Would your business survive a disaster?

Having a precise recovery plan ready before a disaster can determine whether a business survives.CPA Australia's New Zealand president David Searle said while there are many things companies should consider before a potential disaster, appropriate insurance is among the most important.Several businesses in the Canterbury region, which was shaken by the 7.2 magnitude earthquake bringing many buildings to rubble, had to drop their insurance amid the financial downturn.

Having a precise recovery plan ready before a disaster can determine whether a business survives.

CPA Australia's New Zealand president David Searle said while there are many things companies should consider before a potential disaster, appropriate insurance is among the most important.

Several businesses in the Canterbury region, which was shaken by the 7.2 magnitude earthquake bringing many buildings to rubble, had to drop their insurance amid the financial downturn.

“There are definitely businesses that have let their income protection insurance and other insurance go because of the economic crisis.

“It is those sorts of things that businesses let go when costs get tough which can end up being catastrophic for a number of Canterbury businesses.”

Mr Searle said income protection insurance should never be compromised as “you never know what’s around the corner.”

It is equally critical that businesses back up their files and keep it offsite and regularly test it.

“Backing up your computer systems is incredibly important, Mr Searle said.

“I know of lots of situations where people have gone and tested [back ups] and realised they’ve got a lot of blank information.”

Other simple ways businesses can ensure they are better placed to recover following a disaster include: securing an external computer hardware provider in advance in case your existing computer systems are damaged by a disaster; determining alternative suppliers for your business; and having updated contact information for your staff.

“Everyone is focusing what they can do afterwards but the more work they do beforehand the easier it’s going to be to get up and running after a disaster.

“The more planning you do and the more documentation you have, the quicker you’re going to get back on your feet.”

In response to the Victorian bushfires in 2009, CPA Australia also developed a post-disaster toolkit for businesses to recover faster.

Its emergency guide includes the following steps:

1. Assess the overall damage. Determine if you can trade from your existing premises and what stock, supplies, equipment and other key assets are recoverable and what is not recoverable.

2. Make an insurance claim if you have insurance. Assess insurance coverage and how quickly a claim can be processed.

3. Determine the government support you can access. Seek assistance if eligible.

4. Constantly communicate with and update employees, customers and suppliers.

5. Assess the business’ financial position. Take time to do this before making decisions on whether to reopen for business and if so, how to operate in the new environment. Consider any substantial outgoings needed before you restart. Reconstruct your accounts, determine your cash position and reconstruct your balance sheets, as these statements may be required for insurance claims for business interruption.

6. Evaluate your market. In rebuilding a business after a disaster, assess any changes to the market.

7. Evaluate how your business was run. This is also a time to look at your businesses' strengths and weaknesses.

8. Develop a plan to reopen your business in whole or in part. Determine how much it will cost to reopen your business as planned and continue operations at that level. Determine how you are going to finance the reopening and redraft the plan or exit the business to suit the finances available to the business.

9. Reopen business/exit business (whichever is relevant)

Businesses operating in disaster-prone areas throughout New Zealand can also use the CPA Australia resources available online to develop a disaster recovery plan specific to their business needs.