Surviving a disaster

By LINDA WHITNEY FOR MAILONLINE
Updated: 19:00 EST, 19 September 2000

The fuel shortage brought many small firms to the brink of disaster. Dwindling fuel supplies put their customer and stock deliveries in peril and prevented their staff getting to work.

Worse, there is little you can do to reclaim any losses. Your company insurance package may include cover for business interruption but to claim, you must have suffered physical loss or damage, such as from a fire or flood.

The Association of British Insurers says you can't claim if you - or your suppliers - simply ran out of petrol, unless you have a very sophisticated policy that covers this specific risk.

But there is one positive thing you can do - use the experience as a spur to think about disaster planning. How would your business survive a catastrophe such as a major fire, flood or burglary?

Don't think it can't happen to you: research by insurer Zurich shows that, over five years, one in five medium- sized businesses will suffer a major disaster, and of those that have a big fire, eight out of ten will not survive.

The number of smaller firms which go under may be even higher. Yet nine out of ten businesses have no continuity plan and many do not have business interruption insurance.

Fortunately, the firm's insurance was up-to-date and included business interruption cover. 'We claimed about £8,000, which was enough to tide us over,' he says. 'Some of our competitors also offered to help out, but we didn't need to take up their offers.' Now he is far more risk-aware, checking his insurance is updated regularly and dividing stock into smaller stores around the factory rather than keeping it all in one place.

What's needed is a plan to see you through a disaster. Companies specialising in this - your insurance broker may be able to give you names - typically charge at least £1,000 though your broker may help, for a fee.

Zurich Commercial sells 'bounce back' software which helps you draw up the plan. It costs £450 from Zurich partner brokers and the price includes a consultant to install it and get it started.

If you want to save money and do your own continuity plan, here's what it should cover:

• Which are the critical tasks and who will do them.

• Up-to-date contact details for key employees.

• Details of all plant and equipment, eg, manufacturer, serial number, warranties, where they (or spare parts) can be bought or hired. Don't forget that vital data needs back-up, too.

• Sources (and alternatives) for vital equipment or raw materials and delivery times. If these are long, try to find others in your industry and agree to cover for each other's problems. Don't assume competitors won't help.

• Insurance details - does it include business interruption?

Check you have enough cover - work out your gross profit (turnover less the stock you would not need to buy if no longer trading) and get cover for that for however long it takes to get back in action.

Your insurer may help minimise costs by, for instance, finding new sources of supplies or paying for vital stock to help you get started again.

• Contact details for important customers, so you can tell them about the problem immediately and the steps you are taking to rectify it. It is important that you don't leave them in the dark. Consider hiring a PR company to help maintain your reputation.

Once you have worked out a plan, it's vital to test it regularly so you can see which parts need changing and so new staff under-stand what to do.

The worst way to test your plan is by using it for the first time when disaster strikes.