Headed for Disaster: Why So Many Businesses Never Recover After an Emergency
Hurricanes. Tornadoes. Blizzards. Earthquakes. Often, when we hear reports of such disasters on television, we see images of homes and hear stories of families trying to get their lives back to normal after massive destruction. While that’s certainly important, we rarely hear about the impact such storms have on businesses. Storms don’t generally skip the business district, after all, and days or weeks without utilities, plus physical damage, can keep businesses closed and have a significant effect on the bottom line.
In fact, according to the Federal Emergency Management Administration (FEMA) almost half of all businesses that are affected by a disaster, whether natural or manmade, never reopen or fail within two years of the disaster. For those businesses that don’t have a business continuity or disaster recovery plan, that number jumps to a 75 percent failure rate within two years.
Clearly, having a plan to get your business back up and running is vital. Even if you don’t think that you are vulnerable to natural disasters, plenty of potential emergencies could prove catastrophic to your company. For that reason, it’s important to take the time to develop an emergency response plan that will protect your business and get your doors reopened sooner rather than later.
Why Businesses Don’t Have Plans
The need for a disaster plan seems obvious. Smart business owners know that even a small change in the environment can have a ripple effect throughout the organization. So why do so many fail to plan for the worst?
Usually, it’s a combination of reasons, but the most common include:
- A false sense of security, i.e. “It won’t happen to us.”
- Lack of knowledge. Emergency management and planning is a specialized skill, and business owners don’t know where to start.
- Lack of understanding of how a disaster could affect the business.
- Concerns about cost.
Regardless of the reason for not having a plan, the consequences can be dire.
The Basics of an Emergency Plan
Imagine that you rent office space in a commercial building. A major storm causes the roof to collapse — and you can’t access your space. Now what?
If you have a disaster recovery plan, you can take action the moment you hear of the incident. Without a plan, you might be scrambling to find contact information — and experience delays in assessing the damage and restoring operations. Even if a disaster doesn’t physically affect your business, it can still cause problems; for example, if a supplier is closed due to a disaster, your business may be disrupted.
Because not having a disaster recovery plan can be so harmful, many companies have hired an emergency management expert to develop and test response plans. The field of emergency management has grown exponentially since 9/11, as both municipalities and businesses have realized the importance of preparing a coordinated response in advance of an emergency to reduce the overall effect of a disaster. Even if you don’t hire a full-time emergency manager, you can take a page from their book to create an emergency plan, with the following principles:
1. Organizing Information. Creating a central emergency file containing contact information for employees and service providers, as well as account and policy numbers. Develop a chain of command and a list of responsibilities for your staff. In the event of an emergency, you can activate your emergency team to manage important tasks.
2. Assessing Risks. What could possibly happen to your business? Take some time to imagine the worst-case scenario, in terms of weather and other events. Look beyond your immediate business as well – what happens if a major supplier is closed for example?
3. Identifying Priorities. If a disaster were to occur, what would you need to do to get your business operational first? Build your plan around the top priorities.
4. Locating Backups. Knowing in advance what you will do to replace vital services before they are affected is key to a quick recovery. Identify backup suppliers and services, and give your response team a task to get those into place. Establish redundancies for your computer systems and data as well.
5. Testing and Updating. No disaster plan is complete without testing it. Make sure everything works as it should, and regularly update and make changes as necessary. Be sure all new employees are trained in policies and procedures.
Ideally, you’ll never need to put your disaster plan into use, but knowing that you have a “Plan B” in case of an emergency can give you great peace of mind and reduce the likelihood of a business failure if the worst happens. If you don’t have a plan, start making one today, and get help from an expert if you need it.