Disaster survival

As the past few years have taught us, disasters, both man-made and natural, can strike any place, at any time. If not prepared, a business might be forced to close, which can have devastating consequences.

Steve Kessler, CEO of Sander A. Kessler & Associates Inc., believes a well-crafted disaster plan is the key to ensuring a businesses’ survival in the wake of a catastrophe. “The best thing to do is to keep the business operating. The best way to keep the business operating is to have a disaster preparedness plan. By keeping the business going, I keep my customers, and if I keep my customers, I keep my employees,” he explains.

Smart Business talked to Kessler about creating a disaster preparedness plan, the importance of backing up data and the virtues of business interruption insurance.

Both man-made disasters and natural disasters can cripple a business. How can being proactive and preparing for the worst-case scenario help a business reemerge from a catastrophe?
It can mean the difference (between) being able to go back into business or not recovering at all.

Having a solid disaster plan in effect might put you in a position to not only reemerge from the disaster more quickly, but also attract business from competitors who were not as well prepared. While they’re still trying to figure out what to do, you’re already back in business and providing products and services to not only your customers but their customers, as well.

When formulating a disaster preparedness plan, what steps should a CEO or business leader take?
They should ask themselves the question what if? What if it is a fire within their own locale? What if it is a quake or a flood that affects the whole city? Can they operate from another location? Can they get their equipment? How do they communicate to their customers that they’re still in operation? How do they get their power and their water?

It is important to ask these questions. And they should not do it alone, they should include the strategic people in the organization because multiple heads are better than one.

What type of information should be included in a crisis communication plan so that a business leader can stay in touch with their employees if a disaster strikes?
Number one, you should create a telephone tree so that there is a process where people within the organization can contact all of the associates or employees and notify them of what the plan is. All of the owners, leaders and managers should have a copy of the plan along with their areas of responsibility. The associates don’t have to have a copy of the plan, but they should be aware of it and know what their responsibilities are, if any.

How important is it to back up computer data frequently and keep a backup tape off site?
It’s critical. In fact, it’s so critical that we have three layers of redundancy. We use a service in Calabasas that has two servers constantly replicating our data. We have backup tapes that go off site daily to a local storage facility. Then we have weekly backup tapes that leave the state and go to Arizona.

Without data you’re finished. Whether it be customer based information, accounts receivable or accounts payable, this information is critical.

What advice would you give about obtaining business interruption service?
This is the single most overlooked area of insurance. Business interruption covers continuing expenses, the profits you would have earned had the disaster not occurred and salaries of key personnel. Without it most businesses don’t the have the financial means to cover these three critical items.

People think they’re going to be back in business in a couple of months, but if your building goes down it will take three months just to secure permits. Then you have to build.

And if you have a natural disaster, everyone is scrambling for contractors and permits so you’re going to be down longer than you thought — maybe up to a year. If you don’t have this type of insurance, you might never get back into business because you will lack the financial resources.

What are some other types of insurance coverage that should be in place?
You need to always insure your property to the full replacement cost value for building, inventory and equipment. If you’re in a flood plain, such as our recent situation in Louisiana, you need to carry flood insurance. If you’re in an earthquake-prone area such as California, then you need to carry earthquake coverage.

Also, the policy should contain building ordinance insurance which covers demolition costs, increased costs of reconstruction and any loss of value of the undamaged portion of a damaged building. At the time of a loss, no one ever complains that they have too much insurance.

Steve Kessler is CEO of Sander A. Kessler & Associates Inc., a property and casualty insurance and employee benefits firm. Reach him at (310) 309-2200 or [email protected].