Disaster There Are a Number

Disaster

There are a number of steps that small businesses can undertake that can help to minimize their vulnerabilities to disaster. In order to determine these steps, the vulnerabilities need to be understood. There are two main types of vulnerabilities -- asset loss and revenue loss. The steps to address asset loss can roughly be categorized as prevention and insurance. Diversification is the main means of reducing revenue loss.

Asset loss can come from destruction of goods and property, post-disaster theft and looting or other forms of destruction. Insurance can cover the losses from a disaster. A well-written policy will provide a means for a business owner to be reimbursed for losses stemming from a disaster (Accenture, 2010). Owners can also take steps to mitigating their losses. Some of the systemic steps can include maintaining low inventory levels and operating from sturdy, secure facilities that can withstand many disasters. An example would be building an earthquake-safe warehouse if the business is in an earthquake zone. In addition, firms can also move inventories in advance of a disaster if the risk of that disaster is known (such as a hurricane). If these steps are undertaken, the assets of the town's companies will be better preserved than if these actions are not undertaken.

Another form of asset loss is with respect to human resources (Momani, 2010). Staff may be killed or injured, or may simply leave the areas. Businesses should therefore have a recovery plan that involves not only building back the business, but re-building the staff with qualified people.

In addition, there are a number of steps the town council can enforce, or that the town's businesses can undertake voluntarily. Specific care and attention must be made to ensuring that the town's businesses are not inherently vulnerable to disasters. For example, the town could refuse to zone a flood-prone area for commercial purposes. Building codes can ensure that the physical infrastructure of the town's businesses is able to withstand the most important disaster threats. Firms can also undertake these measures voluntarily. In addition, the town's businesses can work together on disaster preparation and disaster recovery initiatives, such as ensuring that window protection boards or sandbags are easily available on short notice in hurricane or flood prone areas.

In the wake of a disaster, a business is likely to suffer from a reduction of revenue, until the normal business climate returns. In some cases, the normal business climate may take years to return, and the loss of business will be prolonged. The loss of business can be insured against to some degree, but there are also systemic steps that can be taken to mitigate the damage. Having a low debt level can help a business to survive a post-disaster slowdown, because the business will still be able to meet its financial obligations even with reduced revenue streams. Diversification, in particular geographic diversification, can help as well. A small restaurant operator with three restaurants in Miami is more susceptible to business failure post-hurricane than a restauranteur with three locations spread between Miami, Tampa and Orlando, since any given hurricane will only close one restaurant in the group instead of all three.

Within a single small town, there are also steps that can be undertaken. All of the businesses in the town are likely to suffer in the event of a disaster. The businesses or the Chamber of Commerce could, however, set up a disaster relief fund that the businesses put money into, and this can be released in the event of a disaster to stabilize cash flows until insurance payments are made or until business returns to normal.