Part 2: Why is Business Continuity Planning important? [GRAPHIC:]Aerojet, a leading space and defense contractor, explains why business continuity planning is important to them. TJ Ogden, Security Projects Manager, Aerojet: If an incident happens, it could be a localized incident, it could be a natural disaster, it can be something that happens on the other side of the world and it could impact your business and shut you down if you're not prepared. A business continuity plan prepares you to react and respond to those incidents and keeps your business operations going. [GRAPHIC:]How important is it to you that your suppliers have business continuity plans? John Whaley, Executive Director, Redmond Operations, Site Manager, Aerojet: What's really critical to us is that they have to ability to meet their commitment days on delivery of hardware into our factory. So one of the aspects we will look at is do they have adequate back-up plans, business continuity plan being one of. That's kind of tie in to their ability to handle any down turns in their business be it an equipment failure, be it a weather event, or, whatever, but we want to make sure that we can keep those piece parts coming in to support our on-going production. I know of one auto company that was dealing with multiple suppliers in their supply chain, thinking they were covered that way, only to find out that both of those suppliers were buying a key component from the same Japanese supplier who was affected by the tsunami and even though they had two direct suppliers deeper down the supply chain, they were basically shut down by that event. Some important reasons to develop a Business Continuity Plan are: To protect your reputation. Following a disaster, businesses without continuity plans could lose their reputation with customers as a sustainable and reliable partner. To protect your sales and revenue. Businesses with continuity plans can continue to meet orders on time and maintain productivity, even during a disaster. This is due to having effective backup plans, which are developed for people and processes, physical facilities and critical production equipment, and IT systems and data. To keep your customers: companies today are moving toward business relationships with more reliable vendors who have business continuity plans in place. Many companies refuse to work with vendors who don't have plans. To improve your business. The process of developing a business continuity plan is eye-opening for executives. In many cases, the practice of reviewing business processes with the management team creates unexpected benefits of improving operational performance. To avoid lawsuits and legal liability that can result from inadequate business continuity planning. Failure to plan can result in contractual breaches, such as an inability to deliver product or missed deadlines; breaches of fiduciary duty to shareholders; damages to neighboring properties or the community; injury; or death. Your employees depend on you for their livelihoods and your customers demand reliability. It's true that the chance of a disaster is small. The probability of a tornado is 0.036% in a specific location. The probability of a flood in a 100 yea flood plain is 1% in any given year. The probability of a hurricane is 3.2% in a specific location. However, the cost of a disaster is huge. The Joplin, MO tornado cost $2.2 billion. Flooding causes more than $2 billion in damages annually. Hurricane Katrina cost more than $125 billion in economic damage alone. These high costs cripple affected companies. After a disaster... 43% of affected companies never reopen 51% of affected companies close within two years 75% of affected companies without business continuity plans fail within three years An organization that successfully recovers from a disaster enhances its reputation for reliability and dependability. According to a report sponsored by the Sedgwick Group, "Although all catastrophes have an initial negative impact on value, paradoxically they offer an opportunity for management to demonstrate their talent in dealing with difficult circumstances." A comprehensive business continuity program supports organizational resilience. Business continuity planning keeps the supply chain running. The typical American multinational corporation buys $3 billion worth of goods and services from more than 6,000 American small businesses, relying on these businesses for more than 24% of their supplies. Without proper business continuity planning by these businesses, a disaster could bring the supply chain to a halt.