murphy, managing director, BT Business, said that it is an issue that many small companies just do not address until disaster struck, but added that by then it was too late and they were picking up the pieces.

He warned that it was clear that they also seriously misjudged the potential financial impact on their business of a major incident.

“While they recognise the importance of planning to combat operational downtime, when their business and communications might be out of action, they need to make it a much higher priority. If they don’t, then quite simply they are putting their business at risk,” Murphy said.

While small businesses do accept the importance of business continuity, the BT Business research reveals that only 28 per cent say it is very important, and only just over a third have plans in place.

DIY approach

Small companies say that the greatest threat to them is an IT and communications system (ICT) shut down.

Forty-five per cent said that they had experienced an incident that affected them for more than a couple of hours, but despite that only half had a business continuity plan covering ICT.

The vast majority of those with plans adopt a DIY approach - just nine per cent seek help from an independent ICT consultant or supplier.

Murphy said that small firms should consider making use of outside specialist assistance to help them deal with unanticipated problems quickly and keep their business up and running.

He added that recognising the risks and planning to counter them would give them both protection and peace of mind.

Adequate insurance cover essential

Nick Starling, director of General Insurance and Health at the Association of British Insurers, said that last summer's devastating floods highlighted the importance of contingency planning.

Insurers handled more than 25,000 claims from firms who livelihoods were put at risk by the floods.

“It is essential for all businesses to have adequate insurance cover, and a thorough business contingency plan in place, so that if the worst happens they can get back on their feet as quickly as possible,” Starling concluded.