Four ways to prepare natural disasters and other events that could interrupt your operations.

Natural disasters are often the first thing that comes to mind when many people think about business disruptions, but they’re not the only things that can interrupt operations. Supply chain issues, power outages, equipment or technology failures, public health crises and crime are other potential causes. Here are four ways you can prepare for disruptions and help your business recover.

Identify risks and address your risks

Conducting a risk assessment can help you identify potential threats and their potential impact on your business. These include operational, financial, strategic, compliance and reputational risks, according to Acrisure.

After identifying potential risks, the next steps are to determine the likelihood of each and develop control strategies. For example, you might change or eliminate a risky behavior, or you purchase insurance to help reduce financial risk. If the cost of mitigating a risk outweighs its potential effect, a business may choose to accept the risk.

Create a communications plan

Regardless of what causes a business disruption, having a communication plan in place will help in a time of crisis. Make a comprehensive plan that details who will communicate, how they will communicate and who will receive the messages—including employees, customers, vendors and, if required, regulatory agencies.

Keep your insurance up to date

Keeping your insurance coverage up to date is an important part of risk mitigation. Review your coverage at least once a year. Also, update your policy when there are significant changes in your operation such as moving to a new location, buying or leasing equipment and vehicles, or hiring additional employees or contractors.

Build a financial plan

Having access to reserve funds during a business interruption can mean the difference between staying open and closing. Although many small business leaders believe a future disaster or disruption is likely, many have not taken basic steps to prepare, reports the U.S. Chamber Foundation. Just 31% have a disaster plan, and only 20% have a disaster budget. At the same time, 70% of businesses affected by a natural disaster or significant disruption say it took a quarter or longer to resume operations.

Setting aside reserve funds in a business savings account or business money market account can help you pay employees and bills, avoid taking on additional debt and keep your business operating if you experience a significant disruption.

You could also access a business line of credit to help manage cash flow during a disruption. Ideally, a business line of credit should be in place before you face a cash-flow gap.

 

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