Creating and Implementing a Business Disaster Recovery Plan

A man reviews a large board filled with lists, charts and other planning materials.

A disaster recovery plan is necessary in case of a company cyberattack, hurricane or earthquake, as well as to deal with unexpected closures like those brought on by the COVID-19 pandemic in 2020. Those are all major unforeseen events, but anything out of your company’s control that could shut down your business or make it inoperable can also benefit from having a well-conceived plan.

A business disaster recovery and continuity plan is essential for businesses of all sizes. No business is too small or too large to fail after an unforeseen crisis, but smaller companies are at the highest risk. The Federal Emergency Management Agency (FEMA) reports that 40 to 60% of small businesses “never reopen their doors following a disaster.” And if the loss is data-related, the odds of survival are bleak. Up to 94% of companies that suffer from a catastrophic data loss will not survive. Only 51% may reopen, but will probably close within two years and the other 43% never reopen after the data loss.

If your business doesn’t have a plan should an unforeseen event strike, now is the time to craft one to improve your odds of overcoming an emergency. Follow these steps to put yours together.

Create an Emergency Response Plan

The first step towards putting a plan together takes brainstorming to outline your immediate response to an unforeseen crisis. An emergency response plan will help you navigate the crisis.

Write out a quick draft that includes how your company will address critical business functions, employee safety and evacuation, and the loss and recovery of data, inventory, property, equipment, and other assets. Make a list of who you and your department heads will contact to broadcast that your business is implementing the continuity and disaster recovery plan. Organize a chain of command assigning responsibilities to the various employees. Once you know how your business will react to the emergency, it’s time to formulate a plan to recover from the disaster.

Disaster Recovery Plan Checklist

Some of the essential parts of your plan are:

Create a Business Continuity Plan

The lines between the business continuity plan and the disaster recovery plan are blurred. In fact, many companies use the two terms interchangeably. The two parts of the plan are interrelated to help your small business return back to normal. Regardless of the term you use, both plans focus on disaster prevention, navigating the emergency, and continuing operations after the crisis is over.

Once you’ve secured your vital company assets and your employees are safe and able to operate from an alternative location, it’s time to focus on business continuity with:

Review Insurance Coverage

Business insurance may be the financial lifeline for a small business that’s been hit by an event out of its control. It’s important to review your company’s insurance policy to ensure there are no gaps in coverage.

Make sure your insurance is sufficient to pay both the indirect and direct costs of a disaster. The direct costs include the physical damages caused by the disaster, such as the cost of your equipment damaged or ruined from a flood — or the cost of hard drive recovery. Indirect costs are the consequences of the loss, such as business interruption due to a missing or damaged roof at the location. Some insurance your business should have to protect itself in case of a business interruption include:

Consider Essential Supplies and Systems

Your business may need to keep two types of essential supplies on hand for an emergency. Supplies to respond to an unforeseen event, such as first aid kits, bottled water, and safety/evacuation gear. The second type of supplies and systems a company should have on standby includes backup systems that can be put into place to keep operations running, such as backup power sources, secure, encrypted cloud backups that can be accessed remotely, or an alternative form of communication.

Compile and Keep Important Information Safe

As mentioned, one of the most dangerous situations a company could face is a loss of data — most businesses don’t survive a catastrophic data loss. All critical company data and information should be duplicated and backed up regularly and kept in a safe, alternate location for retrieval.

The business continuity plan should list the location of company data and who has access to the data. A company contact checklist should include several forms of contact (email addresses, company phone numbers, and cell phone numbers) for:

Create a Communication Strategy

An organized communication strategy is essential to quickly contact all the essential parties. Besides the internal company communications, designate employees to provide updates on storefronts, social media, and newsletters to keep your customers informed.

Report Losses to Insurance, SBA, and Other Relief Organizations

Make sure to report the event to your business insurer to start your claim. As you work to recover your business, the Small Business Administration has a whole disaster assistance program to provide businesses with emergency loans to survive an unforeseen event. Depending on the type of crisis that affects your company, there may be other relief organizations available to provide support.

Stay Up to Date

Don’t get complacent about your emergency plan. You never know when a crisis will strike. Regular company-wide training sessions to respond to varying emergency scenarios, conducting scheduled testing on back up systems, updating the emergency plan with new strategies and information, and regularly reviewing insurances will ensure that your company is prepared for the unforeseen.