Hurricane Season is Here. Is your Business Ready? by Daniel S. Hughes, CPA
With hurricane season upon us, businesses in South Florida and all along the east coast should have an emergency plan in place to safeguard their organizations before and after a disaster occurs.
What types of situations can impede normal business operations? How can a business protect itself from these events, which may include power outages, burst water pipes, server failures, data hacks, fires, floods or acts of nature? How can a business mitigate its losses following a disastrous event? What does the business need to do to recover in a timely manner, if recovery is even possible?
Answering these questions in advance of a potential threat can help businesses be better prepared to act quickly and reduce their risks of interruptions in normal business operations. Following are a few critical factors businesses should consider when preparing a business continuity and disaster-recovery plan.
Employees. How will a business communicate with its workers and their family members during and after a disastrous event? Which business functions and staff members will be required during the preparation and recovery periods?
Businesses should maintain up-to-date contact information for all of their employees and put into place a system for sharing information with them. In the wake of recent disasters involving power outages and overloaded telephone networks, text messaging has proven to be an effective communication tool. In addition, businesses should ensure that critical employees know their roles and responsibilities to carry out the business’s emergency plan. Similarly, the business should be prepared to assign backup staff to cover for those workers who may be unreachable or unable to return to work following a perilous event.
Customers. Businesses that cannot respond to customers’ immediate needs are likely to lose those customers. To build trust and loyalty, businesses should communicate their emergency plans to customers before disasters strike and have in place a plan for communicating with them and providing them with alternative arrangements in the wake of a disaster.
Suppliers and Vendors. Interruptions in the supply chain can cripple a business when its vendors or suppliers are unable to deliver required services, products and materials. As a result, businesses should first consider whether or not their existing suppliers have business-continuity plans in place and whether such plans should be a requirement of their working relationships. In addition, businesses should have at the ready a backup list of pre-vetted suppliers who can step in to fulfill their orders in a timely manner.
Critical Business Functions. What activities are vital to a business’s survival? Critical business functions include those assets that are required to resume operations and those activities whose interruption will result in a loss of revenue and noncompliance with industry and governmental regulations. Businesses must prepare contingency plans in the event a disaster debilitates these functions.
Documents and Data. All businesses should have backup systems in place to retrieve and restore data in order to resume normal operations. This may include keeping duplicates of important records off-site, downloading them onto portable storage devices, such as external hard drives, or saving them to cloud-based applications. Similarly, businesses should regularly update their accounting and operational data, including records of inventory and sales as well as forecasts of future performance, in order to quantify and substantiate incurred losses.
Insurance. Property insurance typically covers costs to repair physical damage. Companies located in regions that are prone to hurricanes, earthquakes, tornadoes or floods should also consider investing in business-interruption insurance to cover the potential loss in income due to an inability to continue normal operations in the aftermath of a covered catastrophe. In fact, in today’s environment of frequent cyberattacks and data breaches, weather conditions and natural disasters are far from the only factors that can impede business operations and lead to monetary and reputational losses. Business interruption insurance helps organizations mitigate these losses and quantify and substantiate claims of lost earnings.
The professionals with Berkowitz Pollack Brant’s Forensic Accounting and Business Insurance Claims practice have more than three decades of experience helping organizations of all sizes and in all industries prepare for and maximize financial recovery from insured perils.
About the Author: Daniel S. Hughes, CPA/CFF, CGMA, is a director in Berkowitz Pollack Brant’s Forensics and Business Valuation Services practice, where he helps companies of all sizes assess economic damages, lost profits and the quantification of business interruption insurance claims. He can be reached in the CPA firm’s Miami office at (305) 379-7000 or via e-mail at email@example.com.