So your home is prepared for a hurricane or tropical storm. Great! Your hurricane shutters are installed, roof is strapped, water and supplies purchased and evacuation route mapped. Be proud you have checked the boxes -- proper preparation pays off.
Most Floridians aware of the advantages of hurricane planning will have undertaken such planning for their home. But what about that other little aspect of your life called your business? Your golden goose simply provides a living for your family and likely many others in addition to making it possible to afford the mortgage on your castle. (Prepare for sarcasm) I’m sure the same storm that would knock your home down will leave your business alone, right? Wrong…
As a reformed Florida surfer, I can tell you that the best waves occur during hurricane season from June 1 to Nov. 30. In other words, right now – surf’s up!
Now is the time to consider the implications of hurricane planning for your business. Two areas of heavy focus should include insurance strategy and business continuity planning (BCP). Insurance will take care of paying you back after the storm hits and BCP will make sure that the business can operate following a loss.
According to Disastersafety.org, “Forecasts for this year’s season predict 12 named storms, five hurricanes and three major hurricanes (Category 3 or higher with winds over 110 mph). That compares with the 2016 season, which had 15 named storms, seven hurricanes and four major hurricanes; and a 30-year (1981-2010) normal of 12 named storms, six hurricanes and three major hurricanes, according to U.S. National Hurricane Center data.”
CEO of the Florida Small Business Development Center Michael Myhre advocates advance planning, stating that “last year, small businesses suffered significant damage and loss due to Hurricanes Matthew and Hermine. No storm should be taken lightly and all small businesses owners should prepare each year no matter the forecast.”
Business planning for hurricane preparedness starts with the plan itself. Communication of the strategy to employees is vital to the success of the plan. Most pre-storm plans involve transfer of equipment and inventory, specifics for protection of buildings and data records, and provision for employee availability to help with prep, including who will do what before and after the storm hits.
Pre-storm is the time to review insurance policies to make sure they are written for your specific business needs. Believe me, once a warning is issued, insurance companies will shut down underwriting and binding of insurance, making it impossible to buy the right policy. Considering that all policies are not created equal, a business owner must be aware of, and intentional about, choices made in coordination with an insurance advisor to protect their golden goose.
Assigning the proper value to your building via an up-to-date appraisal is important, but most issues with business insurance policies stem from how the contracts are written (what is included/excluded).
- Replacement Cost vs. Actual Cash Value policy assignment – cost to replace/reconstruct your buildings will be depreciated with Actual Cash Value listed.
- Coinsurance percentage -- how does this apply to your current reconstruction value? Avoid penalties with an up to date insurance appraisal confirming building limits.
- Business Interruption/Extra Expense – make certain that the correct calculation method is utilized and contingent business interruption is added if suppliers are important to your day to day operations.
- Building Ordinance & Law – Building codes change regularly. Who will pay for the updates during reconstruction to meet the current code? Coverage is likely not automatically given in your policy.
- Flood – coverage for rising waters/storm surge is likely not covered unless your business has separate flood insurance. As an important note, primary limits of flood insurance may not be enough to insure the full replacement cost of your building.
Insuring owned property of your business is only one aspect, albeit an important one, in disaster planning. Best practices for prepared business owners include a Business Continuity Plan (BCP). A BCP is so important because it will define the course for continuous critical operations to the business following a disaster such as hurricane damage. The strategic plan will include such considerations as How prepared are you for a disaster? What are your critical functions? Are the critical parts of your business able to function in the event of a catastrophe? How will they be restored? How will your business operate until functionality is restored?
There are some great resources (and some barely adequate ones) on the internet to assist with building a BCP specific to your business. A generic one will be of almost no use to a business because an executed plan is specific to an individual business operations. One great resource to begin building your plan can be found on Lykes Advisors Blog, http://www.lykesinsurance.com/blog/blog-details/lykes-blog/2016/06/30/planning-for-the-unthinkable, in which Lykes EVP Mark Webb provides an overview of the five phases of BCP strategy including Initiation, Business Impact Analysis, Develop Recovery Strategies, Implementation and Testing/Monitoring.
Proactive business owners will plan for hurricane/disaster recovery to ensure their business will operate following the storm. Once those boxes are checked off and a strategy is in place, get back to work! Or better yet, go grab a surfboard and hang ten.