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March 20, 2020

Can Your Business Withstand a Natural Disaster?

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Young entrepreneurs may wonder why do some businesses survive natural disasters like hurricanes while others don’t. Everyone knows that it’s challenging to keep a business running even during normal conditions, but after a natural disaster, few companies can find the strength to reopen. FEMA states that less than 40% of companies can manage disaster and continue their operations after natural disasters. However, some brands survive even in the toughest conditions, and it’s important for start-ups to identify them, to prepare ahead, and boost their chances to get through a catastrophe.

Business survival factors

Springer conducted a study to understand the characteristics that helped some companies survive hurricane Katrina, and concluded that all businesses that recovered after the catastrophe had certain common elements. Most of them were older companies that had plenty of financial experience and resources. Larger brands with many employees also had better chances to survive, in comparison with small ones run from home. Also, the companies that dealt with natural disasters before or faced financial problems also found easier to get through. 

The study also reveals what companies are more likely to close after a catastrophe. The businesses managed and run by veterans, minorities or women have greater chances to close after a hurricane or similar natural disaster. And given the nature of the disaster, the companies located close to the coast also closed, in comparison with the ones placed farther away that managed to recover. 

Are you ready for the worst-case scenario?

Some factors are outside the control of a business manager because they cannot compensate for lack of experience or resources (for example). Katrina proved that the business owners who dealt with a similar scenario before were able to get through this situation again. And it doesn’t matter if Katrina was the worst scenario for many businesses, it proved that weak brands cannot survive because they don’t have the employees, location, and financial resources to survive a natural disaster. The ones that had these elements, worked hard to recover, but they finally re-gained their success. 

Unfortunately, no one can predict when a natural disaster hits your town, and you need to prepare for the worst-case scenario. This requires a complete external analysis because you need to identify the elements that can impact your success. Figure out what natural disasters are more likely to affect your business, because if you’re running a company in Florida is unlikely a snowstorm to hit your business. 

Guidelines to prepare for one

Establish the elements your insurance must include

You have only one shot to make sure your business can survive a natural disaster; you need to buy adequate insurance and create a disaster recovery plan. The ideal insurance includes:

  • Sufficient coverage. Ensure your policy covers all the indirect costs of a disaster. It should pay for rebuilding the business headquarters (if destroyed), and compensate for the disruption of operations. 
  • Earthquake and flood insurance. Standard property insurance doesn’t include these 2 elements, so you should purchase additional coverage if you operate in an area prone to earthquake and flood hazards. 
  • Insurance for business interruption. Double-check if the broker covers the profits you lose because of interruption. It should pay based on your records that reveal the business’ revenue before the disaster. It should also reimburse the operating expenses that help you continue your business until you register revenue again. 
  • Comprehensible terms and conditions. You must understand the terms and conditions of the coverage to understand what it pays. 

If you run a business from home, when you ask for Florida homeowners insurance quotes check if they also cover home-businesses in case of natural disasters.  

Secure assets

All companies have two types of assets, recoverable and non-recoverable. In case of a catastrophe, all non-recoverable assets are lost, as their name states. So, to ensure you keep all your paperwork and apps, upload the systems, software, and documentation onto a cloud. This way, you’ll have no issue to recover information remotely. No matter if your business office is destroyed you can work from home if you can access your documentation and systems. 

For the recoverable assets, you must check the structural integrity of the building and furniture. Ensure they allow quick evacuation in case of natural disasters because protecting your employees’ lives is essential. 

Have a temporary location you can use if a natural hazard destroys your full-time office. 

Create a recovery plan

To understand how you can protect your business from a natural disaster run a business impact analysis. You can hire a rusk manager to handle this job because they have experience in disaster planning and recovery. They can assist you with the plans and even plan on their own to ensure a catastrophe doesn’t affect your operations. 

When you create a business disaster plan, you should:

  • Create an emergency response plan. Even if a natural disaster didn’t hit your town in a while you should tell employees what they need to do in case of a catastrophe. They should know who to notify about the situation, and what measures to take to preserve their lives and lower property losses. 
  • Detail each step of the plan and assign responsibilities. Use a simple language to describe each employee’s responsibilities, so they can understand the procedures and remember them. 
  • Make a list with important contact details. Make sure that your employees can get in touch with the right people during and after the disaster. The list should include the phone numbers of local and state emergency management agencies, insurance broker, major clients, suppliers, contractors, financial institutions, and realtors. 
  • Choose the communication strategy you prefer to prevent loss of clients. You can post a notice in the newspaper to inform them you need to interrupt operations due to natural disaster. Send emails to clients to tell them you cannot provide services for a limited period. Contact partners and suppliers by phone to ask them to stop supplies delivery because you have no warehouse to store them. 

Having access to all this information you can put your business on the list of companies that can beat the odds and withstand a natural hazard.


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