Businesses "seriously underestimate" the cost of a disaster

Small companies are seriously underestimating how much it would cost their business if it was disrupted by a major incident like a flood or a fire, according to new research from BT Business.
    
Last summer’s floods and big fires like Camden Town and Buncefield hit the headlines and affected many small businesses, but failed to make an impact on the business continuity plans of their peers, with only 4% saying that the flooding last year made them think about it more seriously.
    
One in three of the businesses surveyed think that there will be no cost to their business if they are put out of action because of a disaster, and one in ten think it might cost them up to £5,000. According to Government figures, however, a disaster is likely to cost a business between £8,000 and £17,000.

Bill Murphy, managing director of BT Business, says:

“It’s an issue that many small companies just don’t address until disaster strikes, but by then it’s too late and they are picking up the pieces. It’s clear that they also seriously misjudge the potential financial impact on their business of a major incident. While they recognise the importance of planning to combat operational downtime, when their business and communications might be out of action, they need to make it a much higher priority. If they don’t, then quite simply they are putting their business at risk.” 

Nick Starling, director of General Insurance and Health at the Association of British Insurers, says:

“Last summer's devastating floods highlighted the importance of contingency planning. Insurers handled more than 25,000 claims from firms who livelihoods were put at risk by the floods. It is essential for all businesses to have adequate insurance cover, and a thorough business contingency plan in place, so that if the worst happens they can get back on their feet as quickly as possible.”

According to the Workplace Law Handbook 2008, a business continuity plan should be based on systematic identification and assessment of the significant risks of an emergency occurring in an organisation’s area. Identifying the risks threatening the performance of critical functions in the event of an emergency will enable organisations to focus resources in the right areas, and develop appropriate plans.