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Emergency Planning for Small and Home Businesses
by Janet Attard
What would you do if a catastrophe struck your business? While terrorist
attacks are something we hope we never see in the US again, there are any
other number of relatively "common" disasters such as hurricanes, tornadoes,
flooding rivers, fires and even earthquakes that can potentially disrupt
your small business.
While you might not be able to prevent the disaster, you can take steps in
advance to minimize your potential for loss from catastrophic events. Here
are some guidelines:
Be sure you have adequate insurance
The obvious losses you might suffer in a disaster (damage to buildings,
equipment, etc.) aren't the only possible risks you face. Rent, loans,
equipment leases and other expenses will have to be paid whether your
business is operating or not. Furthermore, you could be held responsible for
damage to any property held on your site for others (for instance, clothing
if you are a dry cleaner; computers if you repair computers.)
If your business is home-based, don't assume your homeowners' insurance
policy will cover business casualty losses. The most that the average
homeowners policy will pay towards the loss of business equipment if your
home office is destroyed is about $2500. Chances are that amount wouldn't
begin to cover your losses. A standard homeowners policy won't offer any
business interruption coverage, either. (Business interruption coverage
helps cover income that is lost while your business in unable to operate. It
helps you continue to pay ongoing expenses such as loans and leases.)
You can solve the problem, and protect yourself against casualty losses in
one of two ways. First, ask the provider of your homeowners (or apartment
dwellers) insurance if there are endorsements available to cover you against
casualty losses for an office in the home. Such endorsements are add-ons to
your homeowners, and can be a relatively low-cost way to get coverage.
Typically such endorsements cover up to $10,000 in business equipment in the
home office, and may provide some business interruption protection.
Sometimes you need more than one endorsement to be sure that your computer
equipment is covered. (If you travel with a notebook computer, or have any
other equipment that you take with you when you travel, be sure your
coverage specifically applies to loss while you are traveling. Such coverage
may not be a routine part of your policy.)
If an endorsement to your home office policy is unavailable or if it doesn't
offer you enough protection, you'll need to purchase a separate business
owner's policy. Many companies will now issue business owner policies for
offices in the home. Expect to pay several hundred dollars for this type of
coverage, though.
Read the small print
The "small print" isn't small any more. But even so, it's unlikely that a
quick glance at the front page of your policy will tell you exactly what you
are. Pay particular attention to what risks are excluded. Even if you have a
business owners' policy, you may find that employee theft, machinery
breakdowns or other perils are not covered. If you are located in a flood
area, you will probably need to get a separate flood insurance policy, too.
Information about flood insurance is available from the Federal Emergency
Management Agency (http://www.fema.gov/nfip/). Pay careful attention to
whether or not your computer equipment, software and computer data are
covered, too. Those may need to be covered under a separate policy. If there
is anything that isn't clear, ask your agent or broker to get you a clear
explanation.
Look to be sure your policy includes business interruption insurance and
insurance for extra expenses. (Extra expenses would be costs over and above
your normal operating costs that you need to spend to keep the business
going during restoration.)
Develop a Disaster Recovery Plan
The specifics of such a plan will depend to some extent on the nature of
your business, but here are some areas you'll want to address.
Know Your Achilles' Heel
Actually you will have several of them. Determine what types of losses would
be most damaging overall to your operation. Would your business go down the
tubes if your accounts receivables files were destroyed? What about your
customer list, contact list, or all the procedures you've developed for your
independent testing laboratory? How long would it take you to get back in
business if they were destroyed? Once you identify these critical
operations, write an emergency recovery plan that details the priority order
in which your operations should be restored and where the resources to
restore each business function can be found.
Computer Data and Vital Records Protection
Most businesses never stop to realize how much their ongoing business
depends on documents, forms, programs, employee records, customer
correspondence, contact lists, and accounting information that has been
developed or collected over the years they have been in business. And sadly,
many businesses that lose such critical data in a disaster are never able to
reopen their doors.
To protect yourself from that fate, take the time to make duplicates of all
of your company's vital records, computer data, video tapes, customer lists,
accounting data other documents or media that are essential to your business
operations. Store these duplicates off-site in warehouses or other
facilities specially constructed for data and record storage. Look for a
facility that is located in a different town from yours, too.
If you just have a small amount of records or data to store, put them in a
bank safe deposit box, or if there are no other options available to you,
store them at a relative or associate's office in a distant location. Be
sure to update the backups regularly, too. All the backups in the world
won't do you any good if they are a year old, or if they are stored in your
office and your office building burns down.
Don't forget about your web site, either. Be sure you have current backups
of that even if your host site claims to make daily backups. One large
hosting company in NY recently had a hard disk crash, and despite claims of
daily backups, were unable to restore the data from mailing lists they
operated for their customers. The reason: their backups were too old. Any of
their customers who had not captured the names from the mailing list program
and stored them on their own computer systems were out of luck. The names
were gone.
Identify alternate business facilities that could be used in a pinch
It can takes weeks or months to restore a facility after a disaster. While
your customers may be sympathetic to your situation, if you can't handle
their needs, they will have to look elsewhere to for someone to serve them.
To avoid losing market share to your competitors, consider what alternate
facilities you might use to operate if a disaster should hit your business.
Among these alternate facilities that will rent office or warehouse space
for short terms, friend or neighbors with a spare room or spare office, or
even your employees homes if your business is one that would lend itself to
telecommuting.
Make an emergency contact list
Your contact list should include state, local and federal emergency phone
numbers; phone numbers, addresses and email addresses if available for major
clients, suppliers, contractors, financial institutions, insurance agents, radio
and newspapers, and any other individuals or businesses you might need to notify
if there was a disaster. You should also have complete contact information for
your employees and corporate officers. Keep the contact list stored offsite so
it is available in case of disaster.
Be sure your employees have emergency contact information for your business,
too. This should be some offsite location they can call to get information in
the event of a disaster.
Inventory your equipment, software, and library
Keep the make, model number, serial number and purchase price. You'll need the
information for the insurance company and for the IRS.
Keep notebook computer batteries and cellular phone batteries charged
Notebook computers and cellular phone connections can help you stay in touch
with associates during some disasters. Often phone services (and cellular) is
restored before electricity. Keep one copy of your contact list on your notebook
computer so that you can pick it up and carry it out of the building if you are
onsite when an emergency occurs.
Develop a set of simple procedures to follow during a disaster
Be sure each of your employees know when an emergency strikes. should take if a
disaster occurs. Consider things such as crucial valves that need to be turned
off to prevent explosion, backup power supplies, location of first-aid supplies,
and methods for communicating instructions to employees and/or customers while
an emergency is in progress.
Keep the emergency plan simple, but be sure it lists the critical steps that
need to be taken and by whom. Identify escape routes and make sure everyone
knows where they are. Designate a check-in point or meeting place that all
employees should go to if there is an emergency such as a roof cave-in that only
effects your facility. Having such a check-in point makes it easier to determine
if anyone is unaccounted for.
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