09/ 12/ 2005
by Jeffrey Moses
The catastrophic damage caused by tropical storms in Florida and the Gulf Coast during the last several years serves as a warning to small-business owners nationwide. No region of the country (or the world, for that matter) is immune to natural and other types of disasters. Floods, tornadoes, earthquakes, windstorms, hail, fire and other types of disasters know no boundaries or geographic region.
For a business, disaster preparation falls into four areas:
- Maintaining proper insurance
- Minimizing risk through advance preparation
- Establishing and following emergency plans
- Setting up, in advance, steps for recovery, so the business can resume activities as quickly as possible
Maintaining proper insurance
Check with your insurance representatives to make sure your policies cover all types of disaster. Coverage for floods is usually not included in homeowners policies or regular business insurance (BOPs)—and thus must be purchased separately. Even if your business or home is not in what is considered a flood zone, you should consider buying flood insurance to cover you for unusual circumstances. (Any water that enters from below or isn’t due to rain or wind is considered flood damage.) Normally, flood insurance is relatively inexpensive in non floodplain zones.
In some regions of the country, earthquake insurance is included as standard in homeowners and BOPs. In other regions, it must be purchased separately. Similarly, wind insurance (hurricane, tropical storm or tornado) may be standard or need to be added.
Always purchase what is called ‘replacement’ insurance for home, business, real estate, and equipment. Replacement insurance means that, in the case of total loss, you will be reimbursed enough money to replace lost items. If you rent, purchase renters insurance and make sure it is ‘replacement.’
Minimizing risk
This area involves both physical preparation of facilities (building or refurbishing to reduce fire, wind and other hazards) and logistical planning to reduce loss of data.
Physical preparation includes:
- Building or refurbishing to––and beyond code when possible and cost effective
- Maintaining electrical, heating/cooling and other systems
- Installing fireproof insulation and firewalls
- Putting in sprinkler systems and fire alarms (connected to police and fire departments)
- Maintaining adequate sewage and drainage systems, gutters, roofing, etc.
- Installing wind shutters
- Consulting with contractors and insurance representatives on how to structurally minimize potential for disaster.
Logistical planning includes:
- Keeping backup electronic and written records for the business, preferably off-site (financial, customer lists and information, etc.)
- Arranging for backup electrical power, heating/cooling, phone systems, etc.
- Keeping backup lists of emergency phone numbers and email addresses (insurance agents, police, medical, fire)
- Planning for the continuation of customer care and relations with suppliers if the company’s operations are down for any period
- Preparation of emergency equipment such as first-aid kits and other medical supplies, flashlights and batteries, food (non-perishables), heating elements for food preparation, etc.
- A packet of complete hard-copy records of business information that can be carried off the premises, such as financial documents, bank account numbers, insurance polices
- Adequate cash to see you and the company through until banks are operating and credit cards with adequate limit
- Lines of credit for emergencies to help the business get back on its feet
- Designated lines of communication between family members, so everyone will be informed of safety and whereabouts of loved ones.
Establishing, following emergency plans
If you have to decide what to do after an emergency occurs, it may be too late. When an emergency happens, response should be automatic. Employees should be informed in advance where and how to exit buildings, where to seek safety/shelter, how to respond if people are injured, what phone numbers to call for emergency help, etc. This should all be planned and documented in advance so every individual within the company knows exactly what to do. Fire, earthquake, windstorm—each type of disaster has its own set of required responses. Employees should be informed and trained how to respond.
Keep in mind that during a crisis, individuals often lose the ability to make what would ordinarily be considered simple decisions—and they may not be able to perform even the most ordinary activities. For instance, it has been noted by experts that the simple act of using a cell phone to call 911 during an emergency may be difficult. Because of the stress of the situation, the caller may forget to hit the ‘send’ key, and not realize why the call is not connecting. To reduce the chance of this happening, it is advised to practice pressing the proper keys and then pressing the send key (without actually hitting the keys to connect with 911, of course).
This relatively minor example illustrates why major response activities should be planned in advance. In the event of a disaster, every moment can be important. Wasted time endangers life and property.
Setting up steps for recovery
Recovery steps include:
- Recording details of loss (injuries to employees, structural damage to buildings, financial loss, revenue loss, etc.) for insurance purposes
- Notifying insurance representatives of losses as quickly as possible
- Setting up emergency repairs, working with insurance reps and contractors
- Setting up emergency funding for repairs, employee salaries, ongoing debt obligations, and other financial necessities
- Accessing lines of credit set up in advance of emergencies.
