No one likes to think about bad things happening to their company. But in reality, catastrophic events occur on a regular basis. Fires, windstorms, blizzards, and other natural or manmade disasters can seriously affect a company’s ability to continue normal business operations. Some companies never recover. Having a business continuation plan and appropriate insurance often are the difference between a company making a full recovery or closing its doors forever.

The first step that a company should take to ensure its survival after a catastrophic event is to have a written plan. These plans frequently are referred to as business continuation plans, disaster plans or emergency preparedness plans. Boilerplate business continuation plans are available from a variety of resources, including the federal government (www.ready.gov). Advanced planning is key, because when a disaster strikes, a firm rarely is afforded the time or the clarity of thought to deliberate over important decisions.

A business continuation plan will identify which operations, personnel and suppliers are key to a company’s survival. The plan should address what operations can continue from another location should the company’s primary location become temporarily unusable, and identify potential alternative locations. The plan should discuss the offsite backup of vital business records (accounts receivable, accounts payable, customers lists, etc.), and how long it would take to have critical systems back in working order. The plan also must address how the company would obtain temporary replacement vehicles or equipment in an effort to minimize any service disruption. Finally, the plan should identify the roles and responsibilities of key people within the company relating to business continuation.

Even with a good business continuation plan, there always will be some type of negative financial impact on a company that suffers a catastrophic event. Because of this, most firms choose to purchase some form of commercial insurance. In most cases, a waste company will purchase property coverage to insure its building and the building’s contents; commercial auto physical damage coverage to insure trucks and other on-road vehicles; and inland marine coverage to insure mobile equipment (wheel loaders, excavators, cranes, skid-steers, landfill compactors, etc.). It is important to remember that most commercial insurance coverages only pay for the actual cash value of the item lost or destroyed. Thus, a firm that operates primarily older vehicles and equipment may find it more difficult to rely solely on insurance to cover the cost of rebuilding its fleet.

While protecting the value of the buildings and contents, the vehicles, and the mobile equipment with insurance is a good start, there are other costs and expenses associated with a disaster for which a waste company may want to purchase insurance. Certain business expenses (utilities, bank notes, certain payroll, etc.) will continue even if a company’s operations halt completely for a period of time. Additionally, there may be extra expenses (vehicle and equipment rentals, rent at a temporary location, additional labor, etc.) during the post-disaster restoration period. Business interruption insurance and extra expense insurance can be purchased to cover the loss of profits and extra expenses incurred while a business is getting back on its feet after a disaster. It is best to speak with your risk manager or insurance agent about how these coverages may be beneficial to your company.

Bruce Hooker works for Mattei Insurance Services, Inc. based in Sacramento, Calif.

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