Hurricanes, fire, flood, earthquakes, even computer viruses are disasters that can threaten a business, and they can happen anywhere at any time. They’re never planned, but they can be prepared for with recovery plans that could help you save your business in case of an emergency.
“The overall goal of a disaster recovery plan is to return your business to normal operations as quickly as possible,” said Jeff Lubberts, director of Major Loss, Universal Underwriters Insurance Company, now Zurich. “A recovery plan helps businesses maintain cash flow, protect employees, keep customer relations positive and retain their client base. While property insurance will repair or replace facilities, interruptions in business operations can cause lost customers, employees and vendors.”
A good first step is to meet with an insurance agent who understands the needs of your business. Take the time to review your insurance policy and ensure you have the proper coverages in place. Most policies do not cover flood or earthquake damage and you may need to buy separate insurance for them.
Also consider business income interruption and extra expense insurance. Even if you have to close your doors for only a few days, the impact on your revenues and net income can be substantial. And as your revenues decrease, you will have both ongoing and new expenses. Your insurance agent will work with you or your accountant to estimate your projected revenues and expenses, calculate anticipated income and then determine the potential losses from a temporary closure.
After reviewing and/or updating your insurance policies, you can create a disaster recovery plan by following these steps (the Open for Business toolkit from the Institute for Business and Home Safety provides a more in-depth explanation of the process):
• Identify your disaster exposures. Disasters can be natural, man made and political. Identify any potential hazards, such as fire, flood, tornadoes and the loss of an important supplier.
• Identify critical personnel, equipment and data. Evaluate all aspects of your business to determine what elements must be in place to return to normalcy quickly.
• Collect information. Create a list of every piece of information important to your business. This list should include inventories, employee and supplier telephone numbers, equipment (including computers and office equipment) listings, vendor lists, software inventory and other important items. Having this information stored in a secure location, accessible from outside the company’s building, can improve the chances of staying in business should the worst happen.
• Develop a formal written disaster recovery plan. All of the above information should be incorporated into a plan that identifies specific disaster scenarios, steps that will protect a business prior to the disaster and instructions for getting operations back to normal as quickly and efficiently as possible.
• Test the plan. Test the plan initially to ensure it has accounted for everything necessary in a disaster. Review and update the plan annually and as exposures to loss change. Make sure your employees know what to do in case of an emergency. They should know where all the emergency exits are located. A safety coordinator could be appointed — someone who will take responsibility for making sure all the fire extinguishers work, planning safety drills, developing evacuation plans, etc.
Developing a disaster preparedness plan is just as important to a small business owner as developing a business plan. Having a disaster plan in place will make the difference between being shut down for a few days, and losing your livelihood.
Zurich American Insurance Co., www.zurichna.com/zdu.
U.S. Small Business Administration, www.sba.gov.
Institute for Business and Home Safety, www.ibhs.org.