Analyze the Impact of a Business Disruption
To be prepared for a crisis, it’s important to recognize the likely impact on your business. Here are some examples you may want to consider:
- If a critical service or business product is disrupted, how long could your firm function? For how long would your clients tolerate such a disruption? Determine the amount of time you have to get back up to speed before your business is severely affected.
- Determine your potential loss of revenue. Consider which services and products produce revenue and the effect if they are lost for various time periods. Will your clients go elsewhere resulting in further revenue losses?
- What will your expenses be if a business function is not operating. Will you have to hire extra personnel? Will you have to make higher-cost purchases from alternate suppliers? If you can’t meet deadlines, will you be in breach of your contractual responsibilities and have to pay penalties?
- Will you be able to deal with additional expenses through cash flow and lines of credit? Establishing a good relationship with your banker allows them to understand your business and provide options when your business experiences unforeseen financial challenges.
- How much of your potential revenue loss will be covered by insurance? How quickly will your policy pay claims in an emergency?
