Risk-takers: Why a business might never reopen post-natural disaster

Risk-takers: Why a business might never reopen post-natural disaster | Insurance Business America

Risk-takers: Why a business might never reopen post-natural disaster

A natural disaster, such as a fire, flood or tornado, can wreak havoc on a business, from a few days of closure to a months-long broken supply chain.

However, despite the risks, many businesses aren’t properly preparing: in fact, a whopping 61% of small business owners say they don’t have a formal disaster recovery plan, and 31% don’t know if their business would survive if it was forced to close for more than a month, according to the latest research from small business specialist Insureon.

Data from the Federal Emergency Management Agency (FEMA) paints an even more worrying picture. According to the organization, around 40-60% of small businesses in the US never reopen in the wake of a natural disaster.

One way to reduce the odds of being forced to permanently shutter your business is to create a disaster recovery plan before it’s needed, says Insureon’s president Jeff Somers.

“With hurricane season in full swing and active wildfires currently raging across the state of California, it is more important than ever for small and medium-sized businesses to consider putting a formal disaster recovery plan in place,” Somers told Corporate Risk and Insurance.

Insureon’s research, conducted in partnership with online small business directory Manta, found that almost two-thirds of small firms don’t have business interruption insurance, which can help pay for a business’s operating costs if it is forced to temporarily close.

“While 60% of respondents do not have business interruption insurance, it can be a vital part of any disaster recovery plan, as it assists businesses with lost revenue, day-to-day expenses, and rent and relocation costs in the case of a disaster,” commented Somers.

The research highlights a worrying lack of preparedness among firms at the smaller end of the scale, which businesses need to address.

“There are plenty of measures that small businesses can take in order to protect themselves against unforeseen natural disasters,” Somers said. “Most importantly, to help prevent permanent closure, SMBs can be proactive in creating a recovery plan before it’s even ever needed.”

In creating a recovery plan, Insureon recommends considering the following factors: Names and contact information for key employees, including what their role will be during the disaster; contact information for utility companies, the landlord if the space is rented, and key vendors; an identification and assessment of any risks the business might face from a natural disaster, along with

potential strategies and solutions; and documents, programs, and resources that are critical to the business’s operations - for example, processing payroll.