Business continuity vs. disaster recovery — what's the difference?

Business continuity vs. disaster recovery — what's the difference?

Kim Mercado
By Kim Mercado
Sep 15, 2023
8 min read

As a business owner, you know that when everything is going according to plan, it's a beautiful thing. But what will you do if that well-designed plan suddenly rides far off the rails? 

A disaster, natural or otherwise, can devastate your business if you're unprepared. While you can't predict a calamity, it's wise to have protections to ensure your business can recover from a disaster quickly.

Why business continuity and disaster recovery are fundamental

To give some perspective, the statistics are sobering.

To say that the stakes are high is putting it mildly. First mistake: Never think it can't happen to your business. 

If you need evidence, look around you. When was the last time you had car trouble that prevented you from getting around easily or a piece of equipment broke down when needed? Maybe you experienced a theft that forced you to close or reschedule customer appointments.

The news is full of events that force small businesses to temporarily and permanently close, whether it’s a natural disaster or human-caused event like a widespread power outage. Just like you plan for your business's success, you can plan for its survival when disaster strikes.

Let's examine the similarities and differences between business continuity vs. disaster recovery.

What is business continuity planning?

A business continuity plan (BCP) defines what will happen to a business during and after a disaster. This plan helps minimize the impact of disruptions so you can continue operating quickly.

Some incidents that could impact your business include:

  • Water damage from burst pipes or a leaky roof
  • Broken or malfunctioning equipment
  • Accidents that damage business property
  • Theft or vandalism to your business site and/or assets
  • Natural disasters, such as fires, hurricanes, tornadoes, earthquakes or floods

Essentially, a BCP centers around preparedness. It usually includes contingencies for various scenarios, from minor interruptions like power outages to more significant disasters such as a fire destroying your office locations or worksites.

What is disaster recovery? 

A disaster recovery plan focuses on the logistics and procedures immediately following a disaster and usually includes instructions anyone can follow. These include steps for restoring or recovering technologies and data, resolving infrastructure issues or figuring out an alternative place to operate from. 

Business continuity vs. disaster recovery: The difference 

While business continuity and disaster planning often overlap, several key differences exist. One focuses on keeping the business running during unfavorable conditions (continuity); the other focuses on returning operations to normal as quickly as possible (recovery).

Continuing your business during disaster

Continuity planning forces business owners to perform risk assessments and make financial contingency plans to ensure they can still generate revenue while also covering costs — even if they can't operate at peak capacity or performance. 

You'll need to answer several questions. Among the more critical ones are: 

  • Can you maintain sales and revenue in the event of a disaster?
  • If not, will you still be able to pay existing overhead?
  • What will be the cost of a temporary relocation?
  • Do you have the assets to fund the relocation? 
  • Can you remain profitable through the ordeal? 

Thinking through various disaster scenarios and answering these questions can help owners create new procedures. Owners can quickly restore critical business functions by implementing a risk mitigation strategy.

Recovering from disasters faster

Disaster recovery strategies tend to be narrower and don't account for all contingencies. Unlike continuity planning, recovery planning might include safety elements, where you practice fire drills or buy emergency supplies.

Disaster planning often revolves around logistics. For instance, from a physical standpoint, you'll need to ask questions such as: 

  • Do you have a second location where you can consolidate operations? 
  • Can you perform business functions remotely?
  • Can you assemble a skeleton crew until you can repair or rebuild?

But not all disasters are physical. Consider how much of your business depends on digital operations. Cyber attacks can also stop businesses and can be equally crippling as a weather-related event. So, you'll want to answer these questions as well: 

  • Are your computer servers on the premises, or do you operate in the cloud? 
  • Do you back up data? Is your data backup recoverable from the cloud or a data center? 
  • Do you have security measures in place to prevent unauthorized systems access?
  • Where do you have vulnerabilities in your IT infrastructure? Who has access to sensitive information and passwords?
  • What kind of cybersecurity protections do your service providers have in place? 

Recovering and resuming business operations

For the best chances of resuming normal operations, you'll need to employ both business continuity planning and disaster recovery to help you make it through a catastrophic event. 

During continuity planning, you'll identify the risks and vulnerabilities to your business. This assessment can be used to inform recovery procedures. They're both part of a comprehensive business plan.

Working with your insurance company

Another vital component of your business continuity program is business insurance. Insurance helps ensure that an unexpected event won't financially ruin your business. It can help pay for property damage, medical costs, replace equipment and protect your business against costly lawsuits. 

For instance, commercial property insurance can help small businesses pay for damage to their property caused by fire, wind and hail. This type of coverage can protect inventory, equipment, furniture and structural damage so you can get back to business faster.

In the meantime, employees and suppliers need to get paid, and fees on temporary space and rental vehicles will require a considerable cash outlay. This is where business income or business interruption insurance aids in business continuity. Business interruption insurance helps cover the cost of mortgages, rents, salaries and even taxes. It also covers the profit you would have received had the disaster not struck. 

If an employee gets injured or becomes ill due to the disaster, workers' comp insurance can help pay for related medical costs. Similarly, general liability coverage helps with costs related to non-employees such as customers. 

And if you have business vehicles, commercial auto insurance helps cover the repair cost.

After the disruptive event happens, contact your insurance agent or file a claim immediately so you can start the recovery process. 

NEXT's business insurance helps you recover faster

NEXT provides tailored, accessible and always-on business insurance for over 1,300+ professions. You can customize and combine policies based on your business's unique risks, and we strive to make claims decisions within 48 hours.

We're entirely online, so you can get a free quote and buy coverage in under 10 minutes. Access your policy, file a claim, and get an instant certificate of insurance 24/7.

Start a free quote with NEXT.

Business continuity vs. disaster recovery — what's the difference?


kim mercado
About the author

Kim Mercado is a content editor at NEXT's blog, where she writes and edits posts for small business owners. She enjoys helping entrepreneurs solve their business challenges and learn about insurance. Kim has contributed to Salesforce, Samsara and Google.

You can find Kim trying new recipes and cheering the 49ers.

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