Small Business: How To Protect Your Business From Disaster

Because of the effects of Hurricane Sandy which hit New Jersey in 2012 and the oil spill that occurred in the Gulf of Mexico in 2010, it became apparent that the survival of any business(especially a small business) depends on the speed with which the business owner or the management responds to a disaster. The point under discussion here is that critical business catastrophes are not only inevitable and unpredictable but they also can vary widely, from explosions, terrorist attacks, water pipeline breaks, protracted blackouts, sabotage, fires, biological contamination, and computer network crashes. As a practical matter, some of these risks may only succeed in taking your business offline for days. However, even minutes of downtime could prove fatal for your business if it is operating in a very competitive environment. So to remain in business it should be in the best interest of the owner or the management of the business to arm themselves with methods for prevention, preparedness, response and recovery.

From a historical standpoint, one out of every four small businesses usually fail after a disaster. Independent studies suggests that because small businesses don’t have the financial assets that big companies do, they are, as a result, more vulnerable to economic losses after a disaster than the latter. The only sensible questions small business owners need to ask is how they can best protect their businesses from the vagaries of unanticipated disaster. Answering that question requires an understanding of the concept continuity or contingency planning.

Contingency Planning is Not Rocket Science!

Having a contingency plan – a plan that identifies all the critical procedures and resources necessary for the survival of the business–can help a business owner to keep their doors open after a disaster. The happy truth is that such a plan does not have to be overly complicated. This means that, for a small business, a contingency plan can be as simple as providing workable answers to the following three questions: What is going to happen? What is the business going to do about it? What can the business do ahead of time to get prepared? The bottom line here is that, for any small business owner, having a contingency plan can help in maintaining customer interest and loyalty, for two reasons. First, having a workable contingency plan means that you will continue to provide goods and services even in adverse condition –a feat that builds customers’ confidence in your business as well as makes them more likely to choose your company over your competitor. Second, having a contingency plan builds and entrench customer loyalty: Because you have taken the necessary steps to ensure you can continue to meet your obligations to the marketplace, it is only natural that the customers will show loyalty to your company. Hence the time which the business owner spends in contingency planning equals time and business saved when a disaster occurs.

Business Insurance Coverage! There it is!

As a practical matter, having the proper business owners insurance coverage is also critical to your business recovery when disaster strikes. Such an insurance coverage safeguards your business against many known and unknown risks – fires, flooding, lawsuits, accidents, loss of records, theft, and so on. In some cases, financial losses to your business could result from road closings after a hurricane or water mains breaks. For the small business owner therefore, the stakes are high. What is clear is that the losses that could occur  when you are not insured(or when you are improperly insured) far exceed any gains you make from running a profitable business without insurance. This assertion is thus a good reminder that every business owner  need to fully understand  the specific risks they are exposed in the areas where their businesses are located. By navigating through the Insurance Institute for Business and Home Safety website (www.disastersafety.org) you can use the “Risks in Your Zip Code” tool to view risks by location and other vital data(McKinney, 2013). In addition, to get advises  on how to mitigate property loss, prevent data loss, and line-up back-up suppliers, visit  www.disastersafety.org/open-for-business/

Having the  Right Policy Matter Too.

The most frequently cited reason is that many business insurance coverage does not cover every form of disaster. For instance, most property insurance policies do not cover flooding. But as the U.S. Geological Survey made clear, apart from droughts, floods are the leading cause of natural disaster losses in the United States(McKinney, 2013). To make sure you have the right policy, ask the following questions about the policy: Is your policy adequate in light of your risk? What is and is not covered, such as business interruption income? And so on. I suggests that you check table A which explains all you need to know about various policies:

Table A – Types of Business-Specific Policies

Type	Coverage
Business Owners Insurance	One package comprising of liability insurance, business equipment, and personal contents, and may also include coverage for buildings and vehicles. Additional protection include: crime insurance(which covers loss of money or securities resulting from burglaries or losses from employee theft or embezzlement); and business interruption insurance(which cover losses that results from having to suspend operations or reduce production for a time).
Commercial Property Insurance	Covers a company’s physical assets including buildings, equipment, inventory,  computers and records damaged  by an insured cause of loss. Note that property policies typically do not cover loss or damage due to flood.
Data Breach Insurance	This addresses the loss and theft of sensitive customer or employee data – a growing risk for small businesses  because of the increasing popularity of mobile devices as well as the sophistication of hackers.
General Liability Insurance	Protects you against claims of bodily injury or property damage by someone at the business. You will need this important coverage  if you or your employees visit off-site locations, such as training, conference, or event spaces.
Professional Liability Insurance	Protects you against unhappy clients filing suits that claim negligence, errors or omission on your part while you performed services. You will need this form of coverage if your business involves providing opinions, making recommendations, or offering a service.
Flood Insurance	Covers losses or damages caused by flood. You can learn how to buy a flood policy by visiting  the National Flood Insurance Program at FloodSmart.gov

 

 

Sources

McKinney J. (2013): Before Disaster Strikes. Black Enterprise, 43(8), pp. 21-26.