06 . Business Survival 101
Weathering a crisis
By Valerie Menard
When disaster strikes, survivors are glad to be alive. But as the
days go by, surviving evolves into rebuilding, which presents a
whole list of challenges.
Avoiding disasters is the ideal approach, but it’s not always
feasible. Where hurricanes threaten one part of the country, earthquakes
and forest fires can doom another. Rather than relocating to a part
of the country that appears less prone to natural disasters, shoring
up against such a possibility is the wiser course.
Latino business owners face the same challenges, and sometimes
even a few more than the typical entrepreneur, after a catastrophic
event. Here are a few tips for managing your business through a
crisis. Be Prepared
The best defense is a good offense, in life and in business. Businesses
that put together a disaster plan, or a business continuity plan,
improve their chances of restarting effectively.
“Ever since 9/11, businesses have become more sensitive to
creating contingency plans,” says Genaro Gutierrez, professor
of operations and management at the Red MacCombs School of Business
at the University of Texas at Austin.
Disaster plans, however, are not simple. They must take into account
as many scenarios as possible, along with methods for sorting through
the challenges. To begin the process, a company should put together
a diverse team of individuals representing several aspects of the
business.
Key components of a disaster plan should include:
A listing of employees, with personal as well as business telephone
numbers. Third-party information should also be included, i.e. parents,
siblings and business associates, in case you need to locate an
employee after an evacuation.
Alternate forms of communication. Often after a disaster, telephone
lines may not be the most effective method of reaching people. E-mail
or wireless communication like Blackberries should be considered.
Some crisis managers recommend using multiple telecommunications
systems so that if one service fails, the second might work as a
backup.
Access to critical information. Loss of information is the greatest
challenge to restarting a business. Keep backup files in a separate
location or on web-based information storage sites for added security.
Designate a decision-maker in case of a disaster, as well as a
chain of command in case that person is incapable of stepping into
the role.
Once these components have been established, make sure employees
are aware of the plan so that they will be prepared. “Good
communication is key, with employees as well as customers,”
advises Gutierrez.
Insurance
Disaster insurance will help provide revenue for restarting a business.
For companies in environmentally vulnerable areas, some insurance
companies may write policies that reduce compensation or abandon
specific coverage altogether. Vulnerabilities to your business should
be considered as part of disaster planning to determine if insurance
coverage is necessary. For any coverage to be effective, it is important
that businesses keep a recent valuation of the property. Always
base the value on current replacement costs.
Regarding your policy, watch out for waiting periods. Business
insurance policies may include waiting periods applied to business
income loss occurring directly after an event and will not be considered
deductible.
Other points to consider with insurance include:
Indemnity. Some policies may only cover losses while a business
rebuilds, but then discontinue payments once a business reopens.
To ensure that a business will continue to be compensated after
the doors open, consider purchasing an extended period of indemnity.
Business Interruption Insurance. This insurance protects against
lost income due to damage to the property and supplements property
damage loss insurance.
Extra expense insurance. Covers expenses due to a disruption of
business, as opposed to lost revenue as a result of property damage.
It can be applied to rental expenses while a building is being repaired,
or moving expenses, for example.
It’s also important to seek a qualified and knowledgeable
insurance broker from whom to purchase insurance.
Leadership
Successfully managing a business through a crisis will also depend
on good leadership. A disaster plan is of no use without someone
to implement it.
“There’s a universe of things to consider and a universe
of things to prepare for, so inevitably, there will be gaps. This
is where leadership emerges,” Gutierrez says.
Maintaining communication with employees is essential, and once
the business is ready for them to return, strong leadership that
is understanding and flexible will help rebuild confidence. Consider
having counselors available for those experiencing post-traumatic
stress symptoms.
Getting right back to business as usual may not be essential, in
fact. This could be a time to gather managers and see if changes
could be made to improve the business model. Give employees time
to get productivity up, at least one year.
“Don’t forget about customers; they will need assurances,
too. And if possible, diversify the business structure so that supply
and distribution can continue,” concludes Gutierrez. Handled
properly, a business can survive a crisis and grow.
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