As a result, 40 percent of small businesses fail after a disaster and many more fail within a year.
When it comes to recovering from a natural disaster, it’s important for local small businesses to get back on their feet as soon as possible. Unfortunately, many small businesses are not prepared for disaster response and thus fail during the recovery.
According to FEMA, 40 percent of small businesses never reopen after a disaster and another 25 percent, that do reopen, fail within a year.
It’s not only important to that business’ bottom line and to its employees to get back in business, it’s important to the community.
“Small businesses are a huge contributor to our economy so if they’re unable to rebound and provide goods and services on which we rely as a community, then obviously our recovery efforts are going to be curtailed,” said Jim Redick, director of Emergency Preparedness and Response for Norfolk, Va.
Redick said that often, small businesses find it difficult to designate time and resources for something, like a disaster, that may or may not happen or happens infrequently and they often rely on insurance.
And one of the keys to recovering from a disaster is understanding what the vulnerabilities before the disaster strikes, said Kathleen Tierney, emerita director of the Natural Hazards Center at the University of Colorado. “They’re not well-prepared for the impacts of disaster, which makes them vulnerable during the recovery period,” she said.
Businesses should know, for instance, about supply chain vulnerabilities — will they be able to continue to receive supplies after a disaster and will they be able to deliver products? Have they taken a close look at their insurance policy? Have they thought about business interruption insurance and if they can get it at a decent price, are they sure that the coverage will really help during a disaster? If they’re in earthquake country are they located in a building that is a hazard as far as collapsing?
“We found during the extensive research we did on businesses was that in disasters, the key source of disruption isn’t necessarily damage at the site of the business but offsite, such as loss of electrical power, loss of water and natural gas, so a business can come out unscathed but not be able to operate,” Tierney said.
Another key is having a plan whose primary focus is their most precious resource, their employees, and that the plan is supported from the top of the organization, no matter how large or small the organization and that they receive training and do exercises, eliminating some of the guesswork during a disaster.
“A lot of times what we have seen is their employees evacuate out of the area and there’s no accountability of where they are,” Redick said. “If it’s appropriate for them to evacuate, that’s fine, but have the means by which they can communicate to let you know when they’re coming back and what their status is. Some never come back.”
Redick said businesses don’t have to go it alone and that no entity should have to start from scratch when it comes to preparing for disaster. “There are materials and tools and templates out there if they reach out and talk to their local emergency managers,” he said.
“When we meet with businesses and I ask them how many have a business continuity plan, some of them raise their hands, and when I ask how many of those are required to have a hazard identification risk assessment, I tell them they don’t have to pay a consultant for that; [Norfolk] has that for them,” Redick said.
That businesses that successfully recover from a disaster are usually the ones that had a plan and were involved in a collaboration with other entities. “They’re not in it by themselves,” Redick said. “The idea of business continuity and disaster planning can sound monumental, especially for small businesses. It’s not.”