Unexpected interruptions, such as natural disasters, that halt or hinder operations may substantially impact your company's productivity and profitability. Taking the proper steps to prepare can help mitigate risk, reduce losses and ensure your company has the physical and financial capacity to rebound.
Insurance that insulates your company against the impacts of a natural disaster provides a solid foundation for your total risk management strategy. Be aware of the types of natural disasters you are most likely to encounter based on your location and industry, and then develop a comprehensive and customized insurance strategy that directly addresses the most prevalent threats.
Note that not all perils are inherently covered. For example, earthquakes and floods require separate policies. You also should talk with your insurance provider about Business Interruption or Business Income coverage that can help your company meet payroll during interruption and recovery.
Insurance may not cover every impacted aspect of your operations. Having a clear picture of your company’s finances is essential to building a financial buffer as part of a multipronged approach to risk.
Start by examining your current operating expenses, cash flow and liquidity levels. Look for opportunities to set up a “rainy day” fund that can provide, at minimum, the start of a safety net should disaster strike. To bolster those efforts, consider business savings products, such as an FNB FirstRate Business Savings or Money Market Account, that put your money to work for you without restricting access to funds.
When damages exceed insurance coverage and liquid savings, it may be necessary to pursue credit options. Your overall capital structure will factor into your borrowing capacity since the debt your business holds will determine the amount of credit you can access.
As part of your overall business plan, remain cognizant of how your company uses debt as a financing strategy and realize that, in the event of a significant business interruption, having the ability to take on debt could be the difference between stabilizing your operations or experiencing long-term impacts.
Preparing, refining and consistently reviewing a business continuity plan is critical. Your plan should address a wide range of topics, including potential threats, loss of electricity, employee safety, communications, points of contact and ongoing training.
Based on your company’s focus, the impact of a natural disaster on your physical operating space can vary. If your business is driven by manufacturing or production, for example, the implications are far greater. Even for companies that do or can operate with remote workers, a natural disaster can affect the homes and personal lives of your employees and create significant challenges that indirectly impact your operations.
Operation plans also apply to vendors and third-party partners, including your supply chain. If your usual supply chain could be impacted for an extended time, your plan should identify back-up suppliers from regions less likely to experience the same natural disaster.
The basis for being able to navigate, stabilize and recover from a disaster starts with a solid overall business plan that is developed by consulting with trusted advisors, like your banker.
