Residents and business owners in Florida are no strangers to hurricanes and hurricane preparedness. While most of us know what to do to keep ourselves, our employees, and the physical structures of our places of business as safe as possible in preparation for an impending storm of the magnitude of Irma, many do not realize, that just as much preparation needs to be put in place to ensure business continuity after the storm.
Before we discuss recovery, indeed, the first priority is the safety of your personnel and clients/customers. Every business location should have an evacuation plan for all staff and customers. This means more than knowing where the emergency exits are located. You need to designate someone to be in charge of communicating with employees and customers, and implementing your evacuation plan in a calm and orderly fashion.
It is a good idea to assign a “Team Captain” to take charge and coordinate your plan in the event of an emergency. Check into the backgrounds of your employees for anyone that has had military, or other kinds of training, that would make him or her ideal for this role.
Have your captain or emergency coordinator check all public safety gear and equipment, including firefighting equipment and first aid materials. Repair and replace faulty items as necessary. In addition to fire safety equipment and first aid kits, you may want to budget for Automatic External Defibrillators (AEDs), and other “shelter-in-place” supplies that may be needed. Make sure all employees know how to access and use these supplies.
All businesses should also have an employee communications plan. This plan starts with each employee having a list of all employee addresses, home phone and cell phone numbers. A call system should be established, with department heads and other “captains” calling designated employees to find out if their homes suffered damage and if they need any assistance. In addition to having a plan in place for employee communications, you need to know who to contact in an emergency, and how they can help. Be sure you have contact information for:
- Local and state police
- Fire department and emergency medical services
- Local government officials, emergency management office
- Local public health agency
- Local American Red Cross chapter
- National Weather Service
- Utility companies
- Neighboring businesses
Continuity and Recovery
While preparing to protect life and limb and your property is your first priority, the importance of preparing for what to do after the disaster, cannot be understated. According to a recent study conducted by Business Insider, over a five year period from 2000 to 2015, natural disasters cost the global economy 2.5 Trillion dollars. According to The Institute for Business and Home Safety “…at least 25 percent of businesses will close after a natural disaster and never reopen.”
Preparing for Continuity
Check your policies before their annual renewal dates to make sure that coverage has kept pace with exposure. That review should be extensive for property and casualty policies and for business interruption insurance.
Business interruption insurance is critical. This type of insurance, often called “business income insurance,” provides money to a policyholder for a pre-designated period to replace lost revenue and cover payroll when a business needs to be shut down due to disaster.
Business interruption policies and many property and casualty policies do not cover flood damage. The National Flood Insurance Program includes the option of buying business interruption coverage for flood damage. Businesses in South Florida need to be particularly concerned about flood damage.
Many business interruption policies do not pay claims when a business is shut due to off-site events, such as electrical damage when a hurricane knocks down power lines.
In some states, many insurance companies do not include coverage for hurricane damage, also known as windstorm, and for earthquake damage as part of standard property insurance policies. Businesses and homeowners are usually able to obtain separate policies to cover windstorm and earthquakes. Insurance agents can provide details.
Continuity preparation should also include daily electronic backups of important documents, files and databases. Business owners should make copies of those records and store them in an off-site, physically secure facility. Articles of incorporation, accounts receivable, client records and important personnel and administrative documents should be among the priorities for back-up.
Other key business continuity preparation issues include:
- Credit: Because insurance payments can be delayed, it is important to maintain a sufficient line of credit for business continuation.
- Tax Issues: Depending on the magnitude of the disaster, federal aid may be available in the form of tax breaks at the end of the year. Thus, it is critical to stay up-to-date on tax policy changes.
Preparing for Recovery
After a hurricane or other disaster, recovery for your business involves rebuilding not only your physical structures but also your “financial structure.”
Remember, in the wake of a disaster, the main goal should be to restore customer confidence by getting the doors back open as soon as possible, which means even a partial reopening may be better than remaining closed.
Cash flow and traditional forms of credit may be interrupted in the aftermath of a hurricane or other major disaster. Your business may qualify for federal grants or low-cost disaster recovery loans.
How MBAF Can Help
In the aftermath of a storm or other disaster, you may be facing more than merely physical damage as your business tries to recover.
By combining traditional accounting practices and investigative techniques, MBAF can provide forensic accounting services to help give a disaster-stricken operation an advantage should any legal issues arise.
Forensic accounting is also invaluable when insurers question claims and when important financial records are lost. By recreating documentation, forensic accounting can help decipher the true value of property and help rebuild operation processes. In addition we also provide the following specific “post-disaster” services:
- Business valuations
- Business interruption cases
- Help prepare insurance claims
- Disaster tax planning
- Loss of profit claims
We hope that all of our clients and friends are prepared for the coming storm. We wish that they and their families stay safe, and we remind them all, that we are here to help with any last minute preparations, and will be there to help you recover in any ways that we can.
Understanding how to prepare and recover from natural disasters can be complex. If you would like to benefit from our expertise in these areas, or if you have further questions on this Advisory, do not hesitate to contact our Tax and Accounting Specialists, or call us at 1-800-239-1474.