No one should want his/her business to experience troubles. “Smooth sailing” is clearly preferred. However, there are many challenges that can seriously interrupt business operations.
What Is a Business Interruption?
Almost every business is exposed to some risks that can result in a business interruption. The term “business interruption” applies to a time when a business cannot operate because of some adverse event. Business interruption occurs when an enterprise’s operations are reduced or suspended because of a direct or indirect loss, such as property damage or cyber attack. Such an event can result in a loss of income or profit and potentially an increase in operating costs during the period of impact as the business attempts to cope with the problem. Events that interrupt business operations can impact cash flows, affect customer reputation and public trust, and even cause a business to fail.
12 Situations that Interrupt Business Operations
There are many things that can interrupt business operations. Most, if not all, of these are difficult to anticipate: natural disasters, including fires, hurricanes, earthquakes, and heavy rains that can result in catastrophic property damage. Pandemics and major health crises. Political and economic instability. Structural fires. Crime or vandalism. Flood or water damage. Loss of electricity or power for an extended period. Equipment failure. Human factors that can cause a business to fail. Technology failures. And supply chain disruptions.
A recent Gartner survey reported that 45 percent of organizations were impacted by third-party actions intended to interrupt business operations in the past two years. These included data breaches, cyber-attacks, business email compromises, and ransomware attacks. In addition, in 2023, some data centers lost data during outages.
How to Combat Things that Interrupt Business Operations
Here are things that can be done to prepare for and combat things that interrupt business operations:
- Conduct a thorough business interruption risk assessment. The assessment should include all potential internal and external dangers for your business as well as environmental and human risks. Those risks can include potential physical dangers to the building and machinery, technological issues, the health and safety of the enterprise’s employees, and the company’s financial health. Consider which risks are preventable and which are not. Rank the risks from most to least likely and calculate the cost of potential interruptions. Critically assess areas of weakness and identify areas of critical dependencies.
- Review your insurance coverage and upgrade it as appropriate.
- Develop a plan to prevent and mitigate potential business interruptions, including operating contingencies.
- Create a crisis communications plan including a definition of a crisis chain of command, pre-scripted messages, and a clear crisis communication methodology.
- Establish appropriate emergency funds and financial reserves.
Simple steps can be taken to include things like installing or upgrading sprinkler systems to minimize fire damage, installing security cameras and alarms to deter vandals and burglars, improving machinery maintenance to prevent unexpected downtime, improving your supplier network to counteract limited supplier resources, and improving your cybersecurity processes.
Seek Professional Accounting Assistance
Contact Orcutt & Co., based in Milford, OH. We deliver comprehensive financial management for small business owners & individuals, providing strategic solutions that best address client needs and aspirations. Our comprehensive accounting services keep you organized and give you the data you need to make prudent business decisions, including bookkeeping, payroll, and tax.
