It’s the time of year when the financial team and the top executives take that final look at the budget for the coming new year. That look is likely to be especially searing this year as inflation means increased interest rates and corporate expenses; at the same time earnings are trending down. Businesses that rely on consumers are especially apprehensive about unemployment (especially in the tech sector), and higher rates affecting home prices and credit card rates.
When the finance team and the C-suite cast about for ways to reduce costs, they often start with operations that don’t directly go to the bottom line. When you sell widgets, you need to buy widget components, but this may not be the year to buy pinball machines for the break room. They look that way at whole departments, too, and many consultants look at outsourcing a lot of roles that have traditionally been performed in-house.
Now Is NOT the Time to Cut Back on BC/DR
Business continuity/disaster recovery (BC/DR) shows up on a company’s balance sheet as an expense. When everything is progressing smoothly, it seems like the cost isn’t contributing to profit. Not in the same way as the sheet metal, robots, or line workers that produce automobiles or the designers and sewing machine operators that produce clothing. But just as a suit can’t be made without needle and thread, some business functions stitch the entire business together without being part of the finished good.
BC/DR is one.
For starters, aside from any regulatory or compliance requirements, BC/DR ensures the company has the ability to quickly and effectively react to a negative change from a disruptive event (natural or manmade) by having and implementing proactive and reactive strategies to safeguard its stakeholders and revenue. To produce an effective, actionable, and compliant BC/DR plan, companies survey all their business functions and force rank through an impact assessment. This produces an organization-wide prioritization of all business processes and the resources needed, identifying the roles and steps needed in an event. After all, if the business can effectively work around a supply chain shortage, the loss of a data center, or a tornado, the information and data gathered during the BC/DR efforts can be leveraged to identify process improvements, risks, and duplicity in work efforts in daily operations.
When cost-cutting becomes necessary, BC/DR becomes even more relevant. The blueprints for bringing a company back from the brink are there when a department is operating at reduced capacity — as, for instance, it might when a natural disaster prevents all people from performing their jobs. The Plan B for moving funds in a time of constricted capital may be just the ticket for operating in a time of reduced revenue. The vendor selected to serve as a backup might be better able to handle a new financial environment than the one to which you’ve given most of your purchase orders for widget components for the past decade.
This alternate view to organizational resilience is contributed to because of business continuity planning and putting together the pieces to recover from disasters.
How To Ensure BC/DR’s Place In 2023
One way to make a case for BC/DR is to do the numbers. As with most business functions, there’s a return on investment (ROI). The formula is pretty basic: (return less investment) divided by investment. The simplest way to show ROI for BC/DR is how BC/DR worked in the event of a real disaster. When a hurricane damaged a production facility that generated $30 million worth of revenue per month, that loss would have been $30 million in direct loss revenue for the month it couldn’t function. This does not account for the negative impact on Brand, cost for laying off or continuing to pay staff, and dead stock from suppliers. Unless the BC/DR plan redirected production, staffing, and supply chain to other facilities within a day. If it cost $1 million for the move and the revenue loss was $3 million for the single day of lost production, you were $26 million ahead of where you would have been without BC/DR. That means your BC/DR ROI was effectively 550%.
These calculations aren’t so dramatic in a year when things go smoothly and there’s no earthquake or wildfire in sight. Still, the cost of your BC/DR efforts (HR and Accounting can help calculate the time spent by team members on their participation and the cost of BC/DR software platforms like BC in the Cloud or Cenari) is a real number and just as critical to the ongoing success of the company as insurance. You can even do the math for each contingency the BC/DR document plans for. If an Enterprise application goes down and costs the company $1 million a day, but the company’s entire BC/DR effort costs less than that, that’s a positive ROI. Solve for x — and then remember that every disaster that affects the company is ONE. BIG. X. The longer the company functions below capacity, the more it costs — and the investment in BC/DR becomes more attractive.
Budgeting for Resilience
Nobody who survived a sinking boat ever complained about the cost of the life preserver. It’s always the fellow back on the dock who never sails. Businesses are always looking to reduce expenses and every asset or function must continue to justify the cost. BC/DR is no different. However, the biggest cost to a business may not be the check it writes for the time spent planning its recovery and the software platforms that help. In the end, the biggest expense is going out of business.
One of the biggest and current threats in todays’ environment is Cyber. Historically, companies relied on Information Security to recover from a Cyber-attack. In actuality, the word recover is a misnomer. When a Cyber event occurs, Information Security runs point, but the impact is widespread on business and stakeholders (a Business Continuity event). Lack of involvement with the BC/DR team can lead to business failures. The IBM & Ponemon Institute annual research report clearly proves that Business Continuity Management Helps Drive Time And Cost Savings Following Data Breaches.
Regardless of the incident, BC/DR becomes a valued asset to the organization and not an expense that comes up on the chopping block. The best way to budget for that is to set aside the right tools, expertise, and time to plan correctly.
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