According to the Insurance Information Institute, 91 natural catastrophes occurred in the United States in 2017, totaling $23.8 billion in insured losses. Natural catastrophes always seem to be an item of interest on the national news taking place in a land far away from us.
Unfortunately, like State Bank of Cross Plains, many of our partners, clients and friends came to the realization that our homes and place of business are not excluded from natural catastrophes.
Although we may not be located in an area highly prone to hurricanes, tornadoes, floods, earthquakes or wildfires, we now realize the need to consider the possibility of potential hazards these disasters may cause.
As a successful business owner, you don't want to think about your operations being interrupted by a natural disaster or other unexpected event. Yet the possibility is a real one. Fortunately, there are many ways you can prepare your business for an emergency.
How businesses are affected by natural disasters
As reported by preparemybusiness.org, a website created by the Small Business Administration (SBA) and Agility Recovery Solutions, approximately 40% to 60% of small businesses never recover from a disaster. For this reason, it is in the best interest of every business to identify potential risks and develop a plan to address them — before a crisis. Many resources are available to assist business owners in developing a disaster preparedness program.
Steps to implement a disaster preparedness program
Following are five steps that will help you create a disaster preparedness program, as outlined by ready.gov, a national public service campaign designed to educate Americans about preparing for and responding to natural and man-made disasters.
Step 1: Program Management
In many cases, there are minimum regulations that govern how certain businesses manage risk, but as a business owner you will need to determine whether the minimums are enough. As ready.gov states, "Many risks cannot be insured, so a preparedness program may be the only means of managing those risks." Management commitment to a preparedness program, as well as a written preparedness policy and oversight committee, may be critical to ensuring your business's longevity.
Step 2: Planning
This step should include the creation of a "risk assessment" that identifies all potential risks and hazards for your business, with ideas for mitigating their impact. It should highlight threats and hazards that are considered "probable," as well as any that could cause injury, property damage, business disruption, or environmental impact. Another critical document is the "business impact analysis," which details sensitive or critical processes as well as the financial and operational impacts that would occur due to disruption of those processes.
Step 3: Implementation
In this step, committee members identify and assess resources, draft written plans, develop a system to manage incidents, and train employees as needed. Several key documents contribute to successful program implementation, including crisis communications, emergency response, and business continuity plans.
Step 4: Testing & Exercises
To evaluate the program's effectiveness, including the success of employee training, management should run tests and drills to see what works and note opportunities for improvement.
Step 5: Program Improvement
During testing or an actual incident, weaknesses in the program are likely to be revealed. They should be documented, along with lessons learned and strategies for addressing such problems in the future.
Other disaster preparedness resources
The Small Business Administration (sba.gov) offers several resources designed to help small businesses shore up their emergency preparedness, including links to templates and worksheets that will help you gather the data you need to put together the various written documents. The SBA's Disaster Preparedness and Recovery Plan outlines the various ways in which the SBA can assist businesses recovering from disasters.
The SBA's main form of support for businesses is the Disaster Loan Program. The organization has two types of disaster loans designed specifically for small business owners:
- The SBA Business Physical Disaster Loan provides loans of up to $2 million to help businesses and nonprofit organizations within a disaster area repair and replace real property, machinery, equipment, fixtures, and leasehold improvements.
- The Economic Injury Disaster Loan offers up to $2 million in loans to help small businesses, small agricultural cooperatives, and certain nonprofit organizations that suffer substantial economic distress because of a disaster. Loan proceeds can be used to meet financial obligations and working capital needs that could have been met if a disaster had not occurred.
Finally, the Insurance Institute for Business & Home Safety (disastersafety.org) offers a variety of resources, including research reports and an online tool that allows you to enter your Zip code and receive information about specific risks in your area.
Disasters are unpredictable, and they can put you, your employees, and your business in jeopardy. But many of their worst effects can be prevented, or at least mitigated, through a structured disaster management plan.
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