Forty percent of businesses do not reopen after a disaster and another 25 percent fail within one year according to the Federal Emergency Management Agency (FEMA). Similar statistics from the United States Small Business Administration indicate that over 90 percent of businesses fail within two years after being struck by a disaster.
It is a common misconception that insurance awards and aid from government agencies will allow merchants to pick up the pieces after a flood, major earthquake or like disaster — many types of disasters are not covered under normal insurance policies and aid from government agencies may be too little, too late.
In this time of uncertainty, emergency preparedness is a hot topic. Many municipalities and chambers of commerce are sponsoring safety forums and emergency preparedness workshops.
While very useful, most of these forums and workshops focus on the immediate dangers of a disaster and not on long-term business survival. While immediate response to a disaster is undeniably important, the importance of long-term business survival is almost as great.
When listing disasters, most people start with earthquakes, floods, and fires, along with the more recent additions of terrorism and war. However, smaller incidents, such as burglary or water damage due to faulty sprinkler systems, can be just as catastrophic to businesses.
Incidents need not affect a whole community or area to cause a catastrophic business failure. Even non-catastrophic occurrences can result in immense losses of time and money.
For example, Tom Ralston Concrete was burglarized in late March. Among other items, the network server and a number of computers were taken.
Initially, it was thought that the backup tapes had also been stolen. While the tapes were eventually recovered, Tom Ralston Concrete lost two days worth of data. Tom Ralston estimates that the cost of the burglary is approximately $20,000. But, if the back up tapes had been stolen, recovery costs could easily have totaled over $100,000. This cost is based upon Gartner Group data estimating that the cost to recreate a single document is approximately $200.
While not threatening its survival, the burglary has had a definite economic and emotional impact on the company.
How Business Can Survive a Disaster
To survive, business owners must prepare for emergencies and take steps to prevent, or minimize, the effect of disasters.
The first step in disaster preparedness is knowing and documenting what is normal in business practices, structures, and personnel. For example, having a map of existing cracks in walls will answer the inevitable after-earthquake question, “Was that crack there before or is the wall starting to fall?” and allow employees to be more calm and productive.
The second step is playing “what if.” Determine and document all of the different items that could impact your business.
Start with large items, such as earthquakes and fires, and continue with such items as transportation strikes and loss of major suppliers. Do not neglect smaller items such as power outages and heavy rains.
Do not only think of what is likely, but think of all possibilities. Unfortunately, with man-made disasters becoming more common, it is now essential to plan for the unthinkable. Besides, a flying saucer might land on your roof.
For each item that could have a negative impact on your business, determine a prevention and recovery plan. Fortunately, the basics of many of the recovery plans will be identical.
Not only examine your business, but investigate your suppliers. Find out about their disaster recovery plans. Identify secondary and tertiary suppliers in other areas.
Follow Through with Plans
The third step is to implement the plans to prevent small and large disasters from occurring. For example, move computer backups to secure off-site locations. Install burglar alarms and fire suppression systems. If appropriate, procure a backup generator.
The fourth step is to implement procedures that will minimize the impact of a disaster. There are a number of simple and not so simple items that can minimize the impact of a disaster.
One of the most important is verifying that your address is clearly marked to allow emergency services personnel to locate your business.
Most fire departments are willing, even eager, to come tour your site before a disaster. This allows them to determine any special dangers that may be present at the site and allows them to perform more efficiently in the event of a fire or other emergency.
Make contact with secondary suppliers. Networking is very important so that you have resources on which you can call.
Form mutual assistance pacts with one or more companies that are in similar businesses. Arrangements could be made for the loan of equipment, supplies, or operating space.
Included in this step is implementation of immediate response capability. Research possible aid sources prior to an emergency.
Learn what tasks disaster relief agencies really perform. Most relief agencies, such as the American Red Cross, are primarily focused on helping people survive the first 72 hours after a disaster. While longer term assistance may be available, the primary focus is the immediate aftermath.
One of the often overlooked aspects of a disaster is emotional impact. Small or large disasters take a toll upon workers. To maximize employee effectiveness after a disaster, it may be necessary to implement such programs as short-term on-site child care.
Create a Certified Emergency Response Team (CERT) for your business or group of businesses. The Scotts Valley Fire Protection District is among those offering assistance in organizing and training these groups.
According to Division Chief Mike Biddle, “in a major disaster, you may be on your own for a while before you can get help.”
In such cases, a Response Team can shut off threatened gas lines and provide crucial first aid. The Scotts Valley Fire Protection District can organize the CERT preparedness course, which takes about 17.5 hours and is free of charge. Training in CPR techniques is also available.
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