Whether you are responsible for the entire BC/DR plan or just a section, it is beneficial to understand the basics of how companies finance operations and the details of how your company manages its finances. The disruption of revenues, introduction of higher costs, and resulting impact on cash flow and valuation can have a devastating and long-term impact on a company’s financial health.
In the past several yeas, disruptions from data security breaches have cost numerous firms millions of dollars in recovery costs and legal fees. For example, businesses affected by the hurricanes in 2005, including Hurricane Katrina, are still feeling the impacts. Many of the businesses who were impacted then did not just go out of business due to the Hurricane but also the continued lack of emergency services, recovery services, and infrastructure in the aftermath of the storm.
There are numerous factors to consider when looking at the financial impact of a disaster or business disruption. Typically, revenues go down, expenses go up and the methods of filling in the gaps can be as simple as using cash reserves and as complex as going to outside funding sources.
Even though as a planner you may not be involved with any of these elements or decisions, they impact your approach to business continuity and disaster recovery planning. They also impact your decisions regarding risk management, business impact and risk mitigation strategies. Understanding these principles can help you – whether you’re developing the plan or working with your financial resources within the firm on this or any other project.