6 Tips to Create a Business Continuity Plan for Trying Economic Times

Individuals can’t control economic and market conditions. However, business leaders can certainly take steps to mitigate the negative impact of market volatility and improve profitability by being prepared. Financial advisors have an important role to play in keeping their clients informed, providing timely insights, delivering prompt service, and offering informed guidance during uncertain times. Planning for the unknowns is crucial if you want to run a sustainable firm.

Business disruptions can occur at any time, but they are particularly difficult to manage during uncertain economic times. It is imperative that financial advisors have recovery strategies in place for “business as usual” when conditions are unusual—such as when a natural disaster strikes.

3 Top Business Risks Facing Financial Advisors

Business continuity is your practice’s ability to deliver its products, support, and services both during and following a business disruption. Creating a business continuity program for emergency situations helps you be prepared for worst-case scenarios.

Many potential threats can disrupt a financial firm’s continuity. A risk assessment can help you focus biggest threats facing your business. A recent survey identified these primary areas as the top business risks globally in 2022: 

1. Cyber-related incidents, including data breaches or ransomware cyber attacks
2. Business interruptions, such as a power outage or office fire
3. Natural disasters, like hurricanes and other weather-related disasters

All businesses, big and small, are at risk of being affected by any or all of these occurrences during the course of business. And, odds are, most businesses have already dealt with at least one of these issues.

What is a Business Continuity Plan? 

A Business Continuity Plan (BCP) is a formal, detailed document that outlines procedures for you, your staff, and your vendors to follow in the event of a specific disruption. This plan ensures your practice continues to function in the event of unexpected interruptions, crises, and disasters. 

As a key element of your risk management planning process, you should establish important proactive steps to take before an event occurs, as well as how to proceed during the event and how to recover afterward. 

Why Do You Need a Business Continuity Plan?

True preparedness includes strategies that encompass every element of your business for any threats you may encounter. Here are five reasons you need an updated and thorough BCP in place for your business as soon as possible.

Speeds Up Response Time

With a solid emergency plan in place, your team knows how to act. Taking the time to formulate official directives now means your team isn’t waiting for strategy approval during a crucial time. 

While costs will vary by firm, industry, and system, the majority of companies say downtime costs over $300,000 per hour and 44% report over $1 million in losses. Faster response times allow you to head off the problem as much as possible so your company can get back up and running. 

Reduces Financial Strain

A BCP is important in every environment, but it takes on added importance during financially fragile times. Why? Because these sudden emergencies often not only exacerbate a firm’s financial hardship but may also be the leading cause of it. You can reduce the strain on your business and impact on your clients by planning ahead for emergency situations.

Improves Future Positioning

Future positioning may be negatively affected if your business experiences a disaster without a plan in place. For example, most businesses weren’t prepared for a global pandemic and how something like COVID-19 could impact their supply chains. And New York Fed economists believe the pandemic-related supply-chain constraints and heightened consumer demand caused recent historic inflation hikes. 

A business’s best chance of pivoting to better positioning during an unexpected, negative event rests on the existence of a comprehensive, up-to-date BCP. 

Increases Response Efficiency

During financially fragile times, businesses often experience difficulty absorbing the additional cost of handling unexpected setbacks or obstacles. Sixty-three percent of small businesses reporting natural disaster-related losses were forced to close temporarily. And Forty-one percent of businesses closed temporarily due to COVID-19 challenges. 

Having a well-researched plan helps companies make effective and cost-efficient moves quickly.

Boosts Business Reputation

Your clients rely on your expert advice and insight. A BCP that details next steps in the event of unforeseen circumstances is reassuring to both your clients and your employees. A solid strategy for navigating a difficult situation quickly helps reinforce your reputation as a dependable company.

6 Steps to Get Your Business Continuity Plan in Motion

It’s easy to put your BCP on the back burner. When times are good, you may feel a bit invincible or want to avoid thinking about negative scenarios. And in challenging economic environments, financial advisors tend to be busy with other important matters and put off their BCP. Even those who recognize the importance of a BCP may struggle to get started, not knowing where to begin. 

Here are six quick steps to help kickstart your process for developing or enhancing a BCP unique to your business. To elevate efficiency, consider leveraging the expertise of an outside dedicated consulting team for BCP and other business support.

1. Appoint a BCP Leader

You need someone responsible for contingency planning and business continuity management. A BCP leader is the person in your office who is responsible for maintaining, updating, testing, and socializing the BCP. If a situation arises, this leader is the one who takes charge of the emergency response and makes sure the plan is implemented.

This BCP leader should establish a recovery time objective (RTO) to help you set expectations on communication and response times. It’s important to define which critical business functions are a top priority to your firm in order to set a recovery point objective (RPO). Larger companies may appoint a continuity team to act as first responders for crisis management.

2. Identify At-Risk Systems and Business Elements

You need to know where potentially weak areas are in your network. Work with your team to identify critical dependencies that could be impacted by an unexpected event. Here are examples of elements that might be affected or at increased risk during a disruptive event:

• Communication platforms for staff or clients
• Data backup and recovery systems
• Vendor or supplier availability
• Office space for staff, clients, and equipment
• Business operations and IT systems 
• Client accounts and portals
• Bookkeeping tools and record access

3. Establish Data Protocols

As you determine the contents of your plan, remember to back up your data consistently and store it in an alternate site. Automate backups when possible, and make it part of your team’s standard business processes to scan and save hard copies.

If something ever happened to your physical location (like an office fire), backup data stored on external hard drives within the office would be no good. A secure, cloud-based backup data center can help you recover from anywhere with minimal downtime.

Establishing data protocols requires a solid understanding of your firm’s primary priorities so you can focus recovery efforts in the right place. More than likely, security, data protection, and access management are examples of critical functions you want to prioritize in the event of a disaster situation.

4. Create a Call Tree

Communication is central to your company’s response time and strategy implementation—especially in an emergency situation. When something goes wrong, your clients and employees will be anxious, looking for guidance and direction. A little forethought now can provide an extremely simple and effective crisis communication solution that saves you a lot of time down the road.

A call tree is a layered communication model with a hierarchy pre-determined by company leadership. With this model, the management team or leaders are each responsible for contacting certain team members, clients, or vendors in the case of a disruption. All emergency contact information (including home and cell phone numbers) is collected for each person on the list and assigned to a caller.

This emergency list ensures everyone is alerted as quickly as possible and up to speed on any information they need to have. The phone tree should be updated regularly and saved in multiple formats and locations.

5. Review Your Insurance Coverage

Will your insurance cover your office in the event of all types of business interruptions? Consider purchasing insurance which may compensate you for lost income. Also, be sure to keep a current inventory of equipment—including photos and receipts—should your insurance provider need them to process a claim.

6. Test Your Plan Regularly

Establish a calendar to test your plan at least annually. Testing your strategy provides a pivotal opportunity to address any oversights or flaws. Client expectations, company software, employee practices, and many other things can change, which should be reflected in your BCP. 

Establish a distribution list to make sure everyone involved has the most recent plan and is updated on any new elements or major changes.

For more detailed information on creating your own BCP, refer to these resources:

• A toolkit and master checklist for disaster planning
• Small business continuity plan template
• Instructions for performing a business impact analysis (BIA)
• Recommendations for small business disaster recovery plans
• How to prepare your firm for a market downturn

Your Reputation and Long-Term Success Are at Stake

Everything you’ve worked for is at stake in the face of a disruptive event, especially when clients are already on edge because of economic uncertainty.

Your reputation, your clients’ trust, and the long-term success of your practice could hang in the balance if you aren’t prepared for emergency situations. In recessionary times, your risks may be magnified. 

The firm that is available, responsive, and proactive when others aren’t, will be the one clients remember long after normalcy returns. Create a BCP that helps you sustain operations and deliver on your value proposition—even in the midst of an unexpected crisis. 

Independent financial advisors face the double-headed challenge of running a business while helping their clients navigate volatile markets. AssetMark helps RIAs sustain growth during difficult times and prepare for whatever might come their way. To learn more and get help with your BCP, reach out to our team and request a consultation today.