Don’t Overlook the Need for a Detailed Weather Emergency Plan

Kirsch CPA Group

Apr 28, 2021

Weather emergencies take many forms and depending on your location, you’re likely more vulnerable to some forms than others. But the following data about the business impact of natural disasters from the Federal Emergency Management Agency (FEMA) is a wake-up call:

  • 40% of small businesses won’t reopen in the immediate aftermath of a natural disaster
  • One year after the disaster, another 25% of small businesses will close.
  • Three years after the disaster, 75% of businesses that lacked a contingency plan will fail.

FEMA suggests a comprehensive five-step process for protecting your business from natural disasters, such as hurricanes, floods, tornados, earthquakes and fires.

 

1. Program Management

This step entails two key tasks:

1. Think broadly about the goals of a disaster plan,

2. Determine who needs to be involved in creating, managing and executing your disaster plan when needed.

Your goals may be straightforward, such as protecting the safety of your employees, mitigating risks of physical damage and getting back to business as soon as possible. But, to come up with a sound plan, you’ll need to get more granular.

For example, how quickly do you need to resume operations to avoid long-term damage to your business? The disaster recovery plan you’d need to create to be able to resume operations within a day (or even a few hours) will look different from a plan that would have you back on your feet within a week or two.

Also, if your goals include managing any legal liability related to a weather disaster, you may need to include legal advice when putting your plan together. Similarly, if your plan will involve managing the financial risks of a weather-related emergency, consider adding an insurance professional to your planning team for advice and periodic coverage review.

 

2. Plan Creation

Next in FEMA’s five-step process is assembling the plan itself. Begin by cataloging all the kinds of risks you face so that you can address and prioritize them. Some examples are:

  • Physical injury to employees and customers,
  • Business operations interruption (with resulting loss of revenue), and
  • Damage to or destruction of equipment, inventory, supplies, vital business records and your actual place of business.

Your plan may include:

  • Identifying roles for employees with skills and knowledge to respond to various weather emergency scenarios,
  • Formulating an evacuation plan,
  • Defining your needs for various kinds of safety equipment, such as first aid kits, fire extinguishers and sprinkler systems,
  • Safeguarding in advance (with remote digital and perhaps physical copies) of vital business records and documents, as well as software, login credentials and passwords,
  • Creating a communication plan that details how messages will be relayed to employees and customers concerning your business’s status and recovery expectations,
  • Maintaining an inventory of key equipment you would need to replace promptly and sources of supply for those items,
  • Developing contingency plans for maintaining operations with a skeleton staff at a remote location, and
  • Establishing HR policies with regard to the compensation of non-exempt employees unable to work until you have recovered.

An effective contingency plan for weather emergencies naturally needs to be comprehensive. But it shouldn’t be so detailed that it becomes overwhelming and difficult to comply with and keep it updated.

 

3. Plan Implementation

Elements of your plan will require action to put it in place. Examples include:

  • Acquainting your staff with what will need to be done,
  • Assigning roles and responsibilities for implementing the plan to specific employees and training them as necessary,
  • Acquiring needed equipment, and
  • Buying appropriate insurance coverage.

When reviewing your potential risks, you also might discover that a weather emergency reveals a need for additional emergency exits. If so, follow through by creating those exits.

 

4. Testing and Exercises

There’s a reason schools have fire drills and armies have military exercises on a regular basis. The strength of a weather emergency plan lies in what happens when a real emergency occurs. But practice makes perfect — or at least better.

Although a priority, tests shouldn’t be limited to how quickly people get out of harm’s way. You should also use periodic testing to determine whether the other safeguards you put in place, such as safety equipment and backup storage for vital business records, are fully operational.

 

5. Program Improvement

Ideally, it won’t take an actual weather emergency to determine whether your plan is sound and comprehensive. Some weaknesses may be exposed during the process of simulating a crisis. But others might not be fully apparent at that stage. Your original plan, even if well-executed in a test, might lack important elements.

Similarly, as time goes by, conditions may change in your business operations, rendering your plan inadequate. In addition to improving your emergency response plan based on any shortcomings revealed in a drill, take a fresh look at your plan at the end of each year to ensure that it will still provide the protection you need.

Final Thoughts

Keep in mind, even if you never sustain serious damage in a weather emergency, having a sound plan in place could result in savings on your business insurance. And you might also sleep better at night.

 

We can help you tackle business challenges like these – schedule an appointment today.

 

© Copyright 2021. All rights reserved.

About The Author

Kirsch CPA Group is a full service CPA and business advisory firm helping businesses and organizations with accounting,…

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