With good planning you can take steps to minimise the potential impact of a disaster - and ideally prevent it happening in the first place.

Overview

Unplanned events can have a devastating effect on small businesses. Crises such as fire, damage to stock, illness of key staff or IT system failure could all make it difficult or even impossible to carry out your normal day-to-day activities.

At worst, this could see you losing important customers - and even going out of business altogether.

With good planning you can take steps to minimise the potential impact of a disaster - and ideally prevent it happening in the first place.

This guide will help you to identify potential risks, make preparations for emergencies and test how your business is likely to cope in a disaster.

Why you need to plan for possible crises

It's essential to plan thoroughly to protect yourself from the impact of potential crises - from fire, flood or theft to IT system failure, restricted access to premises or illness of key staff.

As part of the planning process you should:

• identify potential crises that might affect you
• determine how you intend to minimise the risks of these crises occurring
• set out how you'll react if a crisis occurs in a business continuity plan
• test the plan regularly

For example, if you're reliant on computer information, you should put a back-up system in place so you have a copy of key data in the event of a system failure.

Crises that could affect your business

Depending on your business' specific circumstances, there are many possible events that might constitute a crisis:

• natural disasters - for example, flooding caused by burst water pipes or heavy rain, or wind damage following storms.
• theft or vandalism - theft of computer equipment could prove devastating. Similarly, vandalism of machinery or vehicles could be costly and pose health and safety risks.
• fire - few other situations have such potential to physically destroy a business.
• power cut - loss of power could have serious consequences. Would you be able to operate without  IT or telecoms systems, key machinery or equipment?
• fuel shortages - temporary shortages in fuel supply could prevent staff getting to work and affect your ability to make and receive deliveries.
• IT system failure - computer viruses, attacks by hackers or system failures could affect employees' ability to work effectively.
• restricted access to premises - how would your business function if you couldn't access your workplace - for example, due to a gas leak?
• loss or illness of key staff - how would your business cope if a key member of staff  were to leave or was incapacitated by illness?
• outbreak of disease or infection - an outbreak of an infectious disease among your staff, in your premises or among livestock could present serious health and safety risks.
• terrorist attack - consider the risks to your employees and business operations from a terrorist strike, either where you are located or you and your employees travel. Also consider whether an attack may have a longer-term effect on your particular market or sector.
• crises affecting suppliers - how would you source alternative supplies?
• crises affecting customers - will insurance or customer guarantees offset a client's inability to take your goods or services?
• crises affecting your business' reputation - how would you cope, for example, in the event of a product recall?

Though some of these scenarios may seem unlikely, it's prudent to give them consideration.

Assess and minimise the impact of risks on your business

You need to analyse the probability and consequences of crises that could affect your business. This involves assessing the likelihood of a particular crisis occurring - and its possible frequency as well as determining its possible impact on your operations.

This kind of analysis should help you to identify which business functions are essential to day-to-day business operations. You're likely to conclude that certain roles within the business - while necessary in normal circumstances - aren't absolutely critical in a disaster scenario.

Minimise the potential impact of crises

Once you have identified the key risks your business faces, you need to take steps to protect your business functions against them.

Premises

Good electrical and gas safety could help protect premises against fire. Installing fire and burglar alarms also makes sense.

Think what you would do in an emergency if your premises couldn't be used. For example, you might suggest an arrangement with another local business to share premises temporarily if a crisis affected either of you.

You may consider using a business continuity supplier, which can make alternative premises available at short notice. But this can be expensive.

Equipment/machinery

If you use vital pieces of equipment, you may want to cover them with maintenance plans guaranteeing a fast emergency call-out.

IT and communications

Installing anti-virus software, backing up data and ensuring the right maintenance agreements are in place can all help protect your IT systems. You might also consider paying an IT company to regularly back up your data offsite on a secure server.

Printing out copies of your customer database can be a good way of ensuring you can still contact customers if your IT system fails.

People

Try to ensure you're not dependent on a few staff for key skills by getting them to train other people.

Consider whether you could get temporary cover from a recruitment agency if illness left you without several key members of staff. And take health and safety seriously to reduce the risk of staff injuries.

Transport

Provide IT support systems to facilitate home working should the need arise.

Consider stock piling critical supplies and materials. Create a list of alternative supplies should your main supplier be unable to deliver the goods and materials you require.

Insurance

Insurance forms a central part of an effective risk-management strategy.

You can use a business interruption policy, for example, to insure against loss of profit and higher overheads resulting from, say, damaged machinery. Employers' liability cover - required by law - enables businesses to meet the costs of compensation and legal fees for employees who are injured or made ill at work through the fault of the employer.

Liability insurance - employers' liability, public and products liability insurance - is designed to pay any compensation and legal costs that arise from negligence or breach of duty.

Key man insurance is designed to cover you for the financial costs of losing key personnel. Group life assurance is provided by employers as part of a benefits package and pays out a lump sum to an employee's family should the employee die.

Plan and test how you'll deal with an emergency

You should draw up a business continuity plan setting out in writing how you will cope if a crisis does occur.

It should detail:

• the key business functions you need to get operating as quickly as possible and the resources you'll need to do so
• the roles of individuals in the emergency

Making the most of the first hour after an emergency occurs is essential in minimising the impact. As a result, your plan needs to explain the immediate actions to be taken:

• consider whether you'll need to give staff specific training to enable them to fulfil their responsibilities in an emergency situation and ensure all employees are aware of what they have to do
• arrange the plan in the form of checklists to make sure that key steps are followed
• include contact details for those you're likely to have to notify in an emergency such as the emergency services, insurers, the local council, customers, suppliers, utility companies and neighbouring businesses
• include details of service-providers such as glaziers, locksmiths, plumbers, electricians, and IT specialists
• include maps of your premises' layout to help emergency services, showing fire escapes, sprinklers and other safety equipment
• set out how you'll deal with possible media interest in an incident
• make sure hard copies of your business continuity plan are lodged at your home and with your bank and at the homes of other key members of staff.

Test your business continuity plan

Once your plan is in place, you'll need to test how well it's likely to perform in the event of an emergency.

Think about the things that would cause most disruption and that are most likely to happen to your business. Then make sure that your plan covers each of the risks.

Keep your plan updated

Remember to update your plan regularly to take into account your business' changing circumstances.

If you move into new premises, for example, you could face an entirely new set of risks. You'd need to draw up new maps for the emergency services and amend any contact numbers necessary.

You should test your plan regularly, even if your business hasn't undergone significant changes.

Business Gateway can offer you advice on other areas of starting and running a business. Contact us on 0845 609 6611.