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Small businesses: How to create a disaster preparedness plan

About 25 percent of businesses don't reopen after suffering a major natural disaster, according to the Institute for Business and Home Safety -- and if you aren't properly prepared for a disaster, that could easily be you.

"Unfortunately…disasters are increasing in frequency and their financial cost is rising. It’s now more important than ever for organizations to prepare for the unexpected," says Todd Macumber, president of the Risk Services Division at HUB International, one of the largest insurance brokerages in North America.

Here are five steps you can take to create a disaster preparedness plan for your business.

small business disaster plan 1.  Back up your data.

Make sure all your data are backed up at a secure offsite location. You may also consider doing what many small businesses have done in recent years: Transfer your data to a cloud-based storage system, which allows you to access files from anywhere you have an Internet connection.

Keeping everything "in the cloud" is also helpful if you need to set up a temporary work station.

If you decide to back up your data in the cloud, it's important to encrypt your data before sending it to an external organization for safekeeping. Encryption scrambles data so that only someone with the secret code can open it.

2. Create a post-disaster communication plan for employees.

If a disaster strikes, one of the first things you should do is let your staff know if they need to come to work. The less your employees have to travel during a disaster, the better.

Here are a few ideas on how to create an internal post-disaster communications plan.

  • Assign a staff member to be in charge of the internal communication plan.
  • Set up a dedicated emergency phone number with an answering service for staff to call. This could be as simple as a recorded message letting callers know if the office is open.
  • Create a phone chain that lets employees know who they should call for updates.
  • Set up a text message alert system so you can send a mass text to all employees in case of an emergency.
  • Create standard “talking points” for your employees so they can answer questions from media outlets.

3. Create a post-disaster communication plan for customers and vendors.

Your disaster preparedness plan should also cover how you will communicate with your customers and vendors.

Here are a few ideas on how to create an external post-disaster communication plan.

  • Assign a staff member to be in charge of the external communication plan, and ensure he or she is trained on how to update the website (to include an emergency alert), out of office replies for general email addresses and the phone system.
  • Create a process for changing the voicemail on your company's main office number as well as your employees' individual voicemails.
  • Create a process that allows you to forward your calls to designated cellphones or a remote land line if needed.
  • Train all employees on how to set up automatic "out of office" email replies.

4.  Conduct an emergency "remote work" drill.

As a business, you can only afford to be closed for so long -- so it's important to be proactive about reopening your business after a disaster.

Many businesses are now testing emergency remote work plans where a company schedules a day for one or more employees to work from home.

The goal is for the participants to do as much of their normal daily responsibilities as possible. Therefore, you may need to figure out how to forward calls to their cell or home phone.

Ensure the computer and software your employees use are capable of performing all necessary functions. It's better to troubleshoot any issues before a disaster strikes.

5. Review your insurance.

No disaster preparedness plan is complete without a thorough review of your business insurance needs.

"While the greatest tragedy is the loss of life, disasters also cause major financial damage, often leading to the temporary shutdown of companies, or even putting them out of business altogether," Macumber says.

This is why it's critical to review your insurance policies and ensure you have the proper coverage.

Disaster insurance coverage for small businesses

Karl Newman, president of the NW Insurance Council, a nonprofit, public-education organization, suggests small-business owners consider the following insurance coverage as they develop their disaster preparedness plan.

1. Flood insurance. The most common way to get flood insurance is to buy it through the National Flood Insurance Program (NFIP). The NFIP is a government program regulated by the Federal Emergency Management Agency (FEMA). A standard Business Owner’s Policy excludes flood.

2. Business interruption insurance. Provides money to cover lost income and everyday expenses.

3. Earthquake insurance. This covers your business building and contents from earthquake damage.

4. Wind insurance. This is included in most business insurance policies. Review the deductible because some wind deductibles can be high at around 5% of the insured value of the building ($25,000 deductible on a $500,000 building).

Developing a disaster preparedness plan doesn't have to be difficult, but it does take some time and energy to do it right. If you take the proper steps, then you'll help lower your chances of being part of the 25 percent of businesses that never reopen after a disaster.

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