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A Few Lessons from Hurricane Sandy
Hurricane Sandy was one of the most damaging hurricanes recorded in U.S. history.The hurricane caught many by surprise and unfortunately many were not prepared to handle the challenges that came with it. Businesses throughout the northeast had to deal with power outages, lost revenue, layoffs, and more.
Although it is impossible to escape all challenges that can come with a natural disaster, many risks can be mitigated if a plan is put in place. A well thought out risk management plan may make the difference between a business that closes and a business that stays open after an emergency.
Below are some lessons learned from hurricane sandy that will better prepare you for potential emergencies in the future:
Put in Place an Emergency Fund and Have Access to Credit:
In the event of an emergency, one contingency plan that all businesses should have in place is an emergency fund. When hurricane Sandy hit, thousands of businesses were interrupted, yet many were still on the hook for expenses such as rent, salaries and inventory. Given the above, all business should follow conventional financial wisdom and allocate at least 6 months of operating expenses in a high interest savings account for the purpose of emergencies. If you don’t have an emergency fund you should start small and set up an automatic savings plan so that your emergency fund contributions are made without thinking about it.
In addition to having at least 6 months of operating expenses saved in a high interest savings account, businesses should also be able to access credit for emergency purposes. You should never assume that your emergency fund will be sufficient to cover all of your expenses while recovering from an emergency. In order to qualify for credit from a lender you will have to fall within their criteria for what they consider to be creditworthy. Each lender has different criteria, but here are some points to keep in mind.
- Keep an eye on your credit score: It is important to make sure that all owners of your business maintain good personal credit scores. Every lender has a different credit score threshold that will warrant an approval for a loan. Some lenders accept a credit score at 525 or above, while others will accept a credit score at 650 or above. You should check your credit score at least twice a year and make sure you are doing all you can to keep them as high as possible, so that you will avoid any issues accessing credit in times of an emergency.
- Be able to show cash flow: In order to get approved for credit, a business has to show a lender that they have adequate cash flow to support the monthly repayment of the desired loan amount. There are different ways to show cash flow, including tax returns, bank statements and interim financial statements to name a few. It is important that businesses accurately report on their tax returns and financial statement and show healthy bank balances in order to increase their chances for getting approved for a credit.
Backup Your Records:
As a result of the flooding and damage caused by Sandy, many business owners lost important business and personal documents such as tax returns, receivable/payable reports, insurance documents, vendor reports, and organizational documents, to name a few. These and other documents are essential and needed in order to operate and to apply for support in case of an emergency.
Important business and personal documents need to be protected from the risk of flood, fire, and other perils. In addition to keeping a hard copy of your documents, it is important to leverage technology by backing your documents up on your in-house servers and on the cloud. Cloud computing backs up your documents on third party servers like on Amazon, Rackspace, or Dropbox.
Talk with your IT professional about how you can protect your documents and data through both in-house servers and on the cloud.
Assess Your Insurance Needs
Many businesses affected by Sandy had insurance policies but could not get a pay-out because their policies did not cover flood and/or business interruption.
Reviewing insurance policies can be a headache, but it is important that all businesses take the time annually to review their policies to understand what is covered and what not is covered under their policies and to identify any changes that need to be made. Do you have coverage in case your business operations are interrupted? Does your policy cover flood?
Set up an appointment with your insurance specialist today to review your insurance needs and current coverage.
Other Lessons Learned:
- Diversify your vendors. Even if your business is not directly impacted by a disaster or emergency, your business can still be negatively affected if your vendors are directly impacted. Having multiple vendors that you can rely on will minimize your risk if one of your vendors businesses is interrupted because of an emergency.
- Have a business continuity plan in place to minimize the negative impact on the day-to-day operations during emergencies. Include how you will take care of your employees in the event an emergency in your continuity plan.
Recovering from a natural disaster is never easy, which is why we advise that all businesses put together a plan to mitigate risks in the event of an emergency.
Please call your local NYC Business Solutions Center to learn more about services for companies affected by Sandy .
We would also like to hear about the lessons that you learned, if you were affected by the hurricane - please drop us a note in the comment section below.
Lloyd Cambridge is the Center Director of NYC Business Solutions, Queens Center. Please drop Lloyd a comment below. And, don’t forget to share this with your network via Facebook, Twitter, LinkedIn, email, and your favorite networking sites.