As business owners know, not all changes, problems or events that affect businesses are predictable. Low-probability events are difficult to envision — and it is logistically impossible to prepare for every conceivable event that can happen.

However, business owners can prepare for how they respond to unexpected events that have high negative impact when they do occur. To protect or prepare themselves in the event of unforeseen challenges, business owners need to develop three things:

1. A continuity plan: A business continuity plan involves creating the processes, policies and procedures related to an organization’s recovery in the wake of an unplanned, disruptive event (ranging from medical emergencies to natural disasters to acts of violence or terrorism).

In 2004, the Department of Homeland Security and the Advertising Council launched the Ready Business Campaign. Ready Business helps owners and managers of small- and medium-sized businesses prepare their employees, operations and assets in the event of an emergency.

Their recommendations for business continuity planning include the following steps.

  • Carefully assess how your company functions, both internally and externally, to determine which staff, materials, procedures and equipment are absolutely necessary to keep the business operating.
  • Identify, involve and coordinate the key stakeholders who should be involved with planning (e.g., employees, suppliers, emergency responders, neighboring businesses, etc).
  • Plan what you will do if your building, plant or store is not accessible.
  • Plan for payroll continuity.
  • Define crisis management procedures and individual responsibilities in advance.
  • Review emergency plans annually.

2. A financial cushion: In a car accident, an airbag can save your life. In the event of a disaster that threatens a business, a financial cushion could mean the difference between keeping things going or closing the doors. Preparation to withstand a disaster or period of acute distress should be a part of the plan.

Depending on your business and capital needs, the cushion should allow the business to function for three to six months or more. Some of the steps for creating a financial cushion include:

  • Creating an emergency operating budget.
  • Exploring and securing means for additional borrowing power.
  • Assessing insurance needs.
  • Building a cash reserve through savings.
  • Investing that reserve in ways that assure immediate access to capital.

3. Personal resilience: Perhaps the hardest thing for business leaders to do in responding to a crisis is keeping a level head and not letting the stress and the emotions of the situation interfere with their capacity to make sound decisions. People who demonstrate resilience are able to cope with stress and adversity in a way that allows them to “bounce back” from setbacks and perform better than expected under difficult circumstances.

Leaders should consider learning strategies for building personal resilience, such as these from the American Psychological Association:

  • Make and maintain connections that can form a strong support system.
  • Avoid seeing crises as insurmountable.
  • Accept that change is a part of living.
  • Nurture a positive view of self.
  • Take decisive actions.
  • Keep things in perspective.
  • Maintain a hopeful outlook.

Disasters happen all around us, and whether they are caused by nature or by people, they can carry terrible consequences for our lives and livelihoods. While business owners cannot always keep disasters from happening to them, with proper planning, they can be prepared to respond in a way that allows them to minimize damages, preserve their ability to continue and maintain a positive spirit.

About the authors: Priscilla Cale and David Tate are the authors of “Sink or Swim: How Lessons from the Titanic Can Save Your Family Business.” Cale is an author, lecturer and adviser with broad experience in the private sector and academia. Her work focuses on family business governance, succession, leadership development, strategic growth, globalization, and entrepreneurship and innovation.

Tate is a licensed clinical psychologist and an assistant clinical professor in psychiatry at Yale University. His areas of practice expertise include coaching and leadership development, conflict resolution, team building, succession planning and promoting healthy organizational development.

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