| By Bill Boyd

One-third of businesses fail within the first year after a disaster, and another third fail within five years. Companies that plan for emergencies greatly increase the likelihood of staying in business.
One-third of businesses fail within the first year after a disaster, and another third fail within five years. Companies that plan for emergencies greatly increase the likelihood of staying in business.

Catastrophic events come in many forms — from natural, weather-related disasters to the emerging, man-made risks of cyber attacks.

Whether it is the loss of property, a disruption to supply chains or the breach of sensitive data, these events can have profound and significant impacts on a business, potentially leading to the long-term loss of income or even permanent closure.

Recovery from these disasters is dependent not only upon adequate insurance coverage for your business, but also on proper planning that addresses property exposures, and the development of a thorough continuity plan that ensures your business carries on.

A comprehensive plan focuses on many aspects of a business, but two of the leading causes of concern for business owners involve protecting their properties from weather-related risks and safeguarding sensitive data.

New emerging risks such as microbial contamination or secondary contamination are becoming major contributors to environmental risk claims.

Prepare for weather risks

Even if your business made it through the winter season unscathed, it’s important to implement a plan for weather-related property damage throughout the year. While hazardous snow and ice conditions may have passed, businesses must be mindful of the winter thaw and spring showers that could lead to flood risks.

In addition to the threat of floods that occur when severe weather hits, snow and ice have been piling up in many areas of the U.S. this winter. When temperatures rapidly increase, so does the rate at which snow and ice melt. As spring temperatures begin to rise, it’s imperative for businesses to create emergency plans for flooding, which could cause costly property damage or disrupt operations.

Now that it’s been made clear that spring comes in like a lion, what steps can businesses take to prepare? Through Chicago-based insurer CNA’s PrepWise preparedness campaign, businesses have access to educational resources and actionable tips to prepare for critical exposures all year round. A few PrepWise tips to prepare for flooding include:

  • Create a flood preparation plan.
  • Keep water out with barriers, sandbags and other devices.
  • Relocate materials from lower levels. In some cases, this may simply mean placing stored items on one or two pallets, or moving items from lower shelves or racks to upper levels.
  • Review shutdown procedures for affected processes, especially hazardous processes.
  • Make sure drainage systems, including roof drains, are open and flowing freely.


Mobile devices

Loss or theft of laptops, tablets and mobile phones are a leading cause of compromised-data situations. (Photo: iStock)

Take steps to safeguard your data

Businesses not only face risks from natural disasters, but also from the intangible risks of cyber breaches. Not a day goes by without news of another high-profile data breach that compromises personally identifiable or sensitive records and information. The potential consequences of a single data breach can range from sizable monetary penalties, negative publicity, interruption of daily operations and loss of public trust.

As a result, it’s vital to develop an effective plan to identify possible exposures to minimize risk.

  • Perform a risk assessment. A critical first step in enhancing data security is to identify system vulnerabilities and understand how data is managed and secured. Have a thorough inventory of the kind of information you have, how much of it you have and where you have it.
  • Educate your team. Everyone is accountable in managing cyber risks, including temporary workers and contractors. Implement a sound internal communication and training strategy on the protection and proper use of sensitive data, including how to recognize and report security threats. Integrate cyber security into employee orientation, with an emphasis on the consequences of sharing passwords, falling for e-mail phishing scams, exposing laptops and USB storage devices to theft, and otherwise neglecting to observe data security policies.
  • Know your vendors. When entrusting personal information to third parties, implement reasonable measures to ensure they have the capacity to protect this information. This means selecting only service providers that are capable of maintaining safeguards for personal information equal to or better than yours, and contractually requiring them to maintain such safeguards. You should also require your vendors to show proof of insurance to provide you with protection if they are the cause of loss.
  • Address portable devices. Accidental loss and theft of laptops, smartphones and tablets are leading causes of compromised data. It is crucial to always encrypt these devices to render the protected information unreadable and unusable in the event of a breach.
  • Make sure you’re properly covered. Insurance is an important weapon. According to the Ponemon Institute, the average security breach costs organizations almost $200 for each record that’s stolen, or about $5.5 million for the typical company breach.

Sometimes, natural disasters and data risks can double team a business. If a bad storm causes a power outage, a business could lose valuable data if not backed up. That’s why it is critical to investigate business interruption contingencies that may help prevent unnecessary financial loss and maintain excellent customer relations.

Limit business interruption

What’s needed to address natural disasters and data risks is a systematic approach to business continuity with an emphasis toward minimizing risk. A solid business continuity plan helps ensure that operations are maintained after a disaster occurs, prevents disruption to supply lines and services for customers, upholds a good reputation, and minimizes legal liability.

According to the U.S. Department of Labor, one-third of businesses fail within the first year after a disaster, and another third fail within five years. Companies that plan for emergencies greatly increase the likelihood of staying in business and getting back to work quickly.

William (Bill) Boyd is senior vice president for risk control at Chicago-based insurance company CNA.

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