Majority of Small Businesses Lack Disaster Recovery Plan, Unable to Recover


Have you ever considered what would happen to your business in the event of, for example, a fire that destroyed the business premises? Or a flood or tornado that caused irreparable damage to your assets? Disasters such as these are not particularly pleasant things to think about, but effective planning against such events could mean the difference between a natural or man-made disaster temporarily inconveniencing and permanently destroying your company.

Having an effective disaster recovery plan is important for all businesses who want to protect themselves against unforeseen occurrences, but especially so for small businesses who are particularly vulnerable in the event of a disaster. According to the Institute for Business and Home Safety, 25% of businesses that experience a major disaster never open again. Businesses with electronic data are even more at risk, with more than 90% of those unable to access their data for one week going out of business within 12 months.

Yet it seems that many businesses are not effectively secured against these risks. According to a recent survey by Nationwide, around two-thirds of small businesses don’t have a proper disaster recovery plan despite 50% of owners saying it would take their business around three months to recover from a natural disaster.

Disaster planning involves drawing up a recovery plan for your business that mitigates potential risks as well as taking out the right insurance policy to cover you in the event of a disaster. Risks to businesses will vary according to industry, region, business size and several other factors but an effective disaster recovery plan should include the following:

  • A list of potential disasters that could occur along with measures taken to minimize them
  • An inventory of business assets that would be difficult to replace in the event of a disaster
  • A plan of action detailing what is to be done in the event of each type of disaster happening
  • A plan for how to respond to get your business running again as soon as possible if hit by a disaster

The US Small Business Administration has a disaster planning section on its website which contains a number of useful resources to help small businesses prepare against disasters and emergencies. These include tip sheets to prepare against a range of disasters such as hurricanes, winter weather, earthquakes, tornadoes, fires, floods and cyber risks.

The next step is getting sufficient insurance that will protect you against business-threatening disasters. Something like a Business Owners Policy (BOP) can be used to mitigate a variety of risks and is often a cost-effective option for small and medium-sized businesses as it packages together multiple coverages.

A BOP includes Business Interruption insurance, which covers loss of income and enables you to meet financial obligations if a disaster halts your business operations for a period of up to 12 months. It covers a range of costs including rent, employee salaries, and relocation costs. A BOP also includes property and liability insurance and there are optional add-ons that can be tailored to suit your business needs.

You can find out more about Business Owners Policies and get a free quote here.