Business’ crises are often derived from circumstances outside of the company’s control. Weather conditions such as flooding, sudden and catastrophic data loss or supply chain breakdowns can present an immediate and profound threat to any business. To avoid this spelling the end there are certain precautionary measure that can and should be put in place before such events occur, to minimise risk.

Clive Lewis, ICAEW head of enterprise, said: “Business advice is often not sought until a problem already exists. The best solution by far is, wherever possible, to anticipate the problem and plan for it’s resolution – rolling out a pre-prepared response will be faster, more effective and efficient than fire-fighting after the event. Taking the time to implement such plans may well pay immense dividends in the future, proving to be the saviour of your business.”

Public listed companies are required to robustly assess principle risks and explain how they are managed as part of their “going concern” tests. Small private businesses with less resources still need to be aware of the major threats to the business. There follows four key actions that should be taken in preparation for business catastrophes, and four that should be addressed immediately following such an event.

Before disaster strikes:

Undertake a risk assessment

The advent of autumn brings increased risk of flooding and storm damage. Approximately 185,000 commercial properties are at risk of flooding in England and Wales*. Taking steps to prepare for floods could significantly reduce financial losses as well as enable you to fulfil your obligations to your staff, customers, suppliers and the environment. Read more about assessing flood risks from the Environment Agency

Other risks are always present – such as network or power outages, human error or malicious acts

A risk assessment form should be prepared showing:
Each potential risk identified
A risk rating for each risk
Details of existing controls for each risk
Further action required to reduce individual risk further
Revised rating after further action.

Do contingency planning

Share the risk assessment with your staff and ensure appropriate staff members are familiar with procedures. The management and the board should sign off the agreed plan.

The plan should be supplemented by a list of important contacts, building services, suppliers and evacuation contacts. It should include basic strategies for protecting property, data and stock so minimising business disruption and assisting recovery. For example, the Environment Agency has produced a guide to help you prepare your business for flooding, including keeping flood water and ground water at bay.

Insurance

Talk about all potential business risks with your insurance broker at least once a year. Your broker should review your risk management plan to see if they can suggest improvements. Their input will help you to obtain insurance cover and help calculate the maximum cover/ minimum self -cover, best value equation

Remember your reputation

Difficulties such as supply chain problems and how you treat staff, customers and suppliers can adversely affect your business’ reputation and standing in the marketplace. Bear this in mind when preparing the risk assessment and making contingency plans.

After disaster strikes:
Act fast

In the event of a business catastrophe notify your insurer(s) and insurance advisor as soon as possible. Try, where possible, to stem further damage where safe to do so. If your business premises has been damaged be careful when returning to the premises and try to avoid hidden damage, such as weakened foundations. If there is significant damage, turn the electricity and other utilities off.

Get business up-and-running

Keeping staff safe and productive is important. Communicate to staff what your position is and what you expect of them. If staff members are expected to attend work at the usual or another location, give clear guidance of where and when. If staff members are unable to work, explain what the business obligations are. When your business returns to normal, it will need the co-operation of your staff to get going again.

You should also notify customers and suppliers of the business’ position including how quickly you expect to resume supplies and be able to receive deliveries.

If you have a loan, overdraft or other financing you must also keep the finance providers appraised of the situation (including the business’ own shareholders) as well as whether any loan covenants or other undertakings will be breeched. If the impact is significant, you will need to prepare forecasts for interested parties particularly cashflow and trading updates.

Insurance insights

If you have relevant insurance, It won’t be long before you begin the process of claiming for the damage costs. You should begin by identifying and capturing the costs on your claim including protection, temporary repairs, replacements, and extraordinary expenses. Record the evidence of damage and use photographs. Use your broker (if you have one) to iron out any queries regarding your claim. Seek their advice on how it will affect your future insurance costs and what steps you might take to reduce future premiums.

Protect management and financial information

Many businesses keep financial and management data electronically or “on the cloud”. It is vital that financial and other valuable information is protected and the business undertakes regular back-ups. If the information systems are not fully automated consider how you would manage if the records were destroyed. Getting the business up-and-running, including paying and receiving cash is critical. Keeping financial records intact will assist in the early evaluation of losses when you claim insurance.