How to prepare your small business for natural disasters

Thu | October 2022

Throughout history, businesses have struggled to recover from natural disasters:

• 19,000 businesses never reopened after Hurricane Katrina ravaged the Southeastern United States and caused $125 billion in damages.

• The eruption of Mount St. Helens destroyed 4.7 billion feet of timber and 12 million hatchery fish. Although the exact number of businesses destroyed is unknown (likely due to the relatively low population), the economic damage amounted to over $1.1 billion.

• Even among predictable disasters like hurricanes, according to FEMA, disaster repair costs force 25% of businesses to shut down permanently. Of those that survive, many will struggle to reopen for months.

No predictable or unforeseen catastrophe can prevent businesses that plan to recover pre-disaster profit levels quickly. You can start developing a natural disaster preparedness plan immediately to focus on business continuity and ensure your company has a plan to recover if an incident occurs. In this article, we've included elements you need to consider for your business disaster recovery plan.

1. Communications strategies

Communication plan with employees

Life-saving knowledge isn’t common knowledge, so ensuring your employees know what to do during emergencies is vital. Have emergency lines on hand so you can direct anyone you call to get help or assist in leading emergency services to them. Sometimes all people need is a calm voice to guide them through traumatic circumstances.

Routinely meet with your employees and practice safety plans. For example, have regular fire drills or emergency procedure meetings about handling floods, such as avoiding attics in favor of roofs. Part of employee safety includes knowing whom to call, including:

• Local and state emergency numbers

• Insurance company representatives

• Suppliers

• Contractors

• High-value clients

Communication plan with customers

Have documents and postings ready to notify customers if you must close, including:

• Printed Signs out at each location to inform of closing or relocation plans.

• A list of high-value clients to be contacted by phone.

• Your web developers can prepare banners that populate your website at the press of a button, notifying anyone on your site of the situation.

Communication plan with other stakeholders

Reach out to other companies (especially those crucial to yours, such as suppliers) about their emergency plans before it’s too late. Asking questions can enable you to better plan and communicate with clients about what you’ll be doing to mitigate downtime. For example:

• Who should you contact at their business during an emergency?

• Will they be able to relocate if their property is damaged?

• Or will they be temporarily closing?

• What and how much does their insurance cover?

Building relationships with charity foundations or government agencies such as The Helping Hands or the SBA disaster relief program can also assist in hastening a speedy comeback.

2. Data protection plan

Critical information such as documents, passwords, customer databases, or proprietary information should be backed up and secured. While professionals disagree on whether or not natural disaster looting is common, natural damage remains an all-too-real possibility. During a disaster, physical servers run an exceptionally high risk of being destroyed but are also challenging to protect. A good rule of thumb is to treat safeguarding physical data storage like a fragile, cash-filled safe room.  A data protection plan should take into consideration the following elements:

Physical security protects your data from would-be theft with alarm systems, personnel access restrictions (i.e., locks and security cards), or multi-factor authentication.

Disaster protection can range from more complex solutions, such as fire sprinklers or earthquake-protecting seismic server racks, to simple solutions, like flood-proofing tech with raised floors. 

Data backup will ensure that your data is recoverable if damage occurs to physical copies:

• Professionals recommend storing valuable information on secure cloud platforms such as AWS, OneDrive, or Google’s Disaster Relief Service (DR).

• Conversely, a separate physical backup can enable faster data recovery when other local businesses are throttling an area’s bandwidth when attempting the retrieval of lost data.

3. Property protection plan

Determining when and where disasters might strike is often guesswork, so protecting a building can seem expensive and unnecessary. However, providing asset protection infrastructure can be considered an asset itself, among other things. The Federal Emergency Management Agency (FEMA) provides resources for Preparedness and Planning for Your Business.

4. Insurance plan

Make sure you know what and how much your catastrophe insurance will cover; remain vigilant in noticing any policy changes that could impact your company’s operational ability during a disaster. According to the insurance information institute, most policies won’t cover occurrences such as flooding or landslides, so obtaining additional coverage is essential to keep repairs within your financial capacity. Consider the following commercial insurances:

• Ordinance insurance covers you if any damaged property needs to be brought back up to code.

• Tenant improvement insurance covers damages to anything businesses have added to a building they’re leasing, such as additional walls or HVAC systems.

• Depending on your policy, additional property coverage can provide funding for anything from fences to debris cleanup. Always check that new fixtures are registered with your insurance agent to ensure this policy’s effectiveness.

• A variety of sources provides income insurance and supplementations. Organizations like the SBA provide disaster loan assistance. 

5. Plan to cover additional expenses

If you’re unable to increase security or obtain additional insurance policies, then connecting with funding organizations will ensure you have access to any resources necessary for disaster preparation. It’s better to secure your company’s recovery before those efforts are needed, even if it takes a little extra help.

• Stay in touch with SBA and FEMA representatives. In doing so, you’ll have a handle on what financial assistance these organizations will offer local businesses in the event of a natural disaster.

• Keep your bank in the loop by letting them know your plans and what expenses an impending disaster might incur due to relocation or repair needs. If you can provide a detailed record of how you’ve followed a pre-existing disaster plan, you’ll be much more likely to receive prompt loan offers.

6. Recovery plan

Since the final step of a plan is to carry it out, you'll want to review our article "How can your business recover from a natural disaster? ". You can learn how your business can recover from a natural disaster. Hopefully, you won’t need to deal with recovery, but in the unfortunate event that a disaster impacts your business, it can help to know which steps will help you return to normalcy.

Disclaimer: The contents of this post were prepared for informational purposes only. It is not intended to provide and should not be relied on for tax, legal, or accounting advice. Consult with your tax, legal, and accounting advisor before engaging in any transaction.