While driving the other day, I noticed a fly on my windshield that was being buffeted by the wind, but was hanging on for dear life. It made me think about how many of us in today’s economic climate—especially those who own small or mid-sized businesses—are also hanging on, just like that fly. Fortunately, hanging on in times of economic turmoil will eventually be worth the effort, unlike the fly that was finally whisked off the windshield.
There are so many other risks that face your business that are not economic in nature but can cause economic devastation. In this part of the country, the most probable natural hazards are hail and tornadoes, while floods and wildfires are potential risks throughout the United States. Imagine all that you have worked for goes up in smoke, literally—or is blown away. A frozen pipe that bursts over the weekend and is not noticed until Monday morning can destroy inventory and equipment.
Following a disaster, it is anything but business as usual for you, your employees and your customers. The faster you can return your business to some level of normal operations, the quicker you can restore income, jobs, and the goods and services your community has come to depend on from you. The threat of disaster-related closure is especially great for small and mid-sized businesses because they usually lack the financial resources of most large organizations.
If your business escapes a disaster unharmed, there is still a risk that it will suffer significant losses. Upstream losses are those you will suffer when one of your suppliers is affected by the disaster and cannot deliver the goods or services your business needs. A machine shop or restaurant depends on daily deliveries, and if a supplier’s building is damaged by a disaster and they cannot keep the pre-disaster schedule, this upstream loss will affect your firm, even if it is undamaged.
Downstream losses occur when a key customer and/or the residents in your community are affected by a disaster. If your business supplies a component to a large factory and it is closed by tornado damage, you business will suffer a downstream loss even if it escaped unscathed from the disaster itself.
There is help that could go a long way toward averting a serious disruption caused by a disaster. The Institute for Business & Home Safety, a nonprofit initiative of the insurance industry, developed Open for Business, a tool that provides disaster planning and recovery expertise specifically for small to mid-sized businesses. The business continuity plan can be accessed at disastersafety.org or ibhs.org.
It is important to review your business insurance policy to make sure you have sufficient coverage on your property and for replacement of the income your business would have generated if it is temporarily shut down by a disaster. With proper planning for the unforeseen—even if you feel like that fly on the windshield—you won’t be blown away. iBi
