BY WILLIAM J. LYNOTT
In 2017, hurricanes, floods, earthquakes and wildfires hit North and South America with a vengeance. By the time the year ended, damages totaled at least $306 billion—the costliest year for natural disasters yet, according to the National Oceanographic and Atmospheric Administration.
Many businesses found themselves dealing with these natural disasters or other unexpected emergencies. While your factory may not be in a flood zone or near a fault line, a destructive event of some sort is all but inevitable. It may take the form of an employee or vendor accident, a computer crash or power outage that shuts down your operation, or one of those increasingly common, dreaded cyberattacks that puts you out of business long enough for your customers to seek out a competitor … and never return.
The key to minimizing that risk, say the experts, is a well-thought-out plan of action in the event disaster strikes.
Develop a plan
“Every manufacturing business needs to have a disaster preparation and recovery plan, even if the plant is located in a relatively low-risk area for natural disasters,” says Gene Fairbrother, president of MBA Consulting in Dallas and an expert in disaster planning.
Every manufacturer needs to consider how to continue operating if disaster strikes. Your plan shouldn’t be a cumbersome project and it doesn’t necessarily have to be in writing, according to Fairbrother. “To be effective, it should be a model of clarity, fully understood by every employee,” he says.
Even if you have a plan in place, it’s important to refresh it periodically. Some basics of a disaster plan seldom change—for example, your evacuation destination, or the critical need to protect expensive equipment and completed inventory if you had to evacuate in a hurry. However, other things do change, like contact information for customers and suppliers, and places to find replacement equipment and supply inventory in a timely manner. Review your disaster plan at least once a year to make sure it still works for your plant.
Make your disaster plan company policy
“It’s important to make your disaster plan a permanent part of your business philosophy,” Fairbrother says. “It often takes another set of eyes and ears to point out the cracks in a plan or to spot missing components. That’s why you should share it with someone else, especially your employees. They may find a flaw or an important step that you missed.”
Also, having employees on board with the plan can help get the business back up and running as quickly as possible.
And while a business owner has little legal obligation to employees if the company closes due to disaster, temporarily unemployed staff should be kept on the payroll to encourage loyalty, if at all possible.
Follow these steps to prepare for any form of disaster:
1) Maintain an off-site backup of all computer records.
According to some estimates, 90% of all business records now are electronic. That makes protection and recovery of vital business information easier, provided a careful backup system is in place.
Most business owners have learned the importance of backing up the information on their computers, but not everyone does a complete job.
Stefan Dietrich, co-author of the book, “Contingency Planning and Disaster Recovery: A Small Business Guide,” stresses the importance of maintaining an up-to-date backup copy of critical data at an off-site location. “Unattended automated backups are better than using CDs or flash drives,” he says. “Typically, most people don’t follow through with creating backups. For that reason, automated online backups to a remote location via the internet are much better.”
2) Safeguard your most precious business assets.
In the case of a disaster requiring evacuation of the plant, your first concern will be to make sure your employees are safe. Once that’s taken care of, you’ll need to put your plan for saving equipment and inventory into effect.
Your plan should designate which employees are responsible for which pieces of equipment and which inventory and supplies should be evacuated first. While initial evacuation will require getting materials safely out of the building, your plan also should designate a specific location where they can be kept safely long term, if necessary.
Depending on the extent of your inventory, you’ll need access to proper evacuation equipment. Employees need to be instructed on the exact location of the evacuation supplies, and you should refresh their responsibilities as time passes and employee turnover takes place.
3) Safeguard your next most important business asset.
Your lists of customers, insurance companies and vendors are the foundation of the continued health of your business. You must do everything possible to make certain you have access to them in the event disaster strikes.
“If you are out of business for a few days—or longer—you need to let your important contacts know what is happening,” Fairbrother says. “This means having an easily accessible list of all contact information. As with other business records, it’s best if copies of this are stored off-site.”
4) Review your insurance coverage.
“Carefully review your insurance policy to make certain it is appropriate for your needs,” says Donna Childs, chief executive officer of Childs Capital LLC and co-author with Dietrich of “Contingency Planning and Disaster Recovery.” “You should have business interruption insurance to replace lost revenues if your operations are disrupted due to a disaster.” According to Childs, the failure to include business interruption insurance is the most common error in disaster planning for small businesses.
She suggests manufacturers take digital photographs of their factory’s major physical assets and preserve them online where they can access them remotely. “Scan critical documents, such as your insurance policies and lease, and have digitized copies available online for the same reason,” she says.
5) Provide for backup power.
“Consider the use of a backup power generator, so if a disaster strikes, it is not made worse by not having lights and power to at least get everyone out to safety,” says management consultant Isidore Kharasch, president of Hospitality Works in Deerfield, Illinois. “In addition, having a backup battery for your computer should be part of your plan. Even if it lasts for only 2 to 3 hours, it will give you time to close out servers and shut down the system with your critical records intact.”
In the unfortunate event that your plant is fully or partially wiped out by any form of disaster, your plan should include guidance on how to get it up and running again as quickly as possible. These basic suggestions should be part of your plan:
6) Provide physical security.
In the aftermath of any disaster, security of business assets is almost certain to have been compromised. As soon as it is possible to do so, you should put any parts of your plan dealing with the physical security of your plant’s equipment, inventory and other assets into effect.
7) Know who is there to help you and let them know you need their help.
“If you are involved in a major disaster, you should be prepared to make early contact with any organization that may be able to offer assistance,” says Ernest G. Vendrell, professor and associate director of the Department of Public Safety Administration at St. Leo University in St. Leo, Florida. Some of these agencies include:
- Local offices of emergency management
- The Small Business Administration
- Local police and fire services
- The Federal Emergency Management Agency (FEMA)
- Your insurance carriers
“In addition to a variety of educational and training guides, FEMA also offers a number of disaster planning courses that typically are offered free of charge,” Vendrell says.
“It’s important, too, to maintain ongoing contact,” Fairbrother adds. “During a major disaster, there is always much confusion and you don’t want your business to be the one that falls between the cracks.”
8) Keep your customers updated on a regular basis.
If you have protected the information on your customers, you can send emails with updates, or you can put the information on your website.
“Remember, too, that your suppliers have businesses of their own to run; they and your customers will appreciate knowing how and when you expect to be back in business,” Fairbrother says. “In most cases, they will work with you in your time of need. However, don’t lose sight of the fact that they have needs of their own and must continue to take care of those needs. Maintaining contact with your customers and vendors will increase the likelihood that they will stick with you instead of straying off to a competitor.”
You will, of course, want to consider other necessary disaster preparation steps unique to your situation.
Unless you are located in a hurricane or flood-prone area, preparation for a natural disaster may seem like an unnecessary demand on your time, but every year, thousands of unsuspecting business owners around the country find themselves victimized by a disaster of one form or another. Disasters come in all sizes and shapes, not just hurricanes like Harvey and Irma. Fires, floods, ice storms, earthquakes and tornadoes can all take their toll. And, of course, the increasing incidents of cyberattacks greatly increase the chances your business eventually will have to face a disaster of some type. That’s why investing a little of your time creating a disaster preparation plan now will be a wise business investment. If disaster should strike, the last thing you need is to be caught unprepared.
“Contingency Planning and Disaster Recovery: A Small Business Guide”
Authors Donna Childs and Stefan Dietrich take small business owners through every stage of disaster planning from preparation to recovery.
Emergency Management Guide for Business & Industry
Published by the Federal Emergency Management Agency, this step-by-step approach to emergency planning, response and recovery for companies of all sizes is available at no charge at here.
Business Continuity Guideline: A Practical Approach for Emergency Preparedness,
Crisis Management, and Disaster Recovery
Also available free online.
“Simply Essential Disaster Preparation Kit” by Catherine Stuart comes with tips on survival basics and checklists to help anyone prepare for disasters.
“Get Your Claim Paid: A Pro-Active Guide for Handling the Most Difficult Part of Insurance”
Published by The Silver Lake Editors, this book offers advice on how to get different types of insurance claims paid and includes worksheets and checklists to make the process easier.