As seen in The Legal Intelligencer
With spring in full swing, it has brought with it a number of significant natural disasters. From monster wildfires to tornadoes and flooding, parts of the country have been dealing with significant challenges from Mother Nature. While immediate focus and concern at the time of these events is on human safety and infrastructure damage, the long-term impacts can result in significant economic fallout.
Natural disasters have economic consequences for the direct impacted region, but in today's global world these impacts often extend well beyond the area that received the most physical damage.
Following this type of event, businesses can be closed for extended periods. Business closures drive a rise in unemployment; and unemployment drives a decline in consumer spending. As you can see, a difficult cycle begins.
Consider, for example, the current wildfire near Fort McMurray in Alberta, Canada. This fire has been devastating. With more than 88,000 people evacuated and more than 1,600 structures destroyed, the whole community is struggling. Many of the people in this community are employed by the oil and gas firms in the area. In response to this disaster, these firms are focusing on evacuation and homelessness amongst its employees. Many have slowed or shut down production.
The impacts of this event will likely expand into the global arena. Diminished production and concern over time needed to recover, are already being considered in the market.
While no one has the ability to control a natural disaster, businesses can do a better job in preparing for it. The key to better preparation starts with understanding the economic impacts a disaster could cause to the business. A business should evaluate its risks and consider what options it has to mitigate risks.
Risks are wide-ranging and a business should evaluate them from different perspectives including operational, strategic, and financial views. Consider the severity of the risk and the overall impact it could have on business operations. Businesses that have response plans are more likely to have better recovery.
Recovery is often multi-pronged. Getting back into operations is the primary focus. Considerations related to this area include data storage and recovery. Can a business access the files and information it will need following a natural disaster? Communication is also an important subject. Does the business have a plan to communicate with employees, clients, and other organizations if a disaster strikes?
Another prong of recovery often involves seeking financial compensation under an insurance policy. It is important for a business to understand the coverage the insurance policy provides, and to understand what will be needed to be compensated. Documentation and information is critical in supporting an insurance claim. As such, having a plan for data storage and recovery adds value here as well. If an event occurs, a business needs to begin tracking the impacts on its operations as quickly as it can, and documenting those impacts. Statistics show that many businesses do not reopen after a disaster. Preparation can help a business be the one that does reopen. Preparation also brings a greater understanding of the impacts an event can cause and how a business can be successful in response to the event. Considering all the recent events, isn't now a good time to think about your risk?
Reprinted with permission from the May 16, 2016 issue of The Legal Intelligencer. © 2016 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.