Author: Zach Kaiser, Strategic Risk Advisor for McClone
Continuing my dive into the Forbes article titled: “Top Ten Risks Businesses Fear Most,” I have decided to touch on No. 7: Business Interruption.
Interruptions to your business can come from all different directions. For example, your business could be affected by a natural disaster, you could experience a significant mechanical breakdown or the loss of a key employee (or employees). The list goes on.
According to the Federal Emergency Management Agency, 40% of businesses never reopen after a disaster. The unfortunate truth is that every second your business stays unprotected, you’re at risk of closing up shop. As a business owner, your level of preparedness for a business interruption is imperative to the future success (or failure) of your business. Here are three tips to effectively prepare your organization for a business interruption.
- Identify the risks that are inherent to your business.
Consider strategic risks, operational risks, financial risks, environmental risks, or any other types of risk that may pose an immediate threat to the livelihood of your business. Additionally, consider whether or not the risks are internal (i.e. operational) or external (i.e. environmental).
After identifying the risks that are inherent to your business, rank each risk in order by the likelihood of occurrence as well as the level of severity. This exercise will allow you to further understand each unique risk and how it could negatively impact your business, thus putting yourself in a better position to minimize the damage or avoid the risk altogether.
- Understand your business insurance coverage.
In the case of business interruption, your coverage may vary, so it’s vital that you understand your policy terms such as coverage limits, waiting periods and exclusions. When designing your Crisis Management Plan it’s important to take these types of policy terms into account.
Additionally, consider purchasing extra expense insurance to cover your employee’s wages for the duration that your business is unable to operate. If your business is unable to open for months or even weeks, your workforce will likely begin weighing their c
areer options and looking elsewhere for a job, especially if they’re not receiving a paycheck. Even if your business is fully prepared with extra expense coverage, it’s imperative that you communicate with your workforce in a timely fashion and ease their concerns.
- Create a Detailed Crisis Management Plan.
Your customers, employees and community will all have questions regarding the crisis. How will the crisis affect your organization and its workforce? How long will your business be unable to operate? What are your plans moving forward? A detailed Crisis Management Plan will effectively address these types of questions and concerns.
Your employees are depending on your business. They need to understand how the situation is progressing. As I discussed in my previous blog post The War on Talent is Here, today’s job market is more competitive than ever. A top-notch workforce is the key factor behind every successful business. It’s important to ensure that your employees are informed on how the crisis is being addressed and what the next steps are.
Click here for a free Crisis Management Plan template to help you and your business prepare for a business interruption.
By following these tips and addressing the necessary precautions to prepare your business for a business interruption, it is possible to minimize the damage. What steps have you taken to prepare your business for a crisis?
Contact us at McClone today for assistance reviewing and updating your Crisis Management Plan.