Risk management challenges to local business owners this past year have never in our collective memory been as severe as during COVID-19. Previously, we endured the massive 1952 earthquake, the extensive 1989 windstorm, periodic droughts and floods over time plus recent disastrous wildfires.
This pandemic was especially severe in terms of business revenue loss.
Looking back, many entities such as local hospitals — plus other highly regulated organizations — are required to have a “continuity plan” that positions them to prepare proactively for worst-case-scenario disasters to protect both people and property — plus sustain revenue and retain staffing.
But what can a small business do?
Too few have a proactive Business Continuity Plan. Despite this, we observed lots of creative responses — even though reactive — to measures imposed by state governors (especially ours). For example, working online from home, providing take-out and outdoor food service, conducting multiple Zoom meetings, to name but a few. American ingenuity always helps.
However, far too many businesses have had no choice but to shut down completely! To avoid or at least mitigate the risk of shutdowns and other constraints imposed by government requires lots of advance, proactive thinking and planning.
A BCP is essential.
Most ask about the role of Business Income and Extra Expense insurance. Most businesses — even the smallest — already have such protection. Continuation of income is indeed available for unexpected and unintentional losses. Also, shutdowns caused by “civil authority” are usually covered.
When such coverage extends to payroll of “ordinary employees” (not solely owners and executives), business owners have been hailed as heroes — justifiably — and much better than a PPP grant from the SBA (as helpful as they have proven to be.)
However, there’s a “catch.”
All such coverages must be triggered by direct damage to the property of the business or to an adjacent business that causes neighboring businesses also to be shut down. Such is not the case with a virus. Therefore, transfer of this risk to an insurance carrier generally is not possible.
Looking ahead, business planning needs to focus on measures to proactively prepare for the next major disaster — if not another virus — more likely an earthquake on the nearby San Andreas fault. (For details, go to www.shakeout.org.)
One other major risk is that of an EMC — ElectroMagnetic Pulse. It can come from either the sun or from an enemy nation. An enemy can explode an atomic bomb miles above our Midwest. No property will be damaged. No lives will be lost. However, our civilian electric grid will be forced out of commission for months, if not years.
Cars on freeways will come to an immediate stop, leaving their occupants stranded. Power in homes, businesses, and everywhere else, will be out indefinitely. Many patients on ventilators will die. Families without an emergency food supply will hunger, if not starve. People unable to refill their prescriptions will be in dire health straights. Gas stations will be unable to pump gasoline. And on and on.
Congress has shielded our military grid. For some inexplicable reason, it has not appropriated the $2 billion needed to do so for our civilian electrical grid. It should be high priority to eliminate this devastating risk.
Are you convinced now that business continuity planning should be a key part of your organization’s leadership practices?
If so, a complimentary BCP template is available to you by email — along with a personalized 24-page disaster plan for both your business and your family. Just email email@example.com.
It’s not a complex process. The BCP template is on a single page! Every organization is unique. This template walks you through the process to respond to your organization’s unique needs. Ask for your free copy and quickly get this crucial planning system in place to protect your investment in your business as well as preserve your revenue and staff for the future!
John Pryor is a risk management and general management consultant with CSU Bakersfield’s Small Business Development Center and does not sell insurance. Free counsel through local SBDC facilities is available through CSUB’s website.