Better to develop an internal disaster plan than be sorry after disaster strikes

Most business owners understand the need for insurance to pay for damage to their business assets. However, many companies have overlooked an important aspect of risk management — the development and implementation of an internal disaster plan.

Up to 40 percent of businesses affected by a natural or man-made disaster never reopen, according to the Insurance Information Institute. At the same time, a 2013 study by Cintas Corp. found fewer than one in three employed U.S. adults believe their workplace is proactive about emergency preparedness.

A disaster plan can not only assist in establishing evacuation and storm sheltering plans, but it also includes procedures to notify government agencies, contact vendors, allocate emergency funds and backup records.

“Should a disaster occur, following established procedures could help a business get up and running more quickly,” says Chris Zito, president of Zito Insurance Agency, Inc. “While insurance carriers may reimburse or advance funds required to pay for damages, they don’t have an obligation to manage the company’s disaster procedures.”

Smart Business spoke with Zito about how to get started on an internal disaster plan at your company today.

How does a disaster plan benefit an organization?

Disaster planning can help establish contingency plans to allow for the continuation of products or services to be provided to your customers during the period of time the company is out of business. This may include arrangement for alternative locations or the outsourcing of products or services.

A disaster plan also helps your company prepare how to put your customers at ease before they panic and contact your competitor.

It clarifies and identifies who within the company is responsible for:

  • Backing up critical data.
  • Restoring data.
  • Working with the disaster recovery company.
  • Assessing the equipment.
  • Communicating with staff, suppliers, government agencies and the media.
  • Allocating emergency funds.
  • Arranging for security.

What is important to remember when developing a disaster plan?

When developing a disaster plan, be sure to consider if the business has multiple locations. It also can be beneficial to coordinate with neighboring businesses.

It is important to involve employees from all levels in the company as well as employees with special needs.

Many disasters that impact businesses are due to forces of nature, but some can be man-made. Given this, it is also important that a disaster plan address these types of incidents, too. These types of disasters can include chemical spills or violent acts. Supervisors should to know what to do when a violent act occurs. Your disaster plan may include incident reports and investigation forms.

Before a disaster occurs, employees should be familiar with warning systems, know what type of evacuation is needed as well as their role in the completion of the evacuation plan. Some training may also be required. (For example, how to use fire extinguishers and critical operation shut down.) Another good idea is to have someone create different variations of how a disaster could play out; you can then identify holes and work out the kinks during trial runs.

Disaster plans should be reviewed periodically with all staff. And, it is important that new employees be trained in how to handle an emergency as well.

Should a disaster occur at your business, implementing a well-structured disaster plan could reduce the size of your insurance claim and help the business get up and running faster with limited loss to revenue.

Insights Business Insurance is brought to you by Zito Insurance Agency, Inc.