Why does a business need a disaster plan?

Two weeks ago I was mixing with a crowd of chamber of commerce members, and I started talking to a guy who ran a local barber shop. I told him what I did, and he told me that he didn’t need disaster planning services, because he had insurance.

"So why does a business need one?" he asked. Oh boy.

There are a lot of reasons, of which just a few are below. What he doesn’t realize is that insurance just isn’t enough.  Don’t believe me? Just ask the businesses of New Orleans what they think. Insurance is a wonderful tool that can assist in controlling or financing risk, but it isn’t something to supplant a good disaster plan.


Recovering Operations

If your operations are interrupted as a result of a disaster, it is critical that you get those back on track as soon as possible. Simply stated, if your critical processes aren’t recovered, there is no way you can go back to making money, and without a disaster plan, there is no way for you to get back into business. Companies have tried for years to avoid disaster planning, and there is just no way around it.

Think about it in terms of your business: Would you start thinking how to develop your product after you got your first order for one? Of course not, that would be crazy. So why would you do that in a disaster?

Consider this as well: If you lose customers to the disaster, do you think they will come back to you?

Loss of income insurance only goes so far, and the covered perils aren’t always the ones your company is likely to face. In one of the Gulf Coast disaster areas where I worked a couple years ago, there was a beach wedding photography studio with 5-7 full-time employees.

When the disaster struck, the beaches were complexly quarantined and isolated. The studio executives had no idea what to do, but they tried to make alternate arrangements for the bookings they already had. Unfortunately, that was too late. About a year later, I found out the company had gone out of business and faced an equity loss of almost half a million dollars.


Protecting Employees


If you have employees (or are a single-person business) you owe it to them to have a plan in place. Many, if not all, your employees are relying on you to continue to be in business so that they can continue to make money. During a disaster, a family will be stretched financially and will require that income. If they don’t get it, there is a domino effect of losses from business to person.

Ironically, the problem could be the exact opposite, where employers are expecting employees to come in without communicating that to their workforce. A few years ago, I worked with a graphic design company that nearly found itself in legal jeopardy after they fired two employees because they didn’t show up to work after a disaster.

The employees were living in a rural area where cell service was almost nonexistent as a result of disrupted communication towers. The company was so infuriated that they didn’t come to work that they sent nasty termination e-mails. Within a week, though, the employees were threatening litigation, and the company relented. It was soon after that I got a call from them inquiring about a disaster plan.


Protecting Property

It is well-known that the majority of the damage during Hurricane Katrina occurred after the hurricane had left New Orleans. It was the flood waters and the resulting deluge that caused the majority of the property damage. This is why a good disaster plan can keep you out of trouble. A plan that determines evacuation of employees and property, and adequately budgets for resource protection and supplies has the best chance to mitigate damage after a disaster.

When I was growing up in Orange County, we were told to get sand-bags and prepare for possible flooding during El Niño, which is a weather system that periodically strikes California. I remember as a child wondering why people needed sand bags when we had the beach not 50 yards away! As an adult, I would ask why people didn’t buy the bags beforehand, and have an executed plan for filling them, and placing them in the most vulnerable areas of their property.


Conclusion


Remember, disaster planning is not just something you do after disaster strikes. Whether you are a barber, a wedding photographer or a graphic design company, your operations, employees, and customers are relying on you. Remember, if you aren’t there to fill orders and provide services, there will be another company with a disaster plan that will be ready to steal your clients, all because they had a better method to Reverse Disaster.