# What Is a Business Continuity Plan (BCP), and How Does It Work?

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> **Definition**
>
> A Business Continuity Plan (BCP) is a strategic framework that outlines procedures and safeguards to ensure a company can continue operations and recover quickly from potential threats or disasters.

## What Is a Business Continuity Plan (BCP)? 

A business continuity plan (BCP) is a system of prevention and recovery from potential threats to a company. The plan ensures that personnel and assets are protected and can function quickly in the event of a disaster. BCPs are designed to protect a company's employees and its assets so they can get back to business whenever a disruption occurs. BCPs must be tested before an emergency situation to ensure they work and weaknesses are identified and corrected.

### Key Takeaways

*   Business continuity plans are prevention and recovery systems for potential threats, such as natural disasters or cyber-attacks.
*   BCP is designed to protect personnel and assets and make sure they can function quickly when disaster strikes.
*   BCPs should be tested to ensure there are no weaknesses, which can be identified and corrected.

## Understanding Business Continuity Plans (BCPs)

BCPs are an important part of any business. Threats, disruptions, or halts to the business activity for any period, mean losses and higher costs as well as the difficulty to start back again. This leads to a drop in profitability, financial loss, and the potential for [bankruptcy and liquidation](https://www.investopedia.com/terms/l/liquidate.asp).   

The goal of a BCP is to get the business back on track with little to no interruption. BCP involves defining all risks that can affect a company's operations, making it an important part of the organization's risk management strategy. Risks may include natural disasters (fire, flood, weather-related events, or pandemics), acts of terrorism, or [cyber-attacks](https://www.investopedia.com/articles/personal-finance/012117/cyber-attacks-and-bank-failures-risks-you-should-know.asp). Once the risks are identified, the plan should also include:

*   Determining how those risks will affect operations
*   Implementing safeguards and procedures to mitigate the risks
*   Testing procedures to ensure they work
*   Reviewing the process to make sure that it is up to date

Businesses can't rely on insurance alone because it doesn't cover all the costs or the customers who move to the competition. This is why BCP is generally conceived in advance and involves input from key [stakeholders](https://www.investopedia.com/terms/s/stakeholder.asp) and personnel.  

> **Fast Fact**
>
> Business impact analysis, recovery, organization, and training are all steps corporations need to follow when creating a Business Continuity Plan.

## Benefits of a Business Continuity Plan

Businesses are prone to a host of disasters that vary in degree from minor to catastrophic. Business continuity planning is typically meant to help a company continue operating in the event of major disasters like fires. BCPs are different from a disaster recovery plan, which focuses on the [recovery of a company's information technology system](https://www.investopedia.com/terms/d/disaster-recovery-site.asp) after a crisis.

Consider a finance company based in a major city. It may put a BCP in place by taking steps that include backing up its computer and client files offsite. If something were to happen to the company's corporate office, its satellite offices would still have access to important information.

An important point to note is that BCP may not be effective if a large portion of the population is affected, as in the case of a disease outbreak. Nonetheless, BCPs can improve [risk management](https://www.investopedia.com/terms/r/riskmanagement.asp)—preventing disruptions from spreading. They can also help mitigate downtime of networks or technology, saving the company money.

## How To Create a Business Continuity Plan

There are several steps many companies must follow to develop a solid BCP. They include:

*   **Business Impact Analysis**: Here, the business will identify functions and related resources that are time-sensitive. (More on this below.)
*   **Recovery**: In this portion, the business must identify and implement steps to recover critical business functions.
*   **Organization**: A continuity team must be created. This team will devise a plan to manage the disruption.
*   **Training**: The continuity team must be trained and tested. Members of the team should also complete exercises that go over the plan and strategies.

Companies may also find it useful to come up with a checklist that includes key details such as emergency contact information, a list of resources the continuity team may need, where backup data and other required information are housed or stored, and other important personnel.

Along with testing the continuity team, the company should also test the BCP itself. It should be tested several times to ensure it can be applied to many different [risk scenarios](https://www.investopedia.com/articles/04/092904.asp). This will help identify any weaknesses in the plan which can then be corrected.

> **Important**
>
> For a business continuity plan to be successful, all employees—even those who aren't on the continuity team—must be aware of the plan.

## Business Continuity Impact Analysis

An important part of developing a BCP is a business continuity impact analysis. It identifies the effects of disruption of business functions and processes. It also uses the information to make decisions about recovery priorities and strategies.

The [Federal Emergency Management Agency (FEMA)](https://www.investopedia.com/federal-emergency-management-agency-fema-definition-5524719) provides an operational and financial impact worksheet to help run a business continuity analysis. The worksheet should be completed by business function and process managers who are well acquainted with the business. These worksheets will summarize the following:

*   The impacts—both financial and operational—that stem from the loss of individual business functions and process
*   Identifying when the loss of a function or process would result in the identified business impacts

Completing the analysis can help companies identify and prioritize the [processes that have the most impact](https://www.investopedia.com/terms/m/mission-critical.asp) on the business's financial and operational functions. The point at which they must be recovered is generally known as the “recovery time objective.”  

## Business Continuity Plan vs. Disaster Recovery Plan

BCPs and disaster recovery plans are similar where the latter focuses on technology and information technology infrastructure. BCPs are more encompassing than disaster recovery plans because they focus on the entire organization, such as customer service and supply chain. BCPs also focus on reducing overall costs or losses.

Disaster recovery plans, on the other hand, only look at technology downtimes and related costs. They are implemented in different cases, including when there's a failure in communication, a power outage, or a natural disaster to name a few. Disaster recovery plans tend to involve only IT personnel, which create and manage the policy. However, BCPs tend to have more personnel trained on the potential processes. 

## Why Is Business Continuity Plan (BCP) Important?

Businesses are prone to a host of disasters that vary in degree from minor to catastrophic and business continuity plans (BCPs) are an important part of any business. BCP is typically meant to help a company continue operating in the event of threats and disruptions. This could result in a loss of revenue and higher costs, which leads to a drop in profitability. And businesses can't rely on insurance alone because it doesn't cover all the costs and the customers who move to the competition.

## What Should a Business Continuity Plan (BCP) Include?

Business continuity plans involve identifying any and all risks that can affect the company's operations. The plan should also determine how those risks will affect operations and implement safeguards and procedures to mitigate the risks. There should also be testing procedures to ensure these safeguards and procedures work. Finally, there should be a review process to make sure that the plan is up to date.

## What Is Business Continuity Impact Analysis?

An important part of developing a BCP is a business continuity impact analysis which identifies the effects of disruption of business functions and processes. It also uses the information to make decisions about recovery priorities and strategies.

FEMA provides an operational and financial impact worksheet to help run a business continuity analysis.

These worksheets summarize the impacts—both financial and operational—that stem from the loss of individual business functions and processes. They also identify when the loss of a function or process would result in the identified business impacts.

## The Bottom Line

Business continuity plans are created to help speed up the recovery of an organization filling a threat or disaster. The plan puts in place mechanisms and functions to allow personnel and assets to minimize company downtime. BCPs cover all organizational risks should a disaster happen, such as a flood or fire.  

> **Article Sources**
>
> 1.  Federal Emergency Management Agency. "[Business Process Analysis and Business Impact Analysis User Guide](https://www.fema.gov/sites/default/files/2020-07/fema_BPA-BIA-Users-Guide_070119.pdf)." Pages A1-C1.
>     
> 2.  Ready. “[IT Disaster Recovery Plan](https://www.ready.gov/business/emergency-plans/recovery-plan).”