Aviva urges small businesses to put planning at the top of their list in 2011

Article date: 9 February 2011

  • Half of SMEs admit to not having a business continuity plan (BCP) in place
  • Aviva addresses knowledge gap with launch of BCP tool for SMEs 

Small and medium sized businesses (SMEs) are putting their livelihoods at risk by not taking the time to prepare disaster recovery and business continuity plans (BCP).

As part of Aviva’s bi-annual SME Pulse1, half of SME owners asked about BCPs stated that they had no such plan in place, and a further 16% said they didn’t think they needed one. In fact, just 28% of business owners who took part in the research said they had a BCP in place.

However, there are good reasons for having a plan. According to the Federation of Small Business, 80% of businesses affected by a major incident close within 18 months and 90% of businesses that lose data from a disaster are forced to shut within two years2.

David Bruce, commercial product manager at Aviva: “Given the current economic climate, it’s understandable that business owners are focusing on the day-to-day aspects of their business. But that doesn’t mean they should take their eye off the business planning side of things. A disaster or crisis can strike a business at any time and failing to plan for such an event can undo years of good work and hard trading in an instant. If the worst does happen, then having a business continuity plan in place may be the difference between your business recovering or failing.

“Consider, for example, the effects of the recent bad weather on businesses. Some may have had to close unexpectedly because of freezing pipes or operate at a much lower capacity because staff or suppliers could not get to them. Being prepared for such events mean the business owner has greater control over a situation and this can take away some of the pressure at what is likely to be a stressful time."

The research also revealed a lack of knowledge as to the role of a BCP with only 36% of respondents aware of them and confident that they know about their purpose. The remainder had either heard of them but were unsure as to their purpose or effectiveness (31%) or else had not come across the term previously (33%).

And just a quarter (25%) of businesswomen confirmed they had a BCP and kept it up to date, compared to 40% of businessmen.

Bruce continues: “We have designed a new SME BCP template so that we can offer all types of businesses a quick and easy way to create a plan. Whilst it may not be able to stop a serious incident happening, it can certainly ensure a smoother return to normal trading afterwards.”

The Aviva BCP document, "Business Continuity Planning for Small Business", is free to download at https://help.aviva.co.uk/risksolutions/business-continuity/BCP_004 and breaks down the process of creating a BCP into five simple steps3.

SMEs ‘underestimating’ the time it takes to recover
The Aviva SME Pulse also found that business owners grossly underestimate the time it can take to get their company back on its feet following a serious incident or interruption. 

The majority of SMEs believe it would take them only one week (33%) or one month (31%) to return to normal trading. However, according to Aviva’s team of commercial specialists, a return to full normal trading can often take a business more than a year.

The following example of a hypothetical claim is based on Aviva’s experience of business interruption claims and illustrates the considerations that need to be taken into account.

Scenario: A café with 20 covers, located in the middle of a city suffers a major kitchen fire which means the premises must be closed and a re-build is required. In this example, the building is owned by the policy holder, meaning the decision making process does not involve a landlord.

The planning permission/building warrants could take two months then once the specifications are agreed, tenders process undergone and building contract allocated this could be a further two months. Assuming the contractor is available to start immediately, building work could take six months to complete. (Don’t forget delays can be caused by trades holidays, poor weather conditions and availability of required materials.) 

Fitting out the premises and completion of any statutory inspections can take two months and once the business is up and running again, it can take three to four months to win customers back and return to pre-fire turnovers. Thus it could take 15-16 months before the business has fully recovered.

David Bruce continued, “The recovery period after a serious incident is often underestimated. It’s only once the disruption has occurred that business owners realise the number of hurdles involved in getting back to normal. For example, we have seen some instances where just obtaining planning permission can take several months.

“Having your recovery plan firmly in place, rehearsed and agreed upon clearly helps with the process – not just in handling an unexpected event but also in understanding the key influences on the businesses’ day to day operations, which in turn can help estimate the likely recovery time the business might need.

“Worryingly, we found that only 19% of businesses who took part in our research said they had full contingency plans in place and the appropriate levels of insurance which suggests a lot of businesses are unprepared should an event occur.

“We urge business owners to spend some time making sure they have appropriate contingency measures and protection in place."

Regional and sector-specific findings
The latest SME Pulse also revealed some interesting sector-specific and regional findings;

  • Small shops and salons are the least well equipped with 59% not having a business continuity plan (BCP) in place, followed by 58% of restaurateurs and tradesmen.
  • One in four - 21% - of professional services firms don’t believe they need a BCP – the highest of any sector asked.
  • Tradesmen (36%) and professional services firms (44%) are the most confident about a swift return to business within one week, despite the evidence to the contrary from Aviva’s team of commercial specialists.
  • Those in the North East (67%) and London (54%) are the most aware of the concept and value of BCPs, unlike Yorkshire (28%) and the North West (25%).
  • Just 17% of SMEs questioned in the North West and 21% in the South West have a BCP in place, compared to London (37%) and NI (36%)
  • Businesses in the West Midlands (77%) and South West (70%) are the most optimistic about recovering within one month of an incident or crisis. However, perhaps the most realistic business owners are based in Wales (20%) and Northern Ireland (28%) as they felt recovery could take six months to a year.

-ends-

Media contacts:

David Chambers
david.chambers@hillandknowlton.com
0207 413 3155

Joe Dawes
joe.dawes@hillandknowlton.com
0207 413 3155

Sally Leeman
sally.leeman@aviva.co.uk
01603 684225 

1 Research conducted online by Redshift Research on behalf of Aviva, with 500 SME owners in October 2010. This is the bi-annual Aviva Pulse on how SMEs are running their businesses.

2 www.fsb.org.uk/thamesvalley/info/community

3 The Aviva BCP breaks down the process into five steps to help business owners:

  1. Understand what the business does – and must continue to do – to operate effectively.
  2. Carry out an assessment of the key threats to the business eg fire, IT issues or data loss.
  3. Create a disaster or incident response plan to cope with the initial period after an incident.
  4. Establish how long it will be before the business is up and running and monitor the progress of work, decide if you will need temporary premises etc
  5. Share the plan with key staff and rehearse scenarios so that everyone knows their role and you are as prepared as possible. Make sure the plan is kept up to date.

Notes to editors:

Aviva is one of the world's largest insurance groups* with 53 million customers worldwide and 46,000 employees.

Aviva’s main activities are long-term savings, fund management and general insurance, with worldwide total sales of £45.1 billion and funds under management of £379 billion*.

In the UK, Aviva takes care of its 19.2 million customers by helping them look after their future, protecting what’s important – from their health to their homes, their cars to their business – and saving for the future.

Aviva has a 10.5%** share of the UK life and pensions market and insures one in six homes and one in 10 cars in the UK. It is also one of the oldest UK insurers, with a heritage stretching back more than 300 years.

RAC, which is owned by Aviva, provides breakdown and insurance services for individuals and businesses and has around seven million customers.

Aviva is carbon neutral worldwide, and is ranked in the top 10% of socially responsible companies globally by the Dow Jones Sustainability World Index. In the UK, Aviva invested £3.8 million into local communities in 2009. Read our corporate responsibility report at www.aviva.com/cr.

Aviva’s global Street to School programme is working in partnership with Railway Children in the UK to get children living on the streets back into education and everyday life. Find out more at www.aviva.co.uk/street-to-school.

The Aviva media centre at www.aviva.com/media includes images, company and product information and a news release archive.

For broadcast-standard video, please visit www.aviva.com/media/video/.

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* Based on gross worldwide premiums at 31 December 2009

** Source: ABI data released August 2010

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