5 Tips on How to Protect Your Business against Natural Disasters

Natural disasters can often be predicted, but sometimes they can hit without any warning at all. When they do so, they can completely dismantle community structures and business operations – especially those relying on supply chain utilities.

In 2011, for example, a tsunami devastated the east of Japan, forcing businesses to shut down temporarily. Among them was a major supplier of automobile parts. The companies that relied on this supplier were forced to cut down on production leading to a dent in revenues.

 

Disruption of the supply chain is not; however, the only havoc raked by natural disasters. Other unfavorable outcomes include:

 

  • Death of personnel and damage to business plant and property.

 

  • Delayed deliveries due to impassable highways, rails, and ports.

 

  • Power shortages.

 

  • The high cost of raw materials due to short supply with increased demand.

 

Business Interruption risk and property risk, therefore, remains on high alert due to such weather extremities, and unprecedented loses. And while companies may be able to assess and predict technical and commercial risks, it’s always been tough to deal with or predict natural disaster risks.

 

But all that is changing thanks to the improvement in technology that allows for robust scenario analysis and stochastic modeling to map out business aspects like the supply chain leading to insight on the vulnerabilities. As a business stakeholder, you can use such insight to support various decisions and implement comprehensive disaster emergency plans like:

 

1. Diversification

Make use of the insight gained from mapping and studying supply chain vulnerabilities to diversify accordingly. This can involve giving some proportion of your business to alternate suppliers in various locations so materials can still come in when one supplier is down.  

Additionally, businesses can set up several plant operations in different parts of the world so that if one is hit and goes down, the others pick up leading to operational continuity.

 

2. Integration and Backup using Technology

Integration involves setting up the business so that operations are carried out holistically and decision making gets done swiftly. Modern day software can help learn dependencies and outcomes leading to the holistic fusion of various business, thereby eliminating gaps in decision making and information dissemination.

You can then communicate smoothly with your customers or suppliers and calm them down in case of temporary delays. Technology also allows for backing up of records that you can use to recover after your business operation gets hit.

 

3. Building a rapport with on-the-ground NGOs

NGOs on the ground can help you know what to expect after a disaster as many of them do a heavy analysis of scenarios too. NGOs can provide answers on risks and also help set up evacuation plans in case of crisis so you don’t lose personnel and equipment.

 

4. Stockpiling

Scenario Analysis can inform on possible future outcomes and set up buffers against extreme scenarios. Pre-positioning your inventory in anticipation of the worst scenario is also a way to ensure business continuity. Stockpiles will be the cushion against logistical problems due to natural disasters. Products from stockpiles can be used to cater for demand until normal business production resume.

 

5. Getting Sufficient Insurance Cover

A sufficient business Insurance is one that covers plant rebuilding costs, personnel as well as business disruption. When you get your business cover, you should, therefore:

 

  • Include a cover for loss of profit in case of business interruption.

 

  • Include a cover for injuries to personnel

 

  • Include cover in case of extra expense – spending more than your average operating expenses in times of disaster.

 

  • Get property insurance to cover certain items and throw in some separate earthquake, flood or fire insurance whatever is common where you are

 

In retrospect, the risk temperature has increased in recent years as natural disasters now rake havoc around the world frequently without warning. The U.S, for example, has seen hurricanes and floods risks scores increase over the past decade as major coastal cities have been hit by the natural disasters leaving communities in disarray.

 

Businesses, however, can survive such disasters if they remain proactive in implementing comprehensive risk management plans. You just have had to dust off and execute your business continuity plans rapidly, and in some cases, improvise a whole series of actions to protect and evacuate your employees while at the same time safeguarding assets.

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