ComplianceLegalFinanceJanuary 13, 2021

Hope for the best, prepare for the worst: Planning for disaster

Hurricanes. Burst pipes. Tornadoes. Electrical fires. What do all of these things have in common? They can all spell disaster for a business. The event doesn’t have to be of epic proportions or an officially declared disaster to wreak havoc on your business’s bottom line. Events that occur through no fault of your own can impact your business so severely that it shuts down—often for good, according to recent studies.

The good news is that by taking steps to create a plan preparing your business for disasters and emergencies, you can avert or lessen the effect of a crisis of any kind and size.

What risks does your business face?

The first step in any preparedness plan is to assess your risk. History and your business location are the intertwined factors upon which you can base this assessment.

History repeats itself. Is your business located in an area hit by hurricanes almost every year? Do lightning strikes frequently cause fires in your area? Does every winter bring heavy snows with resulting problems such as collapsing roofs? Foreseeable risks of this nature must be accounted for in your risk analysis, even if no damage to your business occurred in the past.

Location of your business. Location is connected with history but also encompasses business facility factors such as running your business in a flood zone, a high-crime area, or a remote area where you are easily cut-off from outside services during an emergency.


If you do business in an area frequently hit by hurricanes and run-of-the-mill storms knock out power at your business location on a regular basis, your risk includes the loss of power for what may be a lengthy period of time during a hurricane.

Who are your neighbors? Consider too, the impact your neighbors’ risks can have on your business. Is your office located above a restaurant where fire can easily break out? Are you located next to or in close proximity to a controversial business or organization subject to vandalism or protests? The risk of your neighbors’ hazards affecting your business should be factored into your assessment.

Identify essential business functions so you can keep your business running

Once you’ve determined both the very likely and possible risks your business could face, in order to adequately prepare, you must figure out what your critical business functions are and how they are impacted by these risks. Only then can you come up with a plan that keeps your business going, or minimizes the interruption or damages if disaster strikes.

Tools to use

Don’t lose sight of the fact that your most important concern is for the safety of the people who work with you and for you—your employees, customers, and vendors and suppliers. No business function, no matter how critical, can supersede the steps you must take to secure human life—including your own—in any type of hazardous situation.

Manage the risk by having a well thought out and clearly communicated emergency plan in place before you need it. Consult our sample workplace emergency procedures in the Business Tools to assist you in creating your own plan.

You may also need to check with your suppliers or vendors for their preparedness plans if their services are necessary for your business to run. Depending on their response, you might want to make alternative back-up arrangements or perhaps even switch providers before their readiness is tested.

Work smart

Working together to encourage all small businesses to have a recovery plan in place, the Small Business Administration (SBA) and Agility Recovery Systems, a company offering disaster recovery solutions and business continuity services, have various worksheets available to assist you in creating your plan. To that end, the Prepare My Business website contains a risk assessment worksheet and a critical business functions worksheet you can use to complete these important steps in emergency preparedness.

Once you have identified the risks likely to affect your business and the most important business functions you need to protect, you can formulate a plan to prevent or in some cases lessen the impact of an unfortunate event.

Prevent and deal with disaster by coming up with a plan

Preventing an event that wreaks havoc is obviously preferable to dealing with one. Some crises can be prevented. For example, having wires and plumbing inspected on a regular basis can head off potential disasters such as fires and floods. Sometimes, though, prevention is simply not possible. However, even if you can’t prevent the event, you can prevent or lessen the negative result by being prepared.


Keith and Tim run a PC trouble-shooting business on the bottom floor of a two-story building. Clients drop off their computers and pick them up when the work is completed. One night a pipe in the upstairs’ office bursts, sending cascades of water onto the computers in for servicing, completely destroying them and any information contained on their hard drives.

Keith and Tim could not have predicted that a pipe would burst and flood their workplace. However, the simple routine practice of placing hard drives into watertight and fire safe containers would ensure that the meat and potatoes of their business would not be damaged in the event of fire or flood.

Mitigation. Because disasters and emergencies and the results that ensue can’t always be prevented, damage mitigation must be part of the preparedness plan for your business. Include the mitigating solutions for the following disaster scenarios as part of your plan as appropriate for your business:

  • Loss of the ability to work out of your business facility. Arrange for an alternate worksite, such as a temporary rented workspace or a work from home solution for you and your employees. If loss of power is the issue, power back-ups such as generators may make it possible to bring your business facility back up to speed on a temporary basis.
  • Loss of critical equipment. Have arrangements in place to quickly repair, replace or rent equipment so that your downtime is kept to a minimum.
  • Unavailability of supplies. Check with your suppliers and vendors to make sure they have a solid plan in place for getting you what you need under adverse circumstances. If they don’t, or just to be certain, arrange for alternates you can use if you need to do so.
  • Access to funds and credit is limited or unavailable. Have cash on hand available for quick access. In an emergency, goods such as gas, ice, water and the like may only be available to those who can pay cash if other payment methods are down and/or if banks are closed.
  • Loss of records or data. Your business data should be backed up on a regular basis and data and records should be stored at a separate, safe location. Options include paper, external drives and online storage sites.

Work smart

Backing up data is a good business practice that often falls by the wayside for many busy business owners. Don’t neglect to keep up on this very important safeguard, and be certain that employees do so as well. Preparation here can help avoid the loss of work completed or in progress, strained client and customer relations and perhaps even possible legal action against you.

  • Unavailability of employees. If it can be achieved without the threat of peril, put together a core group of workers who remain onsite or at nearby lodging who can run the business until all hands are back on deck.
  • Loss of communication with employees and customers. Make sure your plan outlines a process for communicating with employees and the means to do so. Keep in mind that power outages can prevent access to company websites, email, social media or phone service. Maintain multiple forms of contact information for employees, and keep it current by updating it on a regular basis. Come up with a plan to communicate with customers and clients at the earliest possible point and inform them of the status of your business operations. Even if you’re not open for business, it’s important to maintain good customer relations by conveying your plan for reopening your doors in a timely fashion.

Tools to use

Business Owner’s Toolkit makes available disaster response customer email templates you can customize for use in your business.

Insurance can save the day when all else fails

Despite your best efforts, if your business takes a hit that causes you to close for a month, rebuild your entire facility from scratch, replace your entire inventory, or all of the above, having adequate amounts of the proper insurance coverage means your business can come back to life.

Your business should have property insurance, as well as coverage for the specific hazards you face, such as flood or wind damage not covered under a general policy. Also crucial is business interruption coverage to cover losses incurred if your business cannot operate. Covered losses can include the extra cost incurred to operate and restart your business as well as lost profits. And if you operate your business from home, be sure your homeowner’s insurance policy or a separate business insurance policy adequately covers your home business. See our article, "Insurance Can Protect Your Assets," for detailed information regarding choosing coverage to meet your insurance needs.

Preparations to fortify your business can be as simple or as extensive as you see fit. To assist you in your planning efforts, excellent comprehensive resources are available from various government agencies, including the SBA and the Federal Emergency Management Agency (FEMA). These resources address emergency preparedness in general, as well as preparing for specific hazards such as hurricanes, and make available templates, checklists and rating tests business owners can use to create a custom plan.

Whatever preparations you choose to make, take action today to protect the business you have so painstakingly built.

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