Before we go any further, it is important to understand that not all business decisions have a positive ROI. Sarbanes/Oxley is founded on the principle that business executives have a fundamental obligation to make good business decisions — not just profitable ones. And so the issue of “prudent decisions” is before us. While Congress has felt the need to try to legislate this “prudence,” the fact is that most business executives understand and are comfortable with the concept of reasonability and prudence in the management of their companies.

The reason the issue of ROI occurs with such frequency in the corporate setting is a product of cost justification. One of the initial considerations associated with the disbursement of company assets is the justification for that expenditure. It is during the initial evaluation that one of two categories of justification is realized: (a) there is an expected financial benefit for this expenditure or (b) the realization that the expenditure makes good business sense in and of itself. Business continuity planning is by no means the only expenditure that falls into this second category. Insurance is also an expenditure that does not have a positive ROI; yet it is a necessary and prudent expense.

We can say that business continuity planning has the same ROI as insurance. Both are pure expenses until they are needed, and then the expenditures do have a “return,” until they are expenses on the income statement. These two expenditures are actually codependent. The continuity plan is the tactical plan for the use of insurance funds. Having funding with no plan or a plan with no funding are equally ineffective tactics. However, having a plan with funding is the cornerstone for an effective recovery.

So when the question of ROI for business continuity planning arises, keep in mind that it is the “wrong question” to ask. Be careful not to get caught in the trap of answering what one industry expert calls “answering the wrong question precisely.” In fact, neither insurance nor BCPs have a positive return on investment until they are used. Until then, they are expenses with only the promise of a return.

However, they are at the top of the list of “prudent decisions” that management can make to ensure the future operations of their company. And as one CEO said about his job, “My responsibility is not to run the company; it is to make sure the company will be here five years from now to support our clients.” Along with other strategic decisions, insurance and BCPs are “prudent decisions” necessary to fulfill that responsibility.

John M. Stagl, CBCP is a consultant with Belfor and a member of the Continuity Insights Editorial Advisory Board. He can be reached at (800) 421-4109.