Question: I often think about what would happen to my business if there were a natural disaster or other disruptive event. Is this realistic? Are there some measures I can take to lessen my concerns?
Answer: Every business has numerous potential exposures, and of course some are worse than others. Let's talk about this.
In a previous column we discussed risk management. We noted that insurance is basically a transfer of risk from you to the insurer, in exchange for an annual premium. So start by giving your current insurance a look-see. If it's been several years since you've reviewed your coverage, it's time to call your insurance agent. You most likely have a basic business owner's policy (often called a "BOP") that met your needs back then, but may not offer the right coverage now. For example, if you are using a personal car in your business, you need to look into commercial auto coverage. Or, you may want to look into increasing your coverage or perhaps adding a liability umbrella. A third example: Ask your agent about flood and earthquake coverage, if applicable. You may think you have it, but you probably don't.
If you're still concerned, consider purchasing business interruption insurance, which assists with ongoing expenses during an extended forced shutdown. Sadly, a high percentage of businesses without this lost-income coverage never reopen.
But moving on, today's column is about those big fears that are keeping you awake at night. Granted, it's not likely that your business will suffer such an interruption in the near future. But the June 1999 Whatcom Creek gas pipeline explosion was a reminder that such an event can happen locally, at any time, and with no warning.
While we are at low risk for a Hurricane Katrina type of a disaster, we're on the "Pacific Ring of Fire" earthquake zone, and are thus at risk for an eventual seismic event.
Be mindful that there are many other non-natural events and crises, too. Consider how your business would be impacted by a toxic spill, terrorist act, utility disruption, plane crash, infectious outbreak, or other such event. And, for long-time Bellingham residents: remember the GP plant chlorine leak? Stuff happens.
The four basic human survival needs are: air, water, food and warmth. Depending on the nature of your business, you may have a duty to care for not just your employees but also anyone else on your premises. During a crisis event, you may have little or no idea how long the distress conditions might last.
Note that a bad event doesn't have to be near your business to have an impact. Even if you're not directly involved, an event could disrupt, for example, local access to utilities; your network server in Everett; various product suppliers; or access to credit card processing. In fact, a distant event may be worse, because you have less access to information and probably very little control over how or when it will be fixed.
Now, after that dark discussion, here are some ideas for how you can deal with this situation. Basically, you need to develop a disaster management strategy. Here's how.
First, start at home with the Whatcom County Unified Emergency Management's excellent website, whatcomready.org. Learn about how to build a "72 hour kit" and what "shelter in place" means.
At the state level, look at emd.wa.gov. Again, loads of helpful ideas and strategies; see what suits your particular situation.
The SBA encourages business owners to prepare for the possibility of a disaster and offers several tips, including these:
• Start the disaster plan by identifying what your operation needs to do to protect itself. Even if you don't own the building where you do business, take steps to protect your assets.
• Develop a post-disaster communications strategy. Keep current phone numbers for your suppliers, employees, customers, utility companies, local media, and emergency agencies. Appoint a spokesperson to get the word out that your company is still open and on the road to recovery.
• Have back-up copies of all tax, accounting, payroll and production records and customer data on computer hard drives, and store the records online, or at a remote offsite location.
CapitalOne Bank has a very good and concise "Business Disaster Planning Checklist" at capitalonebank.com and type "business disaster" in the search bar.
And last, be sure to check out the federal (FEMA) website at ready.gov.
So, before you lose any more sleep over that dreaded "worst case scenario" - remember all those fire drills you had in grade school? There never were any actual fires. But, we all felt better because we were prepared, and knew what to do.
ABOUT SCORE
To learn more about managing cash flow, and other small business matters, contact SCORE, "Counselors to America's Small Business." SCORE is a nonprofit nationwide organization with more than 13,000 volunteer business counselors who provide free, confidential business counseling and low-cost training workshops to small business owners. Call the local SCORE chapter at 360-685-4259 to schedule an appointment. For details about the organization,visit SCORE.org.
