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The Best Time for a Business Disaster Plan?
Before the Disaster Happens
Before 9/11 and Hurricane Katrina, the concept of a business
"disaster plan" was envisioned mainly in terms of
weather- or fire-related disasters and heavy on the notion of
evacuation.
The concept of business risk today is so much wider — legal
threats from inside and outside the company, computer-related
losses, regulatory threats, and of course, the potential of
human and facility losses due to natural disasters or the
possibility of terrorism. There really is no one-size-fits-all
approach to dealing with business risk — variables like your
business size and structure and personal issues like your age,
health and your time to retirement also factor into what should
be a very customized risk management plan.
If you are starting a business or already own or co-own a
company, the first steps in creating a disaster plan should
involve separate visits to tax, insurance and qualified
financial advisers. A CERTIFIED FINANCIAL PLANNER™
professional with specific expertise in helping business owners
plan their finances is a good place to start. Here are some
general issues you should consider in developing an overall
business disaster plan:
Your plan depends in large part on your industry and
business structure. A three-person law partnership may have
a completely different risk profile than a sole proprietor
working out of his attic or the owner of a body shop. Whether
you use expensive equipment in your business or if all you
produce is valuable ideas on paper, you need to take specific
steps to protect the value of your business assets in tandem
with your personal finances. This process should start with a
financial review to review how to protect your home, your income
stream and your retirement savings if particular scenarios
happen.
Develop a "what if" list. Be as imaginative
and as negative as possible about this. Consider every possible
event that could hurt you or your business — what hurts one
automatically hurts the other. The first question — what if you
died or became disabled tomorrow? Others might refer to some
specific physical plant or computer risks as well as employee or
customer risks that could affect your future operations. A good
way to make the list is to draw a line down the middle. On the
left side, list every possible risk, while writing every
possible remedy for those risks on the right side. Prepare this
list before you meet with experts.
Protect yourself first. If you're a good boss, you
care about your employees and your customers, and we'll get to
them in a moment. But the first step in a business disaster plan
is to review your list of worst-case scenarios and review how
you would protect your home, your health, your retirement, your
kids' education and your estate priorities first. If your
business fails for any reason, all of those critical necessities
could be jeopardized. Make sure you have appropriate life and
disability insurance coverage in addition to a current estate
plan.
Protect your employees second. In a natural or
man-made disaster, lives can be lost. But if you're closed for
weeks and months, key employees may leave and that might be a
greater long-term danger to your company. Talk to your insurance
company about every physical and employment risk your staff
could face in a disaster and see what safety nets are available.
Protect your customers third. If you faced a lengthy
business interruption, how would you serve the customers who are
depending on you? Are there specific customer service and
inventory procedures in place to keep them informed, supplied
and most important, loyal once you're up and running again? Do
you have options for alternate office and production space as
well as resources for temporary workers?
Protect your information. You don't have to be some
high-tech firm to understand the value of proprietary
information that keeps your company running. From proprietary
databases and research to customer credit information, this data
is critical fuel for your business. What's to keep a burglar
from stealing your computers and taking all your valuable
financial, inventory and customer data with them? Better yet,
what's to keep a computer hacker from stealing the information
and leaving the machines behind? Data security and backup
procedures are increasingly important as disaster-planning
priorities. Get help finding the protective measures that fit
your industry.
July 2007 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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