Natural Disaster Contingency Planning

“Head-in-sand” plan will wipe you out

With hurricane season upon us, I want to walk you through a recent engagement with a technology-reliant e-commerce retail client in South Florida who was concerned about saving his business should it sustain a total loss after a fire or natural disaster.

Disaster planning can be emotionally difficult for owners, which, in addition to our expertise, is why they engaged us to help. We’re less emotional about it and can get it done quickly and expertly. And once in place, it’s there forever.

The bottom line is that if a disaster occurs, you could easily lose your business, your income and your wealth. The same will be true for your employees and investors.

Business interruption insurance isn’t enough

Our e-commerce client had business interruption (BI) insurance. But as we thought about the aftermath of a disaster, it became apparent that even with adequate limits of BI insurance, they could still lose their business after a total loss. Why? If consumers visit their website to buy product and it’s down for any more than a few days or a week, even loyal customers will buy from their competitor’s website. So speed to full restoration is a much better solution than relying on BI insurance.

Find an alternative location and line up key service providers

Assuming their office and warehouse were destroyed, what would they do? They would need to replace their warehouse and office space, inventory, office furniture and equipment and communications capabilities. And they would need the money with which to do so. So here are a few of the steps they’re taking in advance to be able to regain full capacity immediately after a disaster:

• Searching for contingent warehouse space within one hour away so their employees can continue working

• Lining up an out of town IT firm to jet in and replace their equipment and connectivity (they’re assuming their local IT company will either be down or stretched too thin to immediately address their needs)

• Maintaining a healthy line of credit with a bank with which to fund inventory replenishment and restoration of operations ahead of receiving a check from the insurance company (which could take weeks if a major storm hits)

 Beneficial by-products of disaster planning

During our disaster planning, we came up with an idea that could potentially kill two birds with one stone. This client’s warehouse in South Florida services all of its US business. We realized that it might make sense logistically to open a second warehouse in the western US to save inbound and outbound shipping costs. Such a facility might then serve its disaster recovery needs too by being up if the South Florida facility is down, or visa-versa.

A project like this disaster plan need not be expensive. Brainstorming about the aftermath of a disaster and writing a skeletal list of advance measures to take could be done for as little as $1,000.

We can assist you in the rest of your risk management too, including insurance. If you want help calculating property and business interruption limits and purchasing insurance in the optimal way, we can do so quite affordably.

This is just one more example of the kinds of projects we can do for you on demand, and a la carte.

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