by Jennifer Mailhes, CPA, Consulting Partner, TR Moore & Company

With hurricane season officially a month away, have you reviewed the disaster recovery plan for your business? What’s that … you don’t even have a disaster plan in place? If you think you don’t need to plan for a disaster, welcome to the comfortable majority. In Symantec’s annual survey of small to mid-sized businesses, half of respondents did not have a plan in place to ensure business continuity following a disaster.

Have you thought about how the following forms of disaster might impact your business?

• A fire, flood, hurricane, tornado or ice storm that damages, destroys or isolates your business’ premises.
• A power surge that fries your computer systems and the intellectual property it contains.
• A virulent computer virus.
• A power failure that leaves a warehouse full of perishable goods susceptible to decay.
• A business disaster, taking the form of a sudden bankruptcy of a major client or supplier, or a sudden and serious illness to a key team member who has irreplaceable knowledge.
• The direct or indirect effects of a terrorist attack.

All together, the odds of being affected by a disaster at some time in your business life are not insignificant. Neither are the costs – the 2011 study cited the average cost of downtime during a disaster at $12,500 per day.

Analyzing the Business as a First Step

When considering financial matters, your accounting firm can help you analyze your business to determine insurance needs as well as how much to spend on disaster recovery.

Insurance can cover not only your loss of property, but also the costs related to income interruption. This will depend on, for example, the financial consequences of catastrophic failure in various parts of your operation.

With your CPA, work out the amount of time you can afford to be shut down, which will give you a better idea of how to invest in procedures to get your business up and running again.

Planning to Ensure Your Business Can Navigate a Crisis

How quickly your company can get back to business after a disaster depends on emergency planning done today. Ready.gov offers the following considerations when devising your plan:

Which staff, materials, procedures and equipment are absolutely necessary to keep the business operating?

• Identify operations critical to survival and recovery.
• Include emergency payroll, expedited financial decision-making, and accounting systems to track and document costs in the event of a disaster.
• Establish procedures for succession of management. Include at least one person who is not at the company headquarters, if applicable

Which suppliers, shippers, resources and other businesses must you interact with on a daily basis to run the business?

• Develop professional relationships with more than one company to use in case your primary contractor cannot service your needs. A disaster that shuts down a key supplier can be devastating to your business.
• Create a contact list for existing critical business contractors and others you plan to use in an emergency. Keep this list with other important documents on file, in your emergency supply kit and at an off-site location.

What will you do if your building, plant or store is not accessible?

• Consider if you can run the business from a different location or from your home.
• Develop relationships with other companies to use their facilities in case a disaster makes your location unusable.

How will you ensure payroll continuity?

What will your crisis management procedures be, and who will carry them out?

• Make sure those involved know what they are supposed to do.
• Train others in case you need back-up help.

With whom do you need to share your plan?

• Ensure the plan is communicated to all staff, with emphasis on those with responsibilities within the plan.
• Meet with other businesses in your building or industrial complex.
• Talk with first responders, emergency managers, community organizations and utility providers.
• Plan with your suppliers, shippers and others you regularly do business with.
• Share your plans and encourage other businesses to set in motion their own continuity planning and offer to help others.

As the Consulting Partner at Doeren Mayhew firm TR Moore & Company, Jennifer Mailhes  is a Houston CPA who guides business owners and their management teams in areas such as strategic planning, CFO services and accounting analysis, and business advisory services. For more information, contact us.