Most business that open fail within the first three years, but even a business that has been in operation for many years can have trouble recovering from a disaster. According to Insurance Information Institute (III), 25 percent of all businesses that close their doors following a disaster never reopen because many of them failed to have adequate insurance and disaster plans in place.
While there's no way to predict the damage your business could suffer during a major hurricane, earthquake, flood, or fire, there are steps you can take to lower your losses and speed your company's recovery.
No matter how small or large your business, develop a plan to identify what your company must do in order to protect itself in the face of disaster. Points to consider in your planning include:
- Set up an emergency response plan and train employees how to carry it out. Make sure employees know whom to notify about a disaster and what measures to take to preserve life and limit property losses.
- Write out each step of the plan and assign responsibilities to workers in clear and simple language. Practice the procedures set out in the emergency response plan with regularly scheduled drills.
- Compile a list of important phone numbers and addresses. Make sure you can get in touch with key people after the disaster. The list should include local and state emergency management agencies, major clients, contractors, suppliers, realtors, financial institutions, insurance agents, and insurance company claim representatives.
- Decide on a communications strategy to prevent loss of customers. Post notices of closure outside your premises, contact clients by phone, e-mail, or regular mail, and place a notice in local newspapers.
- Before a disaster strikes, repair any deterioration to roofs and buildings to strengthen a building's storm defenses. Secure roof flashing and make sure roof and storm drains are clear.
- What things will you initially need during the emergency itself? Do you need a back-up source of power? Do you need and do you have a back-up communications system? Make sure emergency equipment like flashlights, two-way radios, cellular phones, spare batteries, and an emergency generator are available.
Do you have enough insurance?
You may have enough insurance to cover the cost of repairs or rebuilding, but do you have insurance to cover the disruption to your business that a disaster can cause? You should consider:
- Most policies don't cover flood or earthquake damage. You will probably need separate insurance for these perils. Check with your local insurance department for the flood or earthquake insurance contacts in your state. Recent storms, as well as earthquake activity outside California, shows the need for specialized coverage for these risks.
- Review your insurance policies to see if there are any gaps in your coverage. This includes property insurance, business interruption insurance, and extra expense insurance.
- Even if your basic policy covers expenses and loss of business income, it may not cover income interruptions due to damage that occurs away from your business premises, such as to your key customer or supplier. Talk to your insurance agent and find out if there are riders you can add to cover any special risks to your business.
Source: Insurance Information Institute |
- Protect your workers and customers from injury on the premises. Consider the possible impact a disaster will have on your employees' ability to return to work and how customers can return to your shop or receive good or services.
- Inspect your business' physical plant(s) and assess the impact a disaster would have on your facilities, including buildings, fire-protection systems, utilities, communications, access, shipping, and receiving. Make sure your plans conform to local building code requirements. If you are in an older building, make sure it was up to any new building codes to start with, and not "grandfathered" by virtue of being an older building.
- Communicate your disaster and recovery plan to your suppliers and customers, so that everyone is prepared.
- Integrate disaster protection for your building as well as its contents into your plan. Consider the financial impact for a day, a week, or even an entire revenue period
- Back-up computerized data files regularly. And make sure to keep the back-up copies in a secure off-site area that will not be effected by the same disaster to your building.
- Identify critical business activities and the resources needed to support them. If you can't afford to shut down your operations, even temporarily, determine what you require to run the business at another location.
- Find alternative facilities, equipment, supplies, and qualified contractors. Consider a reciprocity agreement with another business. Try to get an advanced commitment from at least one contractor to respond to your needs.
- Protect your computer systems and data. Data storage firms offer off-site back-ups of computer data that can be regularly updated via high-speed modem or through the Internet. Make sure workers know your procedures for shutting down critical equipment.
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