Disaster recovery plan
A disaster recovery plan is a set of procedures and steps to protect businesses and aid in recovery after a natural or man-made disaster.
What is a disaster recovery plan?
A disaster recovery plan (also known as a business recovery plan) is an essential document for all small businesses. It helps business owners respond effectively to a catastrophic event, safeguarding business assets and re-establishing operations as quickly as possible.
The plan should be highly detailed and practical, showing you exactly what to do after a disaster, such as a hurricane, takes place. A disaster recovery plan and business interruption insurance are crucial resources for companies in the aftermath of a disaster.
Why small businesses need a disaster recovery plan
Disasters can strike any business, regardless of size or industry. A strong disaster recovery plan (DRP) helps you:
- Minimize downtime and financial losses
- Protect your equipment, records, and customer data
- Restore operations more quickly
- Reduce the risk of permanent closure
- Support insurance claims by documenting damages and recovery actions
Small businesses are especially vulnerable because they often rely on a small team, limited cash flow, and third-party providers. A DRP ensures you have a plan in place before something goes wrong.
Analyze threats to your business
Every disaster recovery plan should start with a risk assessment to identify the events most likely to disrupt your operations. This can include:
- Natural disasters
- Cyber incidents
- Utility or power outages
- Supplier or vendor downtime
- Fires or on-site accidents
- Theft or vandalism
Rank risks based on how likely they are and how much impact they would have. This helps you prioritize what to plan for first.
Conduct a business impact analysis (BIA)
A business impact analysis (BIA) determines how long your business can afford to be offline and what resources you must recover first. Two important pieces of this analysis include:
- Recovery time objective (RTO): The maximum amount of time you can be without a key system, service, or piece of equipment.
- Recovery point objective (RPO): How much data your business can afford to lose, typically measured in hours.
These objectives help you determine what to back up, how often, and what systems require the fastest recovery.
What are the benefits of a disaster recovery plan?
Despite numerous benefits to having a disaster recovery plan, 61 percent of small business owners polled in a recent survey don’t have a formal business continuity plan in place. Disaster recovery planning helps businesses by:
- Minimizing damage to business property and injuries to staff after a disaster. If your property is damaged, commercial property insurance can potentially cover replacement costs.
- Ensuring continuity of computer and office operations so customer service can resume as soon as possible
- Mitigating customer defections during and after an extended business closure
- Allowing for ongoing invoicing and posting of business receivables so that firms remain solvent
- Making sure a disaster does not put your company out of business
What should a disaster recovery plan include?
Because you must address many factors in your disaster recovery planning, it’s helpful to work with a disaster recovery plan checklist. Broadly speaking, make sure your plan addresses the following elements:
- Establish and equip an alternative location for your business.
- Develop a plan for maintaining communications (both internally and externally) after a disaster strikes.
- Ensure that technology and data backups are in place to guarantee continued operations after a crisis.
- Document all key business functions (including supply chain) and take steps to maintain their integrity post-disaster.
- Create a safety/evacuation plan to prevent staff injuries.
- Develop a plan to test and periodically review and revise your disaster recovery document.
What role does insurance play in a disaster recovery plan?
A key part of disaster recovery planning is reviewing your business insurance to make sure you have adequate coverage for the costs of remediating a disaster.
An important insurance policy to consider is business interruption insurance, also called business income coverage. It provides cash to replace your lost revenue, normal operating expenses, and the cost of moving your business to a temporary location.
Having business interruption insurance might be the difference between your company surviving a disaster or shutting its doors permanently.
In addition to business interruption insurance, small businesses should consider two other coverages that play a major role in disaster recovery planning: extra expense coverage and cyber insurance.
Extra expense insurance helps pay for the additional costs of keeping your business running after a disaster—such as renting temporary equipment, leasing a short-term workspace, covering overtime labor, or paying rush shipping fees to speed up repairs.
Cyber insurance protects your business if a digital disaster occurs, such as a data breach, ransomware attack, or system outage. It can cover data recovery, customer notification, IT forensics, system restoration, and lost income from a cyber-related shutdown.
Together, these policies help fill financial gaps that can occur while your business works to resume normal operations.
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Insureon helps small business owners compare business insurance quotes with one easy online application. Start an application today to make sure your business has the business interruption insurance it needs to weather an unexpected event.
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