We recently discussed the need for all businesses to have a disaster preparedness plan in place as part of our recognition of National Preparedness Month. This involves helping businesses to be better prepared for an unplanned business interruption as a result of a man-made or natural disaster, but equally important is having a plan for the disaster recovery process. History has shown that 25% of businesses that close because of a disaster never reopen. For example, following hurricanes Harvey and Maria hundreds of small businesses in Texas and Puerto Rico closed their doors for good, causing tremendous financial hardship on their owners.
A business continuity or disaster plan should help keep the business operating as it responds and recovers from a disaster or emergency situation. It should include established procedures for succession management. Businesses should identify essential business functions and staff to carry out these functions after the disaster; determine which employees will be considered non-essential vs. essential; and identify records and documents that must be kept safe and readily accessible to perform key functions.
In addition, all companies require office equipment, such as computers, printers, copy machines and telephones. Depending on the damage to the operation, it may be possible to transfer some equipment to a new location. Alternatively, the business continuity plan must identify sources for replacement equipment, which may have to be purchased and installed at a backup facility before initiating operations.
Before a business can begin operating again, it needs access to its data, such as financial information, customer accounts, supplier orders, inventory status and orders to be processed, etc. In addition to the data itself, the software application to access and display the data is required. Key employees identified in the continuity plan should have backup copies of software and data or know where the copies are located. If there is online remote backup, be sure copies can be downloaded onto new computers. After testing and verifying that all software works normally and the required data is consistent, operations can resume.
Recovery efforts should include a survey of what has happened with suppliers and customers. Develop professional relationships with alternate vendors, in case a primary supplier isn’t available. Also, customers may have also been affected by the same event and may be in the recovery phase for their operations. In that case, establish contact at their backup location and inform them that the business is ready to re-open or resume operations.
Again, insurance coverage should be reviewed well ahead of a potential disaster to ensure coverage is sufficient. Make sure the client understands what’s covered under each of their policies. Discuss the need for Flood insurance and Business Interruption coverage that will help cover operating expenses if the business is forced to temporarily close. Along with the insured, calculate the cost of business interruptions for a day, week, month or more. To the extent possible, the insured should also set aside a cash reserve that will allow the business to function during the recovery phase.