Preparing For Disaster Before It Strikes

May, 2003

Usually, it’s only after disaster strikes that businesses realize how financially ill-equipped they are for any type of catastrophe, be it a hurricane, a volcano eruption or an overseas war. But after-the-fact is the wrong time to discover the importance of prudent financial planning. For without it, many businesses take years to recover from disaster; others never recover at all. Fortunately, there are a number of steps businesses can take to prepare for the economic fallout of most major disasters.

Cash Is King
It makes good financial sense for businesses to have three to six months’ worth of readily accessible cash. It might seem excessive, but many businesses may encounter post-tragedy dry spells, and cash reserves will pull them through the hard times. “Cash reserves should be part of every business’ readiness kit, so they don’t have to close their doors,” says Clayton Kirio, president of Kirio & Co. Inc. “If businessowners need to refinance something to get cash, do that. Or maybe hold off on buying equipment. It’ll save them in a crunch, and those who are prepared will also be in a better position to prosper after the economy rebounds.”

Virtual Office
After Sept. 11, many of the companies in the World Trade Center had to relocate. Kevin Kaiser, senior advisor of Colorado-based Summit Wealth Group, suggests having a backup plan in the event businesses aren’t able to physically operate in their buildings. “If something were to happen to our [firm’s] physical office, we could turn our practice into a virtual office and be 90 percent operational within hours,” he says. Kaiser suggests making important files and documents Web-accessible, forwarding calls to cell phones, and meeting via conference calls or Webchats.

Data Recovery
Information is the lifeline of most companies, and more often than not, they do not adequately back up vital data. “Businesses shouldn’t rely on their filing cabinets to protect their documents in the event of a disaster,” says Summit Wealth Group’s Kaiser. “This means backing up server data to an off-site location. It also means backing up hard copy data in a nonpaper format.” His company electronically images all documents, then saves them to both on-site and off-site servers and backs them up on disk.

Make Friends
Most businessowners are, at the very least, on fairly good terms with their creditors. In the event of a crisis, however, it’s a good idea to be a lot chummier. “In case of an emergency, people may need to look at all possible ways of accessing money, which may mean borrowing,” says Vernon Wong, field vice president for American Express Financial Advisors Inc. “If creditors know a business and its owner and feel the lines of communication are open, they may provide the company some leeway in case of an emergency.” They may be more likely to either reduce or defer payments on existing loans as well.

Stay Home
As of mid-March, gas prices in Hawaii were inching their way up toward $2 per gallon. “An oil embargo or cutoff could cause even higher gasoline prices or a fuel shortage,” says Orest Saikevych, investment advisor with Denis Wong & Associates. But cost-conscious business types needn’t trade in their gas-guzzling SUVs just yet, thanks to technology. Saikevych recommends people meet clients at home or telecommute using a laptop and cell phone. Swapping business trips for teleconferences will also shave a few dollars off the top.

Share The Plan
It sounds axiomatic that businessowners should share contingency plans with their employees. But when keeping track of all parts, it’s easy to lose sight of the bigger picture. “Whether it’s a casual conversation, or a formal, written plan, businessowners need to communicate their business continuity plans with their employees,” says Terri Fujii, partner of Ernst & Young LLP. “Decide which employees need to come to work should something happen, because it may be difficult to reach them afterwards.”

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Jacy L. Youn