Business Continuity Planning

In this episode I discuss the basics of building a business continuity plan foundation which can be used to handle any emergency.

Here are some great resources:

https://www.ready.gov/business-continuity-plan

https://disastersafety.org/business-protection/ofb-ez/

Please remember to replace "Insert Company Name Here" with your name!

Transcript

Inspectacast (C) 2020
Season 2 Episode 3  Business Continuity Planning

Transcript from audio- unedited

Tom LeGros  0:00  
Hello, today is June 9 2020. And this is inspect a cast sponsored by preferred reports.

Tom LeGros  0:21  
Hello, welcome to the third episode this year of inspect the cast by preferred reports. And our subject today is probably returning is more back to some normal things right. We've talked about the corona virus. We've talked about doing inspections in the real bad virus conditions and stuff like that. But now we're going to talk about business continuity planning. And yes, it is somewhat associated with the virus. We can't get away from that face it it is a pandemic, we're living through it. But at the same time Business Continuity Planning is not just about big giant crisis. It's not just about the big emergency. It is important for even the smaller ones, the ones that nobody else is going to consider an emergency but it's an emergency

Tom LeGros  1:00  
For you, let's say you lost a facility due to a fire, or for some reason the utilities were cut off because if some water main break, and you don't have any water going to the complexes as manufacturing, so the fire sprinkler system doesn't work and the fire department won't let you operate, even with a Firewatch. But as you do something that could be potentially combustible, you have to have plans to deal with those things. And when you have plans, it makes you a little bit more comfortable when you face the unknown because it's not really unknown anymore. Face it, emergencies and disasters and things like that. The reason why people are affected in such a way is because they are unable to see what the future is going to be what's going to happen after the disaster is gonna be over with. They can't work their way through it because they don't have a plan. And as much as government tries to get people to plan for things. Most people don't they wait till the last minute. How many times have you seen in hurricane evacuations that the storm is 24 hours out and there's a lot of traffic leaving the cities because

Tom LeGros  2:00  
They waited to the last minute. And everybody has their own reasons. They don't believe the weather people, they don't believe the forecast. They don't believe the models, etc, etc. But the real thing is they didn't have a plan. And they waited till the last minute when they finally had no choice other than to just go and head north and get away from the water, and hopefully not have any issues. That's not the way you can run your company. And it's certainly not what you should do for your family. So we're going to talk about this planning process. So what is really Business Continuity Planning? Well, that's really a combination of your policies, your procedures, your processes, your functions that are all refined, and put together for other than routine operations. You want to be able to keep your company operating, keep your people employed, keep the cash flow coming in, even in times that are uncertain. Of course, it depends on what type of business you have, whether you're able to do that and we're going to get into how we assess, you know, not only the risks that you're facing, but also the determine whether or not it's something that you can even operate in whether or not your product is usable by anybody who is currently going through the same thing you're going through, and will you know, those are some of the things you have to ask yourself, even in a disaster even with a disaster plan. Is this an environment that we can safely operate in and keep things going? So we'll talk about that too. What I want to help you do is envision building a basic structure, just a basic foundation, from which you will create all the other plans, annexes, and whatever else they do, because without that basic foundation, without that, that basic set of rules that you have in place for what what do you do when something happens as unusual? Then all the other plans just aren't going to make sense. We rushed with this Coronavirus pandemic, we rushed to follow the CDC guidelines and establish procedures and policies that were consistent with that sort of stuff. If you look at the documents that were coming out and are still coming out, they were all based on our prior influenza pandemic plan that was written back in 2018. thousand seven and I remember back then it was disseminated to all the companies. And they said, Look, you could have a lot of absenteeism coming up soon. So you need to make plans to make sure that one year employees that come into work, don't get sick. And then to that the employees that are sick, stay home and don't infect the others. And they talked about how you need to look at people working remotely and things like that. And even back then working remote was certainly possible, although it is not as widespread and easy to do as it is it is now. So if you have a basic plan, and from that basic plan, you can build things on top of it, you're doing really good. Let's take a look at how do we put that foundation together? It all starts with determining what your critical company operations are, what are your functions, what is it that you do that makes money and that is needed. So once you determine what your critical functions are, those are the things that you need to preserve no matter what, so that you can continue to operate. If you're a manufacturing company, obviously your plant your equipment. That's in important, but so is your supply chain, you have to get raw materials into the plant in order for you to produce whatever it is you produce, and to sell it upstream to whoever your clients are, if you're making the infamous widget, you need to have materials to make your widget. And if the supply chain that you have is is impacted, then you're not gonna be able to put widgets out. So you have to have some kind of alternative backup supplies if that's possible. Or you may have to have a stockpile of raw materials that you store which is expensive, not a whole lot of people do that. But regardless, there needs to be some kind of approach to make sure that you can stay functional and those are things that you need to think through. So if you're a manufacturer, you need to have those raw materials to keep producing. And then you have to have of course a plant to produce them in with the equipment necessary. And then you have to have the logistics capability to move both the supplies in and the finished product out to your customers. And that logistics capability means operating in less than optimum conditions on the roadways, to move things and it may mean instead of Using rail using trucks or whatever I mean, it really that's what you look at. And that kind of emergency could be a pandemic, it could be a hurricane, it could be an earthquake, it could be any number of things. Or it could be the fact that your primary supplier that you get widget juice from to make your widgets, their factory burned down. And that happens to be the only factory on the East Coast, and you had rail service to you were able to get your supplies. And you did the old fashioned in the nick of time inventory. So you didn't keep a lot of stuff on site. So now you have to go to the west coast, which is going to cost you double money and take more time. And you're going to fall behind because guess what your customers do in the nick of time inventory too. So that means when they run out, they need to have the new inventory coming in, there's not going to be they don't want to have a gap. And they're going to start looking at your competition to get their widgets from because that competition may have already had an arrangement with the West Coast, you know, vendor that could get that stuff in faster. So those are the things you look at because when you think about it, your supply chain vulnerability is very important. And think about this. When the virus started, what was the first thing that came to everybody's mind is the supply chain vulnerability because we purchased so much from Chinese manufacturers, and the fact that there is a lead time between when the materials get shipped out of China by by ship over to the United States or wherever, that we were only going to have so much of a window. And after that, we were going to lose supplies for a period of time. You know, in this case, it was a month plus. So you're looking at a month plus bubble of nothing moving or very little moving. And that affects the manufacturing companies is affected Apple, it affected a lot of electronics companies because they couldn't get their supplies to put together a manufacturer their their components and stuff. So those are the things that all need to go into business continuity planning. So again, it's not just for the big, big giant emergencies, it's not for the asteroids crashing on the planet, all that kind of stuff. It's it's for the things that could happen any day and could seriously impact your ability to make money. The other thing is a lot of people have a plan. Well, we got a plan. We just did that before. Look, first of all, not having a plan as a plan. It's just a bad one. Okay, so whether you take action or not, it's not really that relevant. You're doing something right now having a plan that was written by your dad back in the 50s, when he opened the plant, and he actually got that from another company that doesn't even do what he did. But he got it at a conference, somebody said, Hey, here's a plan. That's not a good plan, especially when that only copy from the 1950s is in a dusty binder back on a shelf, way behind out in the warehouse where you put your dad stuff after he retired. That's not a functional plan. Now, if you do have that binder closer to you, and you can reach up on the shelf and pull out the orange binder for your emergency plan, do me a favor, open it up look at the first page. And if you can see the title where it says business continuity plan for insert name here, you have a bad plan. How many people have gone online and there's tons of them and as a matter of fact, I'm sure the show notes will have A couple of different resources you can go to to get your own, that you can download templates that have all kinds of business continuity plans, man, you can have 500 page plant, and they'll all have insert name here, insert committee members names here, etc, etc. They are not customized to your business. The same as when we do safety work. And we tell people you need a safety plan. Well, gee, I wish I don't have one. We can give you one. But you need to customize it to your operations. Don't leave the insert name here on the title page. And even do more than that actually go in and use it because emergency planning is not something that is just put it on a binder, put it on the shelf, buy it from a consultant. No, it actually is going to require your division managers, your supervisors, various staff that are particular subject matter experts to your manufacturing your your baking your furnaces, whatever it is that you use, that says we need these three things in order to function that's the things that we need to protect etc. And when you involve more people into the planning process, then more people are aware of what the emergency plans are. And it even makes it easier to properly educate your employees. You're not going to be able to plan for everything. There are some things that are just completely out of your control. And I had mentioned in the last show Black Swans, you've heard the term Black Swan. They've used it a lot with the Coronavirus situation. A black swan event is something that's so rare, it's hard to predict, and it makes a significant impact in history. Well, the Coronavirus will make an impact in our history, there's no doubt of that. I think it's gonna be less of an impact than what people say now. But we'll see. I mean, history is only you can only look back on history after it's been made. So who knows what's going to happen? what historians are going to say 10 years from now or 20 years from now? Was it predictable? Absolutely. In fact, it was very predictable. So therefore, it doesn't meet the definition of a black swan. How predictable was it? Well, let's see. I actually went on the internet to the CDC site and looked up. Well, the most recent stuff we had was you always heard about the Spanish Flu in 1918 where We also had the Hong Kong flu in 1968. Before that we had the avian flu in 1957. We had polio starting back in 1894. They had a variety of outbreaks, that that that killed thousands. In fact, in 1916 2000 people died primarily in Brooklyn from a polio outbreak 1950 to 57,628 cases, half of them that were paralyzed and ended up dying until the vaccine came out. And in fact, oddly enough, the first there was a set of vaccines that came out that actually gave children polio. And that was because they were they were trying to rush out a vaccination. And one particular vaccine manufacturer for whatever reason the virus became whatever it is for polio became live. And they discovered that because the children were becoming paralyzed on the arm that they got the injection or the polio inoculation. More recently we've had SARS in 2002 MERS in 2015. Ebola in 2014. swine flu in 2009. HIV has been a pandemic since 1981. There's no cure. There's treatments now.

Tom LeGros  12:02  
But there's no cure. It doesn't matter how much people try to push to make planning, emergency planning Business Continuity Planning is not something on the forefront of people's minds when you have insurance inspections done. And if you've got bennis business interruption coverage on your on your plan, which most people do, they're going to ask about what is your business continuity plan or what is your What is your emergency plan to operate. Because part of that is when you have those business interruption plans, you have to have a way to mitigate the damage. In other words, you have to have some way in place to go out and get operational again, get that income coming in. They don't want you to just rely on all the things that they have to do to come up with how much a check is going to be based on your business interruption insurance. They want to know just like if your house last this last part of his roof from his hurricane, that if you can, you can put a blue tarp and minimize the damage to the interior contents because that is a requirement of policyholders to mitigate the damage and reduce the potential loss. They're going to want that kind of plan. There's not a whole That would be going into where we would evaluate how good it is or how bad is it just the fact that you have it. But for your own good, your absolute own good, you need to have a good plan. Now let's go ahead and after this quick break, we're going to look at the different parts of these plans a little bit deeper, and how you can pull it all together in the app right after this. These are frightening times for your insurance. They're understandably apprehensive about meeting new people in their homes or businesses, but you have to get the information necessary to be able to underwrite their insurance policies. Preferred reports one of the largest nationwide providers of insurance loss control surveys has the answer. Get your inspections done ASAP, as safely as possible, using our revolutionary self assessment report and smartphone application within your insurance and answer questions, and provide photos and other documentation for your underwriting file. Using state of the art validation technology, you can be sure the information you get is being received. From your insurance as a standalone or combined with a physical inspection efforts ASAP app is your way to get critical information now, contact preferred reports today, I prefer reports calm, that's preferred reports.com and ask about their new ASAP, as safe as possible. Digital

Unknown Speaker  14:22  
inspection, right.

Tom LeGros  14:29  
Okay, so we've talked about going through and evaluating what we do what how do we make money. Now let's talk about your employees. You need to know who the critical employees are. And you need to have a way to communicate with them. You need to have a way to let them know what's going on, if their job is going to reopen, what their tasks are going to be. And you definitely want to make sure that the ones that are the most critical part of your processes, your managers or maybe your experts or things like that, know what situations they will report in without even being told and which situations they want. There's some communications issues as there can be after, you know, natural disasters, such as earthquakes, fires, floods, big giant fires, floods, wildfires, hurricanes, regular communications may not be possible. So one of the things that you can do is establish a rally point for a specific date and time. So assuming that it's not a disaster that was predictable, let's just say an earthquake, the earthquake was severe enough to where you have established in your plan, that four days after whatever it is happened, we will attempt to meet at a certain point, a certain building location or whatever, if you can't go to that location, if it's if it's impossible reach, then here's our backup rally point. And anybody who was able to that still is going to be able to participate in the business meet does there and then you also let them know you can check social media if possible. We're going to have we'll set up some type of system where we can get messages out or whatever. This is where you look, you want to have an alternative communications process, short of relying on self phone's on relying on internet, that sort of thing. So another important thing that people don't do, because they build these fantastic plans, they put it on a spreadsheet or a Word doc or whatever they stored on their computer, they either don't bring the computer with them the computers destroyed in the crisis, or they had no power, the hard drives damage, it gets wet or whatever. So they don't have their contact information. They don't have their their disaster plans and stuff, so it's gone. And that's why it's important to have especially your key contacts list on paper, I would suggest keeping a regular copy, updated with all your senior management, so that way they have it available to them. Some companies even recommend setting up a go bag or whatever, that's a bag that you have your important materials in that you need if something happens right away that you need to move on. And one of those things to be the current contact list for all your employees as well as a copy of the emergency plan, especially the ones that they're going to be overseeing have it on paper because unless something happens to the go bag, and He gets burned or whatever, that's one thing. But it's a lot easier to keep track of that paper stuff in an emergency and use it. Especially if you do have access to a working cellular phone. Or if you have a satellite phone backup that you use to be able to communicate out with, it will be very helpful. And a lot of people forget that point. And even in your own disasters, if you're facing a hurricane, it's a good idea to have some of that stuff printed up phone numbers and things. How many of is used to keep phone numbers written somewhere, but now just put it in the contact list on the phone? Well, if something happens to the phone, you lose your contact list. I mean, I honestly, I don't know what my home telephone number is, sometimes unless I look it up because I never call it. I never give it out. I always give out my cell phone number. Or if I want to call my wife's phone. I don't remember the phone number. I just tell Siri to call my wife. And she does. But that doesn't mean I know the number. So have something somewhere where you can refer to it in case our technology fails. You also need to have a plan to bring in temporary help temporary labor part time later. backups are whatever it all depends on the situation that you're facing. And that should be accounted for in your plan. The final part in the general design of the broad plan is you need to know your key customers and key suppliers. We mentioned that, particularly about the suppliers without either of them, one or the other, you're not going to make any money. If you have customers that want your product, but you don't have supplies to make the product, then it's pointless. And if your suppliers are ready to send you stuff, but you have no way to sell it to there's no point in buying those supplies and stockpiling things that you're not going to be able to use or sell. So you need to specifically pay a lot of attention. As I said earlier, to supply chain emergency management, it's critically important and it may be costly, you may have to set up a stockpile or have an emergency warehouse or storage or whatever, where you have a couple of days worth of extra equipment and supplies where you can produce maybe another batch of whatever is that you sell. But that's expensive, and especially if the raw materials that you use expire or they become They decay or whatever, that's even worse. So it really depends on how your business is set up. Now, once this all happens, okay, you have to really do a few things. And let's say you've got your basic plan. So now, and then disasters happen, whatever it may be, let's let's make, let's just save it as a major event.

Tom LeGros  19:21  
Okay? Not something small, like the water being out. This is more of a major event. The one thing that you need to do, and it's important to do before you start jumping into things is stop and take a assessment of the situation become situationally aware, that means new sources, government, whoever that's giving you information, and then talking to other people who may be in different parts of the city, different parts of it and find out what's going on. Because you're going to need to know what's happening, how widespread is it, and then determine what kind of an impact it's going to have on your operations and how bad could it get from where it is now? Because sometimes a disaster like for instance, it We look at New Orleans with Katrina. The Hurricane itself was really not that big of a deal. But due to the all the issues with the the flood protection, it became a huge disaster afterwards from the seawall flooding that did not come from storm surge or rain that came from the fact that the the flood walls were undermined and water came in since New Orleans is below sea level and flooded the city. That means it got worse really. And that's something that you need to take account of as best you can. And now here comes the important question once you have all your your intelligence together and you're you know what the situation is or as best as you can, you have to determine is this an environment that you should or even can operate in. And that really depends on what you do. If you're an attorney's office and you don't do anything with with this kind of stuff, then chances are it's probably better that you relocate have a plan that gets you out of the disaster area. You can rent some office space, get some computers on rentals or whatever and then connect up to your cloud. servers or whatever be back in business. Understanding that chances are the courts that you have papers filed and and stuff aren't going to be open. So you're going to have some time off. And so are your associates and paralegals and stuff like that. If you're a manufacturer, and your plants still standing, if you're manufacturing something that people aren't going to need, or that you won't even be able to get out because the railway service is impacted, it's going to be down for a while, whatever, then you may not want to expend the effort to use up your materials to run the electricity if you've been habit or the generators that use fuel that resource to get the plant running to produce something that nobody's going to buy. And if it's a really bad situation, if you have a situation we have a societal Breakdown, Breakdown in government, let's say it's a big massive, you know, worldwide or nationwide issue. That's a problem too, because you know, if you're if you make bagels and your bakery gets flooded, I don't know that in the rest of the cities flooded. nobody's really going to be buying your bagels. So is it important to get the Baker's in and to try to get the ovens going to make bagels when you're in three feet of floodwater More, no, it's not going to be. So if it's a situation where it's just cut and dry, we can't operate, then that's what you tell the employees and the managers are based on our emergency plan and our evaluation of the situation and we will not be able to operate at this time, we're going to go ahead and look to see what we're going to do in the future, we'll keep you posted. And that's the best that you can do. And you have to do that, because that's where everything else follows. Now, just because you're down, and you're not able to produce these things, does not mean that you can't do other things such as file insurance claims. See whatever you can do to salvage equipment, or supplies or whatever from the damaged facilities, get financial assistance from the government to help rebuild, look to open another location, even if it's just temporary temporarily. And so you can move back to the main location because that way you can restart the cash flow and you're not just relying on business interruption insurance, you're actually getting good cash back end. You're reestablishing your relationships with the Your customers and with your vendors that know your back end. And you're also able to use that money coming in plus whatever assistance you get or claims when you get to rebuild your primary location so you can move back in and kind of return for normal. It, it's gonna be one of those situations where, you know, this whole thing stinks. Because you may have to get rid of the employees, you may not be able to really get back into operation for a while. Good example in New Orleans, it took years for some of those businesses to come back. Some of them still haven't. They're trying though, and some of them just gave up no move, got a town went to Houston went to to Lafayette, Baton Rouge or Atlanta and relocated there and started their businesses in new with new employees. But at least having a plan is going to give you a starting point is going to give you a framework that will allow you to look forward to the future and move forward. And that is absolutely critical. So just taking a look at what we've discussed so far. Let's summarize things and wrap this up. Build a basic framework to assure the company can continue on any variety Have situation,

Tom LeGros  24:00  
it doesn't have to be specific to a particular situation. As long as you build a good framework, you can build all the other specific plans if you really need to. But as long as you have something there that you can rely on when bad things happen to at least have a starting point to move forward, and one that does a good situation, check to determine whether or not this is even something that you can operate in. Even if your facilities are functional, and your employees are available. That's your big decision. Make sure that you're able to reach your employees absolutely critical that you're going to be able to get those people back in when you're ready to operate. Because without employees you can't operate. Make sure that you have contacts with your customers and your suppliers because both of those people are an important part of the equation. Because you need supplies to make whatever is you're making. And even if you're a service oriented group, you still need to have computer access. You need to have a variety of things. And you need to have backups for that kind of stuff. And for customers. You want to make sure your customers know that you're an operation and that you're still able to deliver things otherwise they're gonna go to your competition. So silence is deadly lack of communications is a killer. And if anything, make sure that communications is a key component for all the stuff that you're doing, stay in touch with everyone, especially the ones that are paying you money and you're spending money on your customers are the ones the reason why you exist. So it's important that they be kept in the loop that they understand what you're facing, as well as your employees who are important to you because they help you service the customers. And then hopefully, your supply chain hasn't been adversely impacted, or you have backups, and you're able to keep operating. Just remember no matter what happened, unless it's a seriously bad thing, it will go away, it will get better. And the worse it gets, the longer it may take to recover. But those recoveries do happen. We saw that in Katrina. We saw that after Hurricane and we're going to see that after the pandemic. And we'll see that after future events, including the weird Black Swan events, as long as it's not the infamous asteroid that's going to hit and destroy the Earth, that kind of thing, in which case, it's nice to have a plan but no well Those sayings, although the scientists will tell you will happen one day, they can't tell you when, or how or why. And quite frankly, we may not even see it. So does it really matter? No, we need to plan and manage the things that we can manage. And by having a plan with a basically good foundation, you'll be able to do that a lot better than your competition. And you'll be able to get back in operation and profitable faster than others. If you want more information about this, check the show notes. There's going to be some links to various sites that have business plan toolbox. You know, in business merchants plan toolboxes do me a favor, please. If you're just going to keep it without customizing it, at least put your name on the front, please. But hopefully you'll read through it get with your employees and get it written specifically for your business. All right, thank you very much. We'll have another show. Next week I'll put up with the topic is we're trying to stay real timely on things hurricane kind of throws off in the production schedule by the tropical storm kind of throws off on the production schedule a little bit for this show. So I'll have something out for you next week, and I'm trying to get some guests so you're not just listening to me. I don't want to keep doing a monologue every week you're going to get bored move on. I don't want you to do that. So please, on Tuesdays check back for an inspectacast show. We appreciate it. Thanks a lot.

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