What Is a Business Continuity Plan? Why You Need One

What is a business continuity plan (BCP)?

A business continuity plan outlines how an organization can continue its operations during and after an unplanned event or natural disaster in order to minimize downtime and financial loss. It addresses recovery procedures for maintaining business processes, protecting assets and human resources, and preserving communication with clients and business partners. 

Note: Businesses need to periodically test BCPs to identify and correct any weaknesses before a real disruption occurs.

Why does my small business need a BCP?

Business continuity management helps companies maintain their competitive edge by ensuring consistently reliable service, no matter the circumstances. This is especially critical for small businesses that face a higher risk of permanent closure after major disruptions. Even a basic BCP can help businesses minimize losses and resume operations quickly.

BCPs help you grow your business through the following benefits:

Risk mitigation

Defining potential threats to business' operations is fundamental to business continuity planning. BCPs also allow companies to implement and test measures that mitigate those risks to ensure quick and effective disaster recovery. 

Financial stability

Even with insurance, business recovery can be costly and time consuming. BCPs outline prepared solutions to streamline recovery and reduce potential losses associated with operational downtime, such as customers moving to competitors.

Regulatory compliance

Some industries—such as healthcare, finance, and government—require businesses to have a BCP to protect against disruptions. If your business is a part of one of those industries or connected to a regulatory body, you may need to establish and maintain a BCP to stay compliant.

For example, the Financial Industry Regulatory Authority (FINRA)'s emergency preparedness rule states that firms must create and maintain a written BCP. The national fire protection association also includes a BCP in NFPA 1600, which the U.S. Department of Homeland Security adopted as a voluntary consensus standard for emergency preparedness.

Reputation management

A strong reputation is critical for the growth of small businesses. Referrals are a major source of new business opportunities and often rely on consistently good service. Effective continuity planning can protect an organization's reputation by ensuring reliable operations even during disruptions.

How to create a business continuity plan in 7 steps

The business continuity planning process should adapt to the unique needs of your organization. That said, there are some general steps that will help your business create an effective BCP.

Step 1: Initiate the project

Start by securing top management support. Then, establish a continuity team of employees who'll execute and test the business continuity plan. Assign key responsibilities and collect important emergency contact information. Ensure everyone in the business, even those who aren't part of the continuity plan, are aware of the project. By bringing the entire company on board, you can ensure a more efficient and transparent process. 

Step 2: Perform risk assessment

Different disruptions require different management strategies. To account for variation, identify and evaluate all potential risks to business' operations, including human error, natural disasters, cyberattacks, public health emergencies, and supply chain failures.​ Consider which disaster scenarios are the most likely to occur and how they will uniquely impact business operations. 

Step 3: Conduct a Business Impact Analysis (BIA)

The business impact analysis builds the foundation of your disaster recovery strategy. The goal is to determine the impact of disruptions and identify critical business functions by running through potential loss scenarios. The processes that are most vital to company finances and operations take priority during recovery procedures.

Step 4: Develop recovery strategies

Next, formulate plans to maintain and restore critical business functions, including alternative processes and resource allocation. Determine your organization's recovery time objective (RTO) and recovery point objective (RPO).

The RTO is the maximum time limit that your business can sustain a systems failure. The RPO is the amount of data loss between normal operations and disruption. The RPO is determined by the interval of time between data backups and how critical it is for your business to have the most recent data possible.

Step 5: Create the plan document

Once you've gathered all of the relevant information, compile it into a comprehensive plan. The document should include step-by-step procedures for all possible disruptions and their relevant solutions.

It should also include team members roles and responsibilities and contact information for first responders, vendors, and business partners. Then determine a chain of command to ensure an organized response.​

Step 6: Implement training and testing

Testing a business continuity plan is just as important as drafting it. Without putting it into practice, you don't know how effective it'll actually be in an emergency. Conduct regular tests/simulations to identify and correct gaps in the plan. Ensure the entire staff is aware of the BCP and participates in simulations to ensure preparedness and effective solutions across teams.

Step 7: Review and revise

Businesses aren't stagnant; your business continuity plan shouldn't be either. Periodically update the plan to ensure it remains effective as your company grows. Continue to test and revise the plan to reflect changes in your organization, technology, or external environment. Make sure to educate new employees on the plan as your team grows. 

Business continuity plan vs. disaster recovery plan

A disaster recovery plan (DRP) and business continuity plan are both vital parts of a company's emergency management strategy. However, while a BCP aims to continue operations during and after a crisis, a DRP focuses more on restoring IT systems and recovering data after a power outage.

Here are some of the main differences between these two contingency plans:

• Scope: A BCP aims to maintain all critical aspects of business operations for the entire organization. A DRP specifically addresses the recovery of IT systems and data.​
• Approach: A BCP proactively works to prevent disruptions and continue operations during a disaster. A DRP proactively details steps to recover data access after a shutdown.​
• Integration: A BCP requires the entire organization to participate in training and testing procedures. Typically, only the IT team needs to create and manage a DRP.

Businesses should have both a BCP and DRP in place to foster comprehensive organizational resilience.

Start business continuity planning with LegalZoom

If you still have questions on how to create an effective business continuity plan, LegalZoom can connect you to an attorney who can help. LegalZoom has a wide network of experienced business attorneys licensed in all 50 states. Once connected, your designated attorney can offer legal advice as you build your BCP and review the documents to ensure compliance (if necessary) and comprehensibility. 

FAQs 

What are common challenges in business continuity planning?

Poor communication, lack of testing, and an inadequate analysis of potential business threats are all reasons a business continuity plan might fail. Additionally, without sufficient backing from management or stakeholders, it can be difficult to build a robust BCP or get all employees on board. America's Cyber Defense Agency also offers a business continuity planning suite that walks through important aspects of a BCP.

Who is responsible for business continuity planning?

The person or team responsible for business continuity planning varies depending on the needs of your business. A small company may choose to designate one person to lead the project, while a larger company may prefer to divide up responsibilities between multiple groups.

That said, executive management, IT, HR, and risk management teams are typically involved in developing and implementing BCPs. Your business may decide to put together a team from various aspects of the business and assign a senior manager as the Business Continuity Manager.

How do you test a business continuity plan?

There's no set way to test a business continuity plan. The goal is to make sure the plan is feasible and team members can effectively and efficiently perform their roles. You may choose to start with an in-depth review of the plan with managers and department heads. Then, follow up with a walk-through to test restoring data systems and other critical business functions. Lastly, perform a full simulation of potential disruptions to test how well the BCP stands up to real life threats. 

What industries benefit most from business continuity planning?

All businesses benefit from a continuity plan as disasters and disruptions can happen in any industry. However, those with critical infrastructures (systems that're vital to a society or economy) can have particularly severe consequences when disrupted. Financial services, healthcare, manufacturing, and utilities are among those industries.