Lauren Fronczek discusses how to effectively safeguard your business during crisis.

Disasters that threaten a business can happen anywhere, at any time. We know that better than ever as we are currently living through an unexpected catastrophic event. Yet, if we are all familiar with Benjamin Franklin’s advice, “If you fail to plan, you are planning to fail,” why are many businesses unprepared when unforseen events happen?

Sometimes damage is isolated. A frozen pipe that bursts on a weekend may not be detected until you open for business on Monday morning; long after the resulting flood has destroyed equipment, floors and walls. Or there may be a natural disaster that occurs; every year there are hurricanes, floods, tornadoes, blizzards, earthquakes, hail and wildfire. While some disasters can be unpredictable, others are preventable. However, proper preparation will help regardless of the situation.

Preparedness is defined by DHS/FEMA as “a continuous cycle of planning, organizing, training, equipping, exercising, evaluating and taking corrective action in an effort to ensure effective coordination during incident response.”1

Plan ahead

What is a Business Continuity Plan? A BCP is a practiced plan for how an organization will recover and restore its operations in the event of a disaster. Your plan should focus on three main categories of protection to help you survive a disaster event: your human resources, your physical resources and your business operation.

Why is a BCP critical to your organization? Consider some of these reasons when evaluating if you should invest in a prepardeness program:

Customers expect services they are paying for to be completed on time. A major delay may lead to customers going to a competitor.

Larger businesses are asking their suppliers and contractors about preparedness. They want to be sure that their supply chain is not interrupted. Failure to implement a preparedness program risks losing business to competitors who can demonstrate they have a plan.

Insurance is only part of the solution. It does not cover all losses and it will not replace customers.

Many disasters may overwhelm the resources of even the largest public agencies. Also, they may not be able to reach every facility in time.

News travels fast and perceptions often differ from reality. Businesses need to reach out to customers and all other stakeholders quickly.

Money invested in a preparedness program can pay big dividends if an accident occurs. Consider the benefits of a fire being controlled quickly, immediate medical assistance that saves an injured employee or a recovery strategy that enables continued customer service. Spending funds prudently on preparedness can pay back multiple times when measured against the potential for damage to equipment, facilities, loss of staff, lost customers and lost revenue

Where should you start when developing a BCP? First you need to decide on your team. The best leaders surround themselves with representation from different functions who bring a diverse perspective and are not afraid to voice their opinion. If you decide to create a BCP for each department, be sure one person reviews the plans for duplication of content and consistency.

Review your coverage

Next up is reviewing your current insurance program. It is vitally important that you protect your base assets with adequate insurance to cover your place of business and your contents. Many risks cannot be insured, so a preparedness program may be the only means of managing those risks. Some risks can be reduced by investing in loss prevention programs, protection systems and equipment. An understanding of the likelihood and severity of the risk, plus the costs to reduce the risk is needed to make decisions.

After a catastrophic event, your ability to act quickly could make the difference between survival and closure. According to FEMA, roughly 40 to 60 percent of small businesses never reopen their doors following a disaster.2 As you continue to develop a BCP specific to your operation, here are a few (of the many) aspects to contemplate:

Employees. Employees are your most important asset. Do everything you can to protect them.

Suppliers and vendors. You should have a plan in place to deal with supply chain disruption as your ability to resume operations relies on the capability of your suppliers to deliver what you need on time.

Equipment, machinery and vehicles. When you know that a storm such as a hurricane or flood is coming your way, move vehicles to an area of safety should time and location permit so they will not get damaged.

Critical communication. Seamless communications with your employees, suppliers, vendors, key contacts and customers is essential. Your customers will want to know the status of your services. Your employees will want to get updated information about when and where they should report to work as well as the status of recovery. Remember, that they also want to see that you care about their personal wellbeing and safety.

Emergency plans. Meet with your employees at least once a year to review emergency plans. Designate one employee from each work shift to be a safety coordinator.

Business functions. Have you identified which business functions you would classify as a high, medium and low priority? This is something that can be overlooked but should be assessed prior to an event occurring.

Key contacts. It is important to maintain a list of key contacts and revisit that list periodically throughout the year.

You should be having conversations throughout the year with your insurance advisor regarding catastrophic event planning and exploring what tools they have available to you. National Interstate has put together a Disaster Preparedness Guide that is available to all our insureds.

Crisis leadership

When you think of a strong leader, what qualities come to mind? According to Korn Ferry’s research the top four qualities of a good leader are: (1) sets vision and strategy, (2) drives growth, (3) displays financial acumen and (4) manages crises.3 Oftentimes, employers are not actively searching for or developing that fourth quality, until it is too late.

According to the Center for Creative Leadership here are five tips for leading through a crisis4:

Seek credible information. You must strive to deliver the most reliable, up-to-date information from trustworthy news sources.

Use appropriate communication channels. Transparency is key, and information should be disseminated to the entire organization by every means possible.

Explain what your organization is doing about the crisis. Clearly outline your plan and be honest that it may change as circumstances change. If you do change course, make sure to communicate. Key information should be handled with the 3 R’s: Review, Repeat, Reinforce.5

Be present, visible and available. In his book, Crisis Management, Gene Klann states, “Particularly during a crisis, employees have a need to hear from their leaders frequently. When leaders appear calm, concerned, knowledgeable, and in charge, workers feel encouraged and are more likely to have confidence that things are under control and will be fine.”5

Dedicate organizational resources for future crises. After getting through a crisis, devote time to analyze how things were handled and how you can improve for future situations.

According to Steve Winborn, National Interstate’s SVP of Claims & Risk, “In my 24th year managing commercial claims and risk, I can tell you first-hand it is not if but when you will be confronted with an unexpected or catastrophic incident. The best leaders anticipate the unknown, have a plan in place in advance and point the way forward in these times of chaos. Be the calm in the storm, and constructively initiate positive actions laid out in your plan during these stressful times, and control what you can. It is critical to work with your insurance professionals to best prepare for and plan for these unforeseen events.” There is no better time than now to assess your organizations’ preparedness for a catastrophic event. Doing so ahead of time will help put your business in a better position when an unexpected event inevitably occurs.

Sources:

1 “Plan and Prepare for Disasters”. https://www.dhs.gov/plan-and-prepare-disasters. N.p. 19 June 2012. Web. 25 June 2020.

2 “Make Your Business Resilient”. https://www.fema.gov/media-library-data/1441212988001-1aa7fa978c5f999ed088dcaa815cb8cd/3a_BusinessInfographic-1.pdf. N.p. N.d. Web 30 June 2020.

3 “Crisis Management: The Overlooked Leadership Skill.” https://www.cfo.com/leadership/2020/03/crisis-management-the-overlooked-leadership-skill/. Gary Burnison. 17 March 12020. Web. 25 June 2020.

4 “How to Lead Through a Crisis.” https://www.ccl.org/articles/leading-effectively-articles/how-to-lead-through-a-crisis/ . N.p. N.d. Web. 25 June 2020.

5 “Crisis Leadership: Using Military Lessons, Organizational Experiences, and the Power of Influence to Lessen the Impact of Chaos on the People You Lead.” https://www.ccl.org/wp-content/uploads/2020/03/crisis-leadership-center-for-creative-leadership-guidebook.pdf. Gene Klann. 2003. Web. 25 June 2020.

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