This page provides information about how to protect your business from disasters. It discusses assessing risk, making a plan for risk and then testing and practing the plan.
How to Better Protect Your Business from Disaster
Everyone in business knows time is money.
When disaster strikes, the time a business is disrupted is just one of many problems a company can face. Damaged equipment, ruined inventory, workforce impacts and sudden drops in cash flow can drive many businesses to the brink of extinction in the blink of an eye.
There are, however, ways to minimize the impacts on a business, no matter the size, before disaster strikes. Here are some ideas:
Do a disaster risk analysis for the business. Determine the most probable type of disaster that can occur, such as, wind, flood, fire, power outage, etc., and how each disaster type would impact the business.
Develop both emergency and recovery plans for the business. Plan what to do if a disaster were to occur, including what employee assignments will be. Practice those assignments. Also, create a recovery plan of how to jumpstart the business once the disaster event is over.
Evaluate all insurance coverage. Know specifically which business components are covered and under what conditions. If possible, insure to replacement cost. Consider insuring more than physical assets, such as the building or equipment, and include business interruption protection as well to help with cash flow.
Ask about flood insurance. If flooding is not covered under the business policy, which is usually the case, consider buying a flood insurance policy through the National Flood Insurance Program (NFIP). This coverage is available for the structure, contents or both in any community that participates in the NFIP. Home businesses often are not covered under a homeowner’s flood insurance policy but can be insured separately. There is a 30-day waiting period before the policy becomes effective.
Protect business records and files. Regularly back up vital electronic files such as suppliers, billing and payroll records, and customer lists. Consider doing this at least weekly. Make at least three copies of essential information and store the backups in secure, off-site locations.
Estimate the cost of repairing or replacing each essential piece of equipment in the business. These estimates will help determine operational vulnerability and focus disaster-resistance needs.
Maintain a list of essential suppliers and/or repair services needed to begin disaster recovery for the business. Include alternate vendors for supplies and equipment outside of the immediate area around your business in case of a widespread disaster. Keep backups of this information off site as well.
Maintain an up-to-date inventory of assets, important materials and equipment. Document these assets both in writing and with photographs. Include this documentation with the off-site backup files.
Assign disaster mitigation duties to employees. For example, some employees could be responsible for securing storage bins or others for backing up computer files and delivering copies to a secure location.
Prepare the company’s workforce. Determine workforce readiness in the event of a disaster. Know which employees can or should report immediately to work once it’s safe and which ones may not be able to work right away because of personal issues. Help employees prepare themselves and their families for a variety of disasters by providing information on developing family disaster plans, making disaster supply kits and how to better protect their personal residences.
Consider storing minimal inventory on site. One recommendation is to maintain just three to five days’ worth of inventory on hand so that when a disaster occurs, the loss isn’t as great.
Identify equipment susceptible to damage. Consider the location of the equipment. For example, equipment near a hot water tank or pipes could be damaged if the pipes burst. Likewise, equipment near windows could be damaged in a tornado, hurricane or other high-wind event.
Relocate or elevate and secure major appliances, critical equipment or machinery above possible flood levels. Items such as furnaces, water heaters, copiers, computer networks, etc., can be re-set and secured on a raised platform base. Electrical panel boxes and outlets also can be relocated higher. Any alternate location should be above the base flood elevation at that site. Local building officials can identify the base flood elevation.
In any situation requiring structural changes, be sure to first check with local authorities to determine what code requirements must be met.