A Crisis Management Plan is Crucial to Small Business Disaster Recovery
Disasters come in all shapes and sizes. Homes and businesses are lost to residential and commercial fires. Neighborhoods are destroyed by hurricanes and tornadoes. Earthquakes wreak widespread regional havoc. Entire communities, like Paradise, California, are wiped off the earth by raging wildfires. And health emergencies from diseases like the Spanish and Asian flu, typhoid, and now, coronavirus, have crippled societies around the world. For reasons like these, having a crisis management plan for your business is critical.
The Camp Fire, which started near the small, wooded Northern California town of Paradise provides an extreme example of how important it is to have a plan to rebuild your business after any kind of disaster. The firestorm, which began November 8 and burned for more than two weeks, torched nearly 240 square miles – an area larger than the size of Chicago – consumed over 18,000 structures, leveled 95% of the town and killed nearly 90 people. More than half of the town’s businesses are now burned rubble and ashes.
“There’s really not a blueprint for pretty much the entire business community being decimated,” said Monica Nolan, Paradise’s Chamber of Commerce director, told Marketplace. The chamber’s office was one of the structures lost.
In the weeks after the fire was extinguished, the Small Business Administration (SBA) had approved over $67 million in disaster recovery loans for businesses, nonprofits, homeowners and renters. The SBA, which recognizes the contributions of entrepreneurs each year with National Small Business Week (May 5-11, 2019), supports businesses through a variety of programs including disaster assistance.
Small businesses can seek SBA Economic Injury Disaster Loans of up to $2 million in assistance to help overcome temporary losses of revenue they experience following disasters. In 2020, small businesses in designated states and territories became eligible for low-interest federal disaster loans for working capital for losses caused by the coronavirus (COVID-19).
Business insurance offers policies covering loss of property, supplies and income, but not all merchants insure themselves against such catastrophic circumstances. And money often can’t fix everything.
Darrel Armstrong operated a barbershop his grandfather founded in Paradise 30 years ago until the fire took it. He lost everything – the building, equipment and even his grandfather’s World War II mementos that decorated the place. He was one of many Paradise business owners who didn’t have insurance. With much of the town’s infrastructure destroyed, Armstrong told Marketplace he can’t even transfer his shop’s phone number to his cell because the line no longer exists. He did business on a walk-in basis, so he didn’t keep a client list, which means he can’t contact past customers to tell them where he relocated.
Like so many businesses hit by small and large disasters, owners often barely have enough time to lock the doors before fleeing. However, there are steps merchants can take to give themselves a fighting chance to recover.
Crisis Management, Disaster Recovery
The Cambridge Dictionary defines “crisis management” as the actions that are taken to deal with an emergency or difficult situation in an organized way. To be effective, those actions need to be spelled out in a crisis management and business recovery plan.
The SBA says 25% of small businesses never reopen after a disaster, and statistics show 90% of businesses that don’t reopen within five days after a disaster ultimately fail. So, planning on what to do in case of a disaster is ultimately a life insurance policy for any business.
The first step in preparation is determining what kinds of disasters could befall your business. Earthquakes, wildfires and floods are prevalent in the west. Tornadoes, wildfires and floods cover the Midwest and Southwest. Hurricanes and flooding can take place just about anywhere along the Eastern seaboard. Extreme winter conditions can happen from Portland, Oregon to Portland, Maine. That means it doesn’t make sense to prepare for a deep freeze in Southern California or earthquakes in Iowa. So, you focus on what disasters hit close to home. The SBA provides a checklist and tips for specific types of disasters.
Once that list is checked, it’s time to make your own crisis management and business recovery checklist. Each kind of disaster poses different circumstances and challenges, and each will need its own management and recovery plan. Many coastal communities are susceptible to tsunamis, so coastal evacuation routes should be documented. Tornado and hurricane shelters need to be identified and mapped for both employees and customers.
Regional disaster emergency systems feature warning sirens. Those signals and messages should be noted and understood by employees. Other regions with nuclear power plants have layers of emergency planning zones and evacuation routes. Every possible scenario needs to be covered in a crisis management plan.
The Red Cross Ready Rating provides a free service to help businesses become prepared for emergencies of all kinds.
Like a homeowner, it’s important to document your business equipment. For retail merchants, inventory records, along with lists and photographs of business machines like computers, point of sale terminals, scanners, printers and supplies will speed up insurance claims.
Just like a homeowner who plans for how their family will deal with an earthquake, house fire or flood, business owners need to plan for how their employees and customers will react to a similar situation. The plan should include evacuation routes, rallying points, a readily available emergency kit and a communications strategy.
Communications are critical in the moments during and immediately following a disaster. In the age when nearly everybody carries a cellphone that also has text and email capabilities, it’s important to have each employee’s contact numbers and addresses. A communications tree and emergency procedures can let employees know who to contact when something goes wrong.
Emergency numbers should also include your business insurance company, electrician, plumber, city or county public works departments, gas and electric companies, local hospitals and health organizations, and even media such as local newspapers or television stations. This information should be stored off-site or in a cloud-based host for easy access.
An emergency kit is vital, too. It should include battery-powered walkie-talkies to add another layer of communications redundancy, flashlights, first-aid supplies and instructions, and enough water and non-perishable food to hold several people for at least 72 hours.
As part of your disaster preparation, it’s vitally important to identify what it will take to recover and get back to work. Every business is different, but each should assign priorities of high, medium and low to every operation necessary to reopen the doors.
Small businesses today rely on data and the digital platforms that hold it. So, being ready for a disaster with up-to-date records and backup data is critical.
“Backups are hugely important, especially in business applications, because that’s your livelihood,” explains C.J. June, managed services director at Paladin Data Corp. “We had a customer that diligently made backups of their files, but they were stored in an old, oak roll top desk right next to their computer. A fire destroyed their building and took both their business computer and their backup files. Managed services stores backup files off-site in a cloud database, protecting businesses against all kinds of disasters. You should also consider subscribing to multiple internet service providers and other measures to ensure IT redundancy, too.”
Industry experts suggest that companies use a 3-2-1 Rule for their backup files.
- Make at least 3 copies
- In 2 different formats
- With 1 of those copies stored off-site
Many companies that provide digital business platforms offer technical services that periodically back up transaction data. More extensive network management is also available. This service constantly monitors business networks and provides round-the-clock support to prevent critical data loss. It also stores a business’s data off-site, protecting the records and limiting downtime.
Information Technology (IT) recovery involves more than just accessing backup data. Businesses will have to replace hardware – network appliances, servers, desktop and laptop computers, point of sale hardware including displays, monitors, cash drawers, barcode scanners and payment terminals – wireless devices and more.
Comprehensive retail technology companies offer all these products, services and hardware, and their support can supply both backup data and hardware in the event of a disaster.
A Business Continuity Plan is another critical part of recovery. It identifies resources needed for recovery – employees, office space, IT, backup data, production or warehouse facilities, and utilities – and the strategies for getting them in a worst-case scenario. The plan should also estimate costs involved with reopening a store or finding a new location.
In the case of the Camp Fire, most of the approximately 2,000 businesses in Paradise and surrounding communities were burned to the ground along with the homes of owners and employees. Even though the public works and utility companies restored power and water, finding buildings to reopen and employees to hire remained a challenge.
Avoiding Personnel Disasters
Not every disaster strikes a business’s brick-and-mortar, equipment and infrastructure. Disease and widespread illness can cripple a business as quickly and effectively as a natural disaster. While many companies have crisis management and disaster recovery plans to cover natural disasters, most don’t have contingencies for pandemics or health emergencies caused by diseases or widespread illnesses.
The Spanish flu in 1918 killed an estimated 675,000 Americans and crippled the country. The Asian flu returned in 1957 and caused close to 70,000 deaths. Coronavirus, which launched COVID-19 in China, this year effectively shut down societies and their economies all over the world. The World Health Organization and Centers for Disease Control offer some common-sense recommendations to businesses that can help keep their doors open during health emergencies.
Communication is critical. Keeping employees informed about personal and organizational prevention measures through emails, websites and internal announcements is key. Experts recommend companies establish direct communications from ownership or management to employees to provide regular operational updates.
Keep it clean. Maintaining a clean environment is crucial to avoid spreading germs and disease. Encourage employees to continuously wash their hands, keep their workstations wiped down with disinfectants, covering up coughs and sneezes, and stay home of they feel ill.
Adjust work and leave policies. Allowing employees to adjust their work schedules or work from home can help lessen the spread of disease. Being flexible on paid time off or sick time also allows employees who might normally work when they’re not feeling 100% the option of staying home.
Technology can help. Many jobs today don’t require employees to be on-site to perform their duties. Retail technology that allows them to work from home should be implemented as quickly as possible. Remote monitoring and management software gives employees access to business networks and lets them perform most job duties from home. Meetings can be done via Skype, Zoom, GoToMeeting and many other platforms.
Not Every Crisis is a Disaster
It doesn’t take a catastrophic wildfire, hurricane, tornado or flood to create a crisis. Localized problems such as gas leaks, electricity outages, broken water lines and even lengthy internet service interruptions can disrupt business. Having crisis management and business recovery plans can help you and your business bounce back quicker from a disaster of any magnitude.
Ready.gov – Ready is a national public service campaign designed to educate and empower Americans to prepare for and respond to emergencies and disasters.
FEMA – The Federal Emergency Management Agency offers businesses emergency response planning for businesses.
U.S. Small Business Administration – The SBA provides disaster loan assistance for businesses, private nonprofits, homeowners and renters.
Red Cross – The American Red Cross offers Ready Rating, a free service that helps organizations become better prepared for an emergency or disaster.
Centers for Disease Control – The CDC provides a variety of recommendations and resources to help individuals and businesses prepare for pandemics.
World Health Organization – WHO provides updates and resources on worldwide health emergencies.