Security a cost or investment?

Security Programs Viewed as Important to Business Success according to 61% of the 100 CEOs and Officers of small and medium market companies ($20M - $1B in revenue) participating in a Conference Board survey about Security. 31% of the group, however, sees security as simply a cost that must be controlled like any other expense.

Security is strongest among "critical-industries" those that typically have to dedicate resources to make sure that their essential products and services are reliable and available - transportation, energy and utilities, financial services, media and telecommunications, information technology, and healthcare. They have a lot of experience with minor recurring service disruptions brought about by weather or natural disaster. They can prepare for a somewhat reliable set of circumstances - hurricanes are going to blow, blizzards are going to fall, forest fires are going to burn. Only the date and duration of these events are unknown.

Security spending is lowest among the smallest companies. Smaller companies are more likely to feel the brunt of natural disasters than organization or firms that routinely deal with service or production disruptions. There is little they can do about it. They don't have the resources and many times, insurance is a cheaper and more effective tactic than preparation. Should you buy a pump to secure against flooding or a generator should the power go down or an insurance policy that pays benefits in either case? By far the cheaper and easier means to mitigate minor disasters for many small and medium businesses is to insure against them.

The small business owner needs understand where his efforts will pay off and where anything he does is going to be overwhelmed by circumstance. Consider:

Nearly 80 percent of companies surveyed report a disruption in business travel due to the terror attacks in September 2001, and 47 percent report a drop in revenues. This trend was found in all major regions of the country.

In the nation as a whole, 16 percent of businesses report that they closed operations as a result of the August 6, 2003 power outage, the same as during the terror attacks. In some respects, the blackout had a greater impact on company operations. As a result of the blackout, 22 percent of companies lost electric power, 18 percent lost telephone service, and 17 percent lost Internet access. These percentages are all in the low single digits for 9/11.

So rather than worry about specific events or trying to mitigate problems far in excess of your ability or resources to handle, consider the advice that Dr. Jeff Cornwall offers in What If? over on The Entrepreneurial Mind.
- Set aside enough cash reserve to pay your bills for 30 days
- Manage overhead carefully
- Avoid fixed, long-term commitments
- Build in flexibility
- Manage inventory

He has a lot more detail and additional no-nonsense recommendations that are good whether preparing for the next California earthquake or the unthinkable. Moreover, they are what every good small and medium sized business owner should be considering as a matter of course, not just as part of disaster planning.