Be prepared. The Boy Scout motto is something every smart executive should apply to his or her business. When an emergency happens, you need to have a plan in place to deal with it, says Jonathan Theders, president of Clark-Theders Insurance Agency.

“You may feel prepared — to a degree —for an emergency because you purchase business insurance, but if one occurs, is your team ‘really’ ready?” says Theders. “There must be a plan of action that goes beyond the insurance product to ensure the safety, security and continuation of your business and its employees.”

Smart Business spoke with Theders about several emergency situations that are often overlooked and how to make sure that your business is prepared for anything.

What are some commonly overlooked emergencies, and why is it important to consider them?

One area that is often underinsured is business income loss. If something happens that makes you unable to go to work, your clients and customers still need your product or service that day.

Not only do you lose revenue for that day, but if it takes you two or three months to get operational again, those people are not necessarily going to wait for you. They are going to find that service elsewhere. They will form new relationships. They will find an alternative, and when you resume operations, they may or may not return.

That can be extremely detrimental because there is no income coming in, so you can’t sustain employee payroll and you start losing key people. Losing key employees can have a significant impact on your business, especially salespeople or customer service representatives.

These people have deep relationships with your customers. If you lose them, whether through death, retirement or a new job, it creates a disruption to the work environment that you need to plan for. If you don’t, it can very quickly lead to the death of the business.

To prevent that from happening, focus on business income and the extra expenses that go into bringing you back up or sustaining funds so that you can continue to make payroll while you’re rebuilding your company. Build a contingency plan for what you would do if a key employee leaves.

Also, ensure that you are protecting your trade secrets and client list by having non-compete and non-piracy agreements in place, in case the employee leaves your business to work for a competitor. Those legal mechanisms are a great way to protect your business.

How can a business develop an emergency preparedness plan?

First, establish your planning team. It should be have representatives from every facet of the business. You need a good cross section of people, because what keeps the CEO up at night is going to be different than the top concern of the head of the sales department. You’re selling yourself short if you have a one-sided or management-only planning process.

The second step to the planning process is to establish authority. You want to make sure that there is senior management buy in, upper level commitment and open communication lines. You don’t want to be so rigid that there is no flexibility for the free flow of ideas.

The third step is issuing a mission statement. It’s important for leadership to issue a mission statement saying, ‘This is the purpose of the plan,’ and indicate how it will involve the whole organization.

The fourth is establishing a schedule for how you will go through the process. Sometimes you discover a project is bigger than expected and it can drag on. This is also the step where you set the budget, the size of which will vary by company.

How do you discover the issues and then determine their priority?

Analyze the hazards. It’s easy to consider natural disasters such as tornadoes or hurricanes, but you really want to focus on anything that could potentially disrupt your business. Use a whiteboard and just start writing down ideas.

Then, take that list and put it into two categories. Using a scale of one to five, five being the most detrimental, rank the financial detriment to the company if the event were to occur. Next, rank the probability of it actually occurring, with one being very unlikely and five being something that could happen at any time.

By mapping out all of these ideas and ranking them by severity and probability of occurrence, you will be able to determine your priorities. For instance, if you find a scenario that’s ranked five in both categories, it would have a catastrophic effect on the company and has a high probability of occurring. That’s the one you start with; that should be at the top of your list.

Conversely, if an event has a low financial impact and a low probability of occurring, you may not need to do anything about it. If you do, it should be at the bottom of your list.

How should businesses use their prioritized list of potential emergencies?

At that point, once you have your list of what can occur, you start thinking about what you can do about it. Insurance is a tool for risk management. It is a financing mechanism for the risk you do not want to self-insure.

The goal of emergency preparedness is to create an understanding of what can occur and a plan so everyone knows what will happen in the event of an emergency.

Jonathan Theders is president of Clark-Theders Insurance Agency Inc. Reach him at (513) 779-2800 or

Published in Cincinnati