Running a business is hard enough work, what with dealing with problems ranging from personnel and payroll to competition and cash flow. Most business owners have been able to recognize the need to insulate themselves from such risks, both internal and external. Each of these risks can usually be handled by establishing the proper business culture and putting personnel in place to handle issues as they arise.
Too often business owners take an ostrich-like approach to the potential of natural disasters wreaking havoc on their company — such as hurricanes, floods and earthquakes, just to name a few. They can happen virtually anywhere and cause billions of dollars in related losses for hundreds of thousands of businesses. According to the website Ready.gov, at least 40 percent of businesses pummeled by nature’s wrath never recover. And many others just barely get back to normal.
Businesses unprepared when disaster strikes are often forced into bankruptcy because they are unable to absorb the loss.
In 2013 a tornado ripped through the Daiki Corp. steel manufacturing plant that employs more than 90 people in Adairsville, GA. Thankfully, all employees escaped without serious injury, but most of the building was reduced to a pile of rubble. The facility had to lay off most of its 90 employees. The repairs took several months and caused a massive loss in production.
It doesn’t take a massive 6.0 earthquake or a Category 3 hurricane to put your business in peril. Sometimes it can be a simple electrical outlet that goes on the fritz and kicks off a chain reaction of bad events.
Such was the case of a furniture store in West Lebanon, VT, where a fire and associated sprinkler activation is estimated to have caused tens of thousands of dollars of damage. The fire department traced the source of the electrical fire to an overloaded outlet behind a desk with a computer containing much of the store’s customer information. The fire charred the computer, desk, files and the ceiling above before the store’s sprinkler system kicked on and extinguished the flames. The sprinkler system reacted in time to put the fire out before it spread beyond the office area, but the system does not alert the fire department when it is tripped, as newer systems are required to do. As a result, water could have been flowing on the first floor of the store for several hours before firefighters arrived on the scene. In a release about the incident, the fire department estimated damages to be in the $75,000 to $80,000 range.
What these examples prove is that there is no way to avoid the possibility of a catastrophe, nature made or man-made, affecting your business, with the collateral damage being loss of production, loss of revenue, your key employees taking on other jobs, and your competitors picking up the business you have now seen go up in a plume of smoke. And in many circumstances the loss is compounded by business owners not realizing that when disaster strikes, one of their biggest enemies is TIME.
How many times has a bad situation gotten out of hand because no one in the midst of the chaos unfolding knew how to turn off the sprinklers, kill the power, make sure the gas leak was taken care of and where to go to do so? How many times have profits and production flowed out the door in a torrent of water because no one knew how to contact the HVAC contractor or the water department, or to find out that the person you need to mitigate the disaster is on vacation and there’s no contact information for his backup? And once the fire is put out and the water has stopped, who do you call to clean up the mess?
Key Steps to Readiness
One of the first steps we tell companies is to be proactive by aligning yourself with a “friendly” competitor. Find out which company would consider letting you use their third shift should you run into production troubles due to a disaster, with full knowledge that you would reciprocate should something befall them.
Next, we encourage companies to have readily available to their employees pictures of all their shut-off valves, with easy to understand descriptions of where they are located. Sadly, only three percent of all employees know where the water sprinkler shut off is at most companies. Not a good percentage when you’re standing in three feet of water.
Equally important is to make sure you have an easily-accessible list of all key contacts (update employee contact information, plumbers, electricians, HVAC people) as well as the location of all building blueprints. We encourage businesses to use a Knox-Box, a small safe mounted on the exterior of a building that holds building keys for fire departments, Emergency Medical Services, and police to retrieve in emergency situations. Local fire departments can hold master keys to all boxes in their response area, so that they can quickly enter a building without having to force entry, thus cutting losses for building owners since firefighters can enter buildings without breaking doors or windows.
It is also suggested that not only do you have generators on hand but also fuel. You would be surprised at how many companies we have worked with that assume having a generator is all they need, never realizing what runs them or that they should also be tested.
Another key component of any readiness plan is proper training for your employees, and for that we strongly suggest table-top exercises. What we do is put six or seven people in a room at the same time and tell them that 20 minutes from now this building is going to be in the path of a tornado. We then have them walk through exactly what they would do when it happens. If you have them go through the paces during a stress-free drill, chances are good they will perform well when the roof blows off the building.
All necessary components – valve locations, contact information, blueprints – only work if they are accessible. So what we do for companies we work with is to include everything they need to know on a flash drive that can be put on the keychains of the three or four people integral to the operation of the business. That way even if they are in the parking lot and have access to a laptop, they can access all the valuable information. We even give them the capability to access this critical data on their SmartPhones through a QR code that we generate for them.
Finally, I can’t stress enough the need to be aware that once the fire is out and the water turned off, most businesses can’t get back on track until the cleanup takes place. And this is not an area to be trivialized. A good restoration company, one well-versed in disaster recovery, can be the key to getting back online quickly and mitigating lost revenue. Here’s what you should look for when hiring such a company:
- Make sure the company can provide assistance immediately, 24/7.
- Make sure they have immediate access to people to do the job right away. You don’t want to waste time while a company “calls around” for help.
- Visit their location to make sure the equipment they need to get the job done is on-site and available at a moment’s notice.
- Talk with your insurance people to see if they have a relationship with a particular disaster recovery company, as that company and your insurance company will have to work closely together.
- Make sure the company you select has done this kind of work before. Just because a company has experience cleaning your neighbor’s rug doesn’t mean they can cleanup a 100,000-square foot manufacturing plant when the roof caves in during a hurricane.
In all fairness, many business owners do prepare for what they perceive as a likely catastrophe. But in many ways it is the less frequent dangers which have the potential to be even more devastating. During Hurricane Sandy, businesses all up and down the East Coast, including those hundreds of miles inland who couldn’t even see the ocean, found out just how vulnerable they were. And it was a difficult and costly lesson to learn, that just because an event is unlikely to happen doesn’t mean that it won’t.
In many cases businesses can’t prevent the disasters that may potentially strike. But there’s little excuse not to be ready when they do. And it all starts with having a “Ready Profile.”
Will you be ready when disaster strikes?
Jason Gargala is a Certified Risk Architect and Commercial Insurance Agent with Ottawa Kent. He designs, builds and implements risk management systems for companies that don't have the luxury of a full-time risk manager on staff. He can be reached at 616.510.0048 and [email protected]