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Natural disasters

Putting precious time into planning for a natural disaster may seem like a low priority. It shouldn’t — fires, floods and earthquakes can strike at any time. Unless you plan ahead, they pose a huge risk to your business. 

Identifying the risks to your business

Before you draw up a disaster recovery plan — also known as a business continuity plan (BCP) — think about what your business will need for it to keep trading.

Those needs may change as you move from business survival mode in to recovery and then a return to business-as-usual. Some things may not be so important in the short term, eg premises, if staff can work from home.

List of disaster risks

Use this list to assess how your business might cope after a disaster. The main things to think about are:

  • How long can we do without ____?
  • Is there an alternative?
  • How could we set up a contingency now?

Premises: Could staff work from an alternative site or home if your current premises can’t be used? Ask your main suppliers, customers — even competitors — if they could spare room in their premises.

Staff: If you have staff, could your business continue without some or all of them? List the main duties of all staff — or, better still, get them involved by doing it themselves.

Transport: If your business uses transport to deliver products or services, being without it is a huge risk. What are the alternatives? Can you rent vehicles? What if the port, airport, road or rail system is disrupted? Could customers come to you in the short term?

Equipment: If you rely on your own equipment to make products, eg as a bakery relies on ovens to bake goods, could you borrow or rent alternative equipment or premises?

Computers/printers: Could your staff use their own computers and printers for work if business computers are out of action? Find out who has them — the business can reimburse them for internet use.

Files: Access to your business data — customer details, emails, files and spreadsheets — will be critical to your business survival. If you store data in the cloud, you can access it anytime and anywhere there’s an internet connection. Make sure at least one copy of your data is stored offsite. Read more about Storing and protecting data.

Customers: You’ll need to keep talking to customers after a disaster. Ask yourself what’s the best way to contact customers. How will they contact you if phone systems are down or you’ve relocated?

Cash: Small businesses usually have better uses for cash reserves than putting it aside for disasters. Talk to your bank manager about how to manage cash flow through a disaster, eg how you’ll pay suppliers, rent and staff if you have to stop or scale back trading.

What would happen to your business if a key supplier is affected by disaster? Look at other suppliers you could turn to in an emergency.

What would happen to your business if a key supplier is affected by disaster? Look at other suppliers you could turn to in an emergency.

What your plan should cover

Note what you’ve learned from compiling the list of disaster risks in the previous section. You can now look at what to do during and immediately after a disaster.

Emergency procedures

What will you and your staff do if a disaster strikes during business hours? Your plan needs to include:

Staff evacuation: Be clear about the procedure to follow in an emergency. Make sure staff know what to do in case of:

  • Fire: If you own your premises, you must establish and maintain an evacuation plan for fire threats. If you’re a tenant, you must follow your landlord’s evacuation plan.
  • Earthquake: Unlike fire threats, it’s dangerous to evacuate staff outside during and immediately after an earthquake. 

Assembly: Decide on a safe place to congregate that’s close to your premises. In a major crisis, staff will want to be with there families. So, make a planfor staff to leave and check on family and friends.

Wardens: Make specific staff wardens responsible for counting all employees and visitors, eg sub-contractors and clients, after an evacuation. Have alternates in case of absence.

Contacts: Compile a list of relevant contacts, eg emergency services, clients, suppliers and your insurance company.

Welfare: Have a procedure to handle injuries. There should be a medical kit on hand for minor injuries. Identify the nearest medical facility for anything more serious.

Safety: Make sure you have a plan for contacting staff to let them know when and where to report to work. Plan for an alternative premises or work arrangements if it’s deemed unsafe.

Supplies

Assess your need to stock emergency supplies. If you’re in a remote location it’s worth thinking about installing a Civil Defence cabinet. These are designed to hold emergency supplies, eg water, blankets, rope, torches, dust masks and gloves.

Don’t let your plan gather dust on a shelf. It must be a living document that gets updated as your business grows and new information comes to light.

Run test drills: Schedule dry runs regularly, but also throw in drills without notice. Discuss how these went and improvements you can make. Use different scenarios to cover fires, earthquakes and other hazards. 

Discuss the plan with staff: Get all staff involved in talks about emergencies. Make sure everyone is clear about their roles and what they should do.

Set up a team: Assign the job of looking after the disaster plan to a team — preferably drawn from across your organisation. It can lead all-staff discussions and keep the plan updated. 

Getting your business through a crisis

It’s normal for businesses to find trading hard if not impossible during and after a disaster. That’s why you must plan in advance how your business can recover and return to normal if disaster strikes.

Tips on business continuity planning 

Size matters

The size of smaller businesses and their ability to adapt quickly to change can be huge advantages after a disaster. However, small businesses are less likely to have money in the bank to get them through periods when they can’t trade.

For small businesses, it’s important to build relationships with other businesses, eg suppliers, and the wider community to call on when in need. To find out more about how to make your business more resilient, visit the Resilient New Zealand website. (external link)

Closing your business

There may be many options apart from closing your business, including:

Investigate all options and only think about close down as a last resort.

Staff

If it becomes impossible to keep your business running you may want to lay off or stop paying employees. Like closing down, this should be a last resort. For more information, our Employment Agreement Builder covers major natural disasters in the force majeure clause (external link) .

Insurance

Check what cover your business has in the event of a natural disaster. Give attention to:

Contents: Replaces your office supplies, computers — anything you can quantify.

Building: Replaces the work premises if you own it.

Business interruption insurance: This policy is designed to keep your business open through a crisis, even if it stops trading. It can cover things like:

  • reduction in gross profit
  • increased operating costs
  • wages.

Talk to your insurer about the different options available.

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