The Prevent Defense
Expect The Unexpected
There are times when everything is going perfectly. The team is working together like a well-oiled machine, you’re scoring orders left and right, you’re moving the business up and down the field at will, your competitors aren’t able to block any of your moves.
And then you get hit from behind by something totally unexpected.
Like a global pandemic.
If COVID taught us nothing else, it’s that every small business should have a crisis plan in place to protect its health and viability. With a crisis plan in place, you don’t need to know how to fight a raging, metaphorical fire because you already have the fire extinguishers in place before the fire starts.
A crisis can be anything from a flood, earthquake and fire to computer hacking, loss of a key partner, a protest or strike. Some have very little chance of happening; others can shake your business to its core.
The goal of a crisis plan is to identify every possible eventuality in terms of the 1) probability it will occur and 2) the impact it will have on your business. Once you’ve identified the different events that can affect your business, you determine how much control you have over preventing the event from happening in the first place or reducing its impact if it were to happen. This is known as the degree of influence you have over any particular event.
For instance, you may run a business where the probability of a robbery is high. You can reduce the impact of the event by reducing its probability (installing security cameras, anti-theft devices, alarms, more lighting in the parking lot, etc.) or reduce the impact it will have on your business (not keeping valuables in sight, reducing the amount of cash on the premises, etc.).
Once you identify a crisis you want to ask five key questions for each and rate them on a scale from 1 (least impact) to 10 (biggest impact).
Questions to ask:
1. If the crisis runs the risk of escalating in intensity, how intense might it get and how quickly?
2. To what extent will your crisis fall under someone else’s watchful eye, such as the news media or a government regulatory agency?
3. To what extent will the crisis interfere with the normal operations of your business?
4. Is your internal/external public image at risk?
5. To what extent would your company’s bottom line be damaged?
Then divide the sum of all five answers by five to get an average.
Let’s use a robbery as an example:
Now let’s look at this in more detail.
A robbery will intensify quickly, so Question #1 is scored a 7. The police or another law enforcement agency will get involved, so #2 is a 9. It will shut your business down for at least the rest of the day, perhaps longer if there is damage, an injury or a fatality, so an 8 for Question #3. Will your image be hurt? Probably not as you’re a victim, so #4 is a 2. Any financial impact would be negligible, especially if you’re insured or the money or items are recovered, so #5 is a 3. This gives you a 5.8 impact on your business (the sum of the scored divided by 5).
Now, assess the probability that the event will happen on a scale from 0 to 100%. This will give you formula such as 5.8/60, i.e., it would have a slightly higher than medium impact and there is a fair probability it will happen.
You want to identify all the potential crises that have both a high impact and high probability and find ways to either reduce their impact or the chance that they will occur in the first place.
Let’s go back to the example above. Your business is in a medium crime zone. After assessing the potential for a robbery, you decided to reduce the chance that it will occur by adding security cameras, alarms and other measures to deter robbers. You also reduce the impact by updating your insurance coverage and add a safe.
You want to run similar scenarios for each crisis that could affect your operations, even the unlikely ones. You can probably leave out an impending zombie apocalypse, but no one predicted a global pandemic in 2020 either.
In assessing the impact or even event, consider the cost in hard and soft dollars. Hard dollars are relatively easy to calculate. These are actual dollars lost in the immediate aftermath. Soft dollars, on the other hand, can be more difficult to calculate. These dollars are related to decreased productivity, low employee morale, increased absenteeism, increased workers’ compensation claims, bad press, erosion of community support, etc.
Depending on the crisis at hand, the cost of intervention may appear to equal the hard cost of a possible loss. But the soft dollar losses can create a trickling effect on your business where you continue to lose revenue long after the initial crisis has passed, often without noticing until it’s too late.
A well-conceived crisis plan has another benefit: it automatically creates order in the midst of chaos. You don’t have to consider all the scenarios and possible outcomes; they are already written down. All you and your team have to do is follow the plan. You already know that if ‘A’ happens, you should do ‘B’ then ‘C’, ‘D’, ‘E’, and so on.
This is a pretty basic tutorial on crisis and disaster planning and management, but it should show you that 1) crisis planning is an important part of your overall business plan and 2), not having a plan can cripple or even kill your business, especially a small business.
Want to know more about crisis planning and business continuity? We have a free “When Trouble Strikes: A Crisis Planner for Business” publication written specifically with small businesses in mind. It covers the topic extensively and gives you additional tools to do your own crisis planning and mitigation.
Table of Contents