Current Industry News: How to Create a Disaster Plan

How to Create a Disaster Plan, by Jessica Herring.
http://www.bizjournals.com/albuquerque/print-edition/2012/07/27/how-to-create-a-disaster-plan.html?page=all

Every business has to deal with unpredictability, but creating a contingency plan can help prepare your business for the unexpected and limit damages.


Disasters such as hurricanes, tornadoes, fires or floods can stall business operations and cost thousands of dollars. According to the Federal Emergency Management Agency, 25 percent of businesses do not reopen following a major disaster. Businesses can save time, money and resources by creating a solid plan in case of catastrophe.

Julie Rochman, the president and CEO of the Insurance Institute for Business and Home Safety, a nonprofit organization supported by the property insurance industry, stressed that disasters come in many forms.

“Don’t just think about disasters only as natural disasters,” Rochman said. “A main breaking, a tree falling down ... anything that closes down your business is a disaster.”
She warned that small businesses are particularly vulnerable because they have a smaller operating margin and often rely on a couple of key vendors.

To prepare for a disaster, small businesses should ensure their key suppliers have a disaster continuity plan.

“We have something we call a ‘cascading chain of failure,’” Rochman said. “If everything isn’t in place, little things can trip you up.”

According to FEMA, preparedness can help a company recover from financial losses and damage to equipment, comply with federal and local regulatory requirements and reduce insurance costs.
FEMA Administrator Craig Fugate stressed the importance of helping businesses recover.

“The faster we can help stores and businesses get back on their feet after a disaster, the more effective the rest of the team can be focusing our resources on helping disaster survivors in areas that don’t yet have access to those goods and services,” he said.

According to “The Wall Street Journal Complete Small Business Guidebook” by Colleen DeBaise, the best disaster plan includes three main precautions: developing a contingency plan, backing up data and reviewing insurance policies.

A successful contingency plan includes analyzing business functions and taking precautions to avoid temporarily or permanently shutting down business operations.

 

Developing a contingency plan

• Assess potential hazards.
• Analyze the potential impact of disasters.
• Stock up on emergency supplies.
• Install a generator for emergency power.
• Check the building’s structure to ensure it is stable and fortified.
• List backup vendors or suppliers in case primary suppliers shut down.
• Consider alternative worksites to continue operation.
• Make a list of 24-hour emergency numbers for employees.
• Ensure there are backup ways to contact employees to keep them informed about changes in plans.
• Practice drills for mock-disaster scenarios.

Backing up data

• Make backup copies of all critical records, such as accounting and employee data, customer lists, inventory, etc.
• Keep information in a separate location at least 50 miles away, and secure information with an online data-backup provider.

Reviewing insurance policies

• Take out a property insurance policy.
• Consider business interruption insurance to cover lost income if the business shuts down temporarily.

The U.S. Small Business Administration can help through its Disaster Loan Program, which helps businesses and homeowners recover from earthquakes, hurricanes, floods and terrorist attacks. Companies can also purchase business interruption insurance through other providers.

“Business interruption coverage kicks in when you can’t get access to your property because authorities have quarantined it, or if the physical property has been damaged,” Rochman said. “It’s really important for businesses to really read their insurance policy and ask their broker ‘what does this mean’ so that you know exactly what their contract says.”

She also said businesses have to think about critical functions that occur in a 24, 48 or 72-hour period.

“You have to ask, what are the absolute core functions that you need to maintain to stay in business?” Rochman said.

She emphasized keeping contact with community leaders and first responders.

“Make a mutual aid agreement with businesses to have them relocate at your facility [or vice versa], if need be.”

Once your business makes a continuity plan, it must be updated.

“If you made a disaster plan two or three years ago, it will be out of date,” Rochman said. “You have to maintain it.”

 

Top tips

1. Have alternative ways (i.e., texting) to reach employees, and cooperatively delegate responsibilities for employees in the event of a disaster.
2. Have a list of key contacts, including vendors, customers, local media, the insurance company, etc.
3. Make sure there are backups of vital records — both hard copies and electronic copies.