The Challenge of Reopening a Business after a Natural Disaster

The Federal Emergency Management Agency (FEMA) asserts that nearly 40 percent of small businesses fail to reopen after being hit by a natural disaster. According to a small-business survey by CNBC and SurveyMonkey, only 8 percent of business owners said that the environment matters the most to them, while others ranked health care, the economy, terrorism and immigration higher. While reopening a business after enduring a natural disaster is challenging and serious, there are steps business owners can take to help keep their businesses up and running.

To learn more, check out the infographic below created by Eastern Kentucky University’s Online Safety, Security & Emergency Management Program.

Understanding Your Environment

Business owners must not only anticipate the different types of natural disasters that may occur in the geographic regions but also understand how their businesses will be impacted. This was quite clear in 2017, a year that saw storms, fires, floods and heat cause over $306 billion in destruction.

The damage tended to be region-specific. For instance, the Tubbs Fire in wildfire-prone California damaged more than 5,600 structures and killed 22 people. Hurricane Harvey brought more than four feet of rain to an area where hurricanes are common, breaking the rainfall record for a single tropical storm in the process. Collectively, there were 10 times the requests for federal disaster aid, with 4.7 million people registering with FEMA.

Overall, 2017 saw several billion-dollar natural disasters hit the U.S. Hurricanes carried the biggest financial impact, as Hurricanes Harvey, Maria and Irma caused damages of $198 billion, $102 billion, and $65 billion, respectively. Other billion-dollar disasters included fires in Northern California ($9.4 billion), drought in the Dakotas and Montana ($2.5 billion), and a severe freeze in the Southeast ($2.1 billion)

The disaster also carried socio-economic ramifications. Per a report by the Dallas, New York, Richmond and San Francisco fed banks, more Hispanic-owned firms in disaster-affected areas suffered natural-disaster-related losses than any other demographic. The report also indicated the lodging and retail businesses were hit the hardest. 65% of the businesses affected cited the loss of power and utilities as the source of their losses. At the same time, the report revealed that just 17% of affected firms had business disruption insurance, and 75% of small businesses don’t have a disaster plan in place. Of the 60% of small businesses that do reopen after a natural disaster, 52% of them said it would take at least three months to recover.

There are several challenges for the long-term survival of disaster-impacted businesses. For instance, businesses may struggle if their customers are displaced, if their customers have access to substitute the goods sold, if they’re part of a declining industry, or if they can adapt to new business environments.

Preparing a Business for a Natural Disaster

Preparing for a natural disaster is half the battle in recovering. An emergency plan could help business owners save thousands, if not millions, of dollars.

There are several ways businesses can ready themselves for a natural disaster. For example, they can use cloud-based storage to keep critical paperwork like insurance policies, invoices, contracts and tax returns safe. They can also conduct a threat analysis to identify potential natural disasters that could pose a threat to them as well as their vendors or suppliers. Thirdly, they could create recovery plans for employees, vendors, and customers, including contact information for all stakeholders. Additionally, they can build a continuity plan by identifying key operations and selecting employees to keep essential performance metrics running.

It can also be important for businesses to be ready to know what to do during an emergency. Many non-profit organizations offer standard emergency preparedness checklists for small businesses to have on hand. Businesses should also spend some time running multiple emergency drills, as spending time practicing an emergency response could save a business thousands of dollars and could make reopening easier.

Businesses may also want to consider purchasing business interruption insurance, which can often be included in a business owner’s policy (BOP). It’s also wise for businesses to save at least 30 days’ worth of funds to cover expenses after a natural disaster until the insurance claims are processed. Finally, it’s important for businesses to create a crisis communication plan that considers an audience consisting of customers, vendors, employees, new media, and the community.

Post-Disaster Steps for Success

Business owners affected by natural disasters can turn to many organizations for help and resources. However, they should also look out for potential threats.

Fortunately, there are ways they can neutralize these threats. For instance, business owners should follow their emergency plans, adapting to the situation as necessary. They should also contact their insurer and file a claim, but they should hold off on cleaning up until a claims adjuster surveys the damage and can provide an accurate estimate. Additionally, businesses should contact lenders and discuss potential leniencies available due to a natural disaster. They can also contact the Small Business Administration (SBA) to inquire about low-interest disaster loans or seek out additional assist resources from organizations like DisasterAssistance.gov. Finally, it’s always important to keep an eye out for scam artists looking to exploit businesses in need.

A natural disaster-caused crisis can be hard to prep for, much less managed. Though many mid- to large-sized businesses may have employees devoted to safety management and emergency preparedness, small-business owners are often tasked with assuming these responsibilities themselves. Fortunately, many organizations offer resources and aid to business impacted by natural disaster.