Have a Disaster Plan for Your Business


Natural and man-made disasters can have a profound impact upon a business.  That is true whether the disaster is a small-scale problem that affects only the business (such as building fire) or widespread (such as an earthquake).  Having a disaster plan in place can be the difference between the business being able to survive and even thrive during the disaster and recovery.

The impact that a disaster can have upon a business

As an example, I knew an fellow attorney whose law firm had a fire in one floor of their building, where they kept old records.  The loss of the old records wasn’t a huge deal, but the water from the sprinklers and fire trucks flowing down to the next floor below, where the current files and computers were kept, was a disaster for the firm.  Nearly as bad was the loss of the ability to use the office for work and for client appointments.  Since the phone system they used involved traditional land lines running to the building, there was also a period of time during which they could not be reached by phone.  Their firm weathered the difficult time and survived, but it wasn’t a pleasant experience for anyone.

Localized versus widespread disasters

Some disasters are specific to a business or a few businesses in the area, such a a fire or localized flooding.  These disasters can be particularly harmful in that a business is affected while its competitors are not – meaning potential customers will instead go to the competitor.  At the same time, a disaster that is not widespread means that there are likely more resources available sooner to facilitate recovery for the affected business.  For example, if your building is the only one on fire, you are likely to get a faster and more effective response from the fire department than if a wildfire is causing hundreds of buildings in town to catch fire that day.  Similarly, if your business is the only one with a flooding problem, companies that specialize in flood repair and recovery will be available to help sooner than if they are swamped (literally) by a hundred other businesses calling that day.

Types of disasters to consider

Some disasters, such as an asteroid impact, are not likely to be worth worrying about as a business owner since you can do essentially nothing about that risk.  Others are certainly worth considering, such as a flood or fire, as those risks can be mitigated.  The specific risks of disaster will, of course, vary depending upon the type of business, geographic location, local terrain, building type, etc.  Those living in coastal areas are certainly more at risk of a tsunami than those in a land-locked state, while a building that is located near a wildfire-prone forest has more to be concerned about in terms of fires.  Checking with an insurance agent to see the costs of insurance (and the types of insurance that agent recommends) is a good way to get a feel for the risks.  Common sense also goes a long way to appreciating the potential risks to your business.

Balancing the risk and cost of mitigation

Just as it is unwise to operate a business without considering the possibility of a disaster and how to handle that disaster, it is also unwise to grossly over-mitigate risks.  That is because any risk mitigation strategy will cause the business to incur some expense, which in turn diverts resources from where they could be expended to make the business more successful.

As an example, consider a business that stands to lose $1000 if the electricity of off for a day (with no other ill effects), and the business operates in an area where a power outage occurs about every 3 years for a couple of hours.  To mitigate that risk, the business installs a $50,000 backup generator system.  Clearly, that generator purchase was not a wise business decision. On the other hand, a hospital that has a 200-bed Intensive Care Unit would likely be thought of a criminally negligent if it did not have a backup generator (or two or three) to provide power to life support equipment under the same circumstances.

Strategies for your disaster plan

Below are some ways that you can make your business more disaster resistant.

  • Ensure fire equipment is up-to-date and functional – By having smoke alarms, a monitored security system, and fire extinguishers, you can greatly reduce the risk of a catastrophic fire event.
  • Have a backup means of taking phone calls – A virtual reception service can handle incoming calls when your business is unable to do so due to a power outage, fire, storm, etc.
  • Purchase insurance – Having insurance to cover the damage to a building, its contents, inventory, equipment, etc. is vital.
  • Make a plan for a backup work site – Some businesses, particularly those based in offices, can have a plan to work elsewhere and purchase the necessary equipment to do so in advance of a disaster.  For example, issuing laptops to employees can allow employees to work from home in the event of a disaster that make the office building unusable.
  • Make backups of your data – By making backups of your business data, you will be able to recover and use that data in the event that the computers and storage media in your building are destroyed.
  • Check that you have up-to-date contact information for employees – Many employees will change their phone number or other contact details without informing their employer.  Often neither the employee nor employer notices until there is some situation that the employer needs to contact the employee, only to find the information is out of date.
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