How to Protect Your Business from a Natural Disaster

Last year, California was rocked by two of the largest and most destructive wildfires in its history. In Southern California, the Woolsey Fire burned 96,949 acres and destroyed approximately 1,500 structures. Simultaneously, the Camp Fire burned 153,336 acres and destroyed nearly 18,800 structures in the north. The economic impacts on small communities such as the ones near Paradise, California, are substantial. Not only have many people lost everything they own, but their businesses and places of employment are gone too.

Based on research by Dun & Bradstreet and Pepperdine University, the majority of businesses (58%) do not have plans established in case of a natural disaster. Disaster planning can be an arduous process, because a comprehensive plan requires consideration of multiple scenarios. Below are six preventative steps that will get you on track to developing an all-inclusive emergency preparedness plan:

  1. Perform a risk assessment of your company. Depending on the location and functionality of your business, you could be facing multiple risks. It’s important to prioritize and plan for each accordingly. For example, in California it’s critical to have a plan in case of earthquake, and if you work with flammable materials it’s also necessary to have a plan in case of fire or explosion. And many organizations now include cyberattacks in their emergency preparedness plans.
  2. Protect your employees. First and foremost, the protection of human life is the top priority for any disaster response. Create an emergency evacuation plan – and devise a way to account for each of your employees during an emergency. Consider implementing a system that will warn employees not to come into work under hazardous conditions. Once you have created your plan and have clearly communicated it to your employees, conduct regular drills to ensure that your plan works and that everyone understands it. Remember to plan for the worst-case scenario.
  3. Secure your assets. Review your insurance coverage to make sure that you understand what is covered in the event of an emergency, and evaluate whether you will need additional coverage based on your risk assessment. Create and maintain a comprehensive, up-to-date inventory of items and equipment – complete with photographs of each asset – and secure the inventory files off-site. Instituting regular back-up procedures for critical software and data can help you maintain access to important files in the event of a crisis.
  4. Don’t forget your supply chain risk management. Review your contractual obligations with vendors and suppliers. What happens if you are unable to fulfill your duties in an emergency situation? Consider discussing this at length with your vendors and adding a clause to each contract outlining the procedure that will be followed in case of emergency.
  5. Review regulatory requirements. Does the government or your industry require you to dispose of hazardous materials in a particular manner? Is your building up to code? Are you required to include certain variables in your emergency procedure or to have the procedure reviewed by a professional engineer? Not following such regulations could land your firm in hot water when a disaster strikes. Make sure you understand and comply with all government and industry regulations and stay up to date on any changes to your business’s regulatory environment.
  6. Develop and communicate a written plan of action. Your written emergency preparedness plan should include all of the elements above at a minimum. Each firm and industry will vary considerably, and you will want to consult top leaders to ensure that all your bases are covered.

Once your written plan is finished, communicate it to the entire firm and practice your procedures to make sure that your staff is fully prepared in case of an emergency. Periodically test and revise your strategy to account for organizational growth and environmental change.

As quoted in the Los Angeles Times, former FEMA administrator Craig Fugate, describes the “seven deadly sins” of disaster planning: “Practicing drills that guarantee success; assuming that plans can be scaled up when a massive disaster strikes; relying on government systems to work under pressure; failing to plan how to protect vulnerable populations, such as the elderly; and mistrusting the public, which often leads to not warning the public early enough.”

While Mr. Fugate is speaking here in terms of city planning for emergencies, the same concepts can apply to your business and employees. Keep these in mind throughout your planning process, so that you can effectively protect your people and assets when an unexpected disaster hits close to home.

How to Recover from a Natural Disaster

Small businesses are particularly vulnerable when natural disaster strikes. Take, for example, the devastating Camp Fire in Paradise, California. Most local businesses were small and 514 of them were damaged or destroyed in the blaze. Even businesses that were not directly affected by the fires were forced to unexpectedly shut down for a significant amount of time. Businesses that remained open likely saw a significant drop in sales and a lag in payments receivable.

Based on research by Dun & Bradstreet and Pepperdine University, 30% of businesses surveyed that were affected by natural disasters reported making late payments post-disaster, and 18% of impacted businesses had to seek additional financing due to the negative impact. Disaster-related business expenses can include clean-up expenses, regulatory fines, contractual penalties, customer loss, and delay in new business ventures. Below are six steps to get you back on your feet following an emergency situation:

  1. Apply for assistance. There are multiple resources available to aid your financial recovery following a natural disaster. First, contact the Federal Emergency Management Agency (FEMA) to apply for assistance. The Small Business Administration and U.S. Department of Agriculture provide low-interest loans for damaged and destroyed business assets in a federally declared disaster. There are many other forms of disaster assistance loans, including home and property disaster loans, economic injury loans, military reservist economic injury disaster loans, and farm emergency loans. Businesses in declared disaster areas may also qualify for tax provisions for financial recovery. As soon as you are able following a natural disaster, take stock of the damage and determine the best option for financing your recovery. Include the application process and contact information for each viable option in your emergency preparedness plan.
  2. Clean up. Compile a list of contact information for professionals who may be able to assist you in clean-up activities following a disaster. A wide range of hazards often exist post-disaster, such as downed powerlines and contaminated water. Conduct a preliminary inspection before you begin clean-up, and prevent a post-disaster disaster by clearing all fire exits of debris, staying away from gas leaks or exposed electrical systems, and reporting obvious hazards to the appropriate authorities.
  3. Be prepared to operate at a minimum. If your business was severely impacted by a natural disaster, the recovery process can take time. Figure out what it might take for your business to operate minimally until things get back to normal. For example, which individuals or roles are the most critical for serving customers? Could they work remotely or from a temporary location if you lost access to your office? What would you do in the event that outside utilities were non-functioning? What if your major suppliers were severely impacted? Develop contingencies for these scenarios, so that your business can function and serve customers as completely as possible during an emergency.
  4. Support your people. Research and make sure your employees have access to support services following a disaster. Be prepared for many of them not to be able to return to work right away. Know where to look for emergency alerts and notifications, so that you know when it is safe for your employees to return to your facilities and when roadways have reopened.
  5. Keep customers informed of your progress. It is inevitable that your customers will need to fulfill their business needs elsewhere if you are not able to provide for them following an emergency situation. However, that does not mean that you cannot continue to maintain those key relationships. Reach out to them, whether directly or through social media, and let them know of your status after a natural disaster. Keep them updated on your progress throughout your recovery and when you expect to be back in business.
  6. Participate in your community’s recovery. A good way to stay top-of-mind and cultivate good will with your community while still in recovery is to get involved as much as possible. Even if you cannot contribute financially, attending community events, sharing helpful resources on social media, and letting them know that you are in this together really goes a long way. Exhibit leadership as much as possible and be a pillar of strength for your community during its hardship.

According to the Institute for Business and Home Safety, an estimated 25% of businesses don’t open again after a major disaster. Having a written and actionable plan in place for recovery procedures will help your business continue to operate under emergency conditions and will also support the successful recovery of your community.

For more small business how-to’s, visit our Small Business Resources.