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Posted: April 26, 2010

Get ready before disaster strikes

Determine your business vulnerability

Daniel Hannaher

Thirteen years ago, the Red River swelled with the runoff from melting snow, rose to a height of 54 feet, and devastated Grand Forks, North Dakota. Especially hard hit was the downtown business community -- 11 buildings were destroyed by a fire while the evacuation was in progress.

In the months that followed, the U.S. Small Business Administration (SBA) made over $52 million in disaster loans to 967 North Dakota business owners.

Disaster recovery and loan making has become a growth industry in the United States over the last 25 years. The nation has been hit by multiple major disasters over the years including Hurricanes Katrina and Rita, flooding in the Midwest, and super cell tornadoes that have torn entire communities apart. Sadly, many business owners think about protecting their assets after the flood, earthquake, fire or tornado has struck. Don't think it will happen to someone else. Emergency preparedness must begin before a disaster strikes.

Pre-planning your disaster preparedness can be the difference between being shut down for a few days with little effect on your business operations to losing all your employees, your customer base, and your livelihood. Disaster preparedness starts by developing an emergency action plan that fits your company's needs while addressing the full scope of disaster scenarios.

Knowing your business, determining its vulnerability to a natural disaster, and considering the resources that support your facility is an important first step, according to the Institute for Business and Home Safety (IBHS), an initiative of the insurance industry aimed at reducing losses due to natural disasters.

Different disasters bring different risks. A business owner can enlist the aid of a qualified professional engineer who will assess the structure for risks and make suggestions on how to protect this critical asset. To eliminate the damage caused by wind-borne debris, for instance, impact-resistant window and door systems or permanent wind shutters can be installed. Earthquake damage can be lessened by anchoring tall bookcases and filing cabinets to wall studs to keep them from falling. Hot water heaters can be secured to the wall for safety.

Consider storing critical financial information off site or upload to an online storage facility. Have alternate suppliers lined up in case your normal suppliers are closed due to the disaster. Always back up important data in multiple locations so customer lists or other important information is not lost.

Underinsured businesses suffer the greatest economic losses after most natural disasters. Business owners need to ask themselves "how much can I afford to lose personally if a disaster should hit my company?" The rest has to be covered by insurance. Small business owners should evaluate their insurance before a disaster hits.

The insurance must be tailored to the individual business and take into consideration not only property damage, but loss of revenues and extra expenses that occur when business is halted by a disaster. When shopping for insurance, small business owners should ask a lot of questions. For instance, if you have replacement value insurance for your structure, ask whether that policy covers required building code upgrades.

Disaster preparedness should not be an afterthought. For more tips on disaster preparedness for small business, visit the SBA's Disaster Office website site at www.sba.gov/disasterassistance.

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Daniel Hannaher is the SBA's Region VIII Administrator based in Denver. He can be reached at Daniel.hannaher@sba.gov.

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