In 2011, an Illinois-based manufacturer suffered the effects of a disaster after their roof collapsed post-snowstorm. This could have halted production, resulting in a large loss of business income, and created utter chaos amongst employees. But it didn’t. Why? Because the manufacturer had a disaster response plan. As soon as the roof collapsed, all of the chief executives – as planned – fell in line under a single leader, which allowed for things to move faster in the decision-making process. The team understood the desperation of the situation. They moved into a temporary location, utilized a forensic accountant and created a temporary call center. They have since recovered thanks to their disaster planning.
Unfortunately, not all businesses have plans in place. According to the Institute for Business and Home Safety, an estimated 25 percent of businesses do not reopen following a major disaster. Your food manufacturing business needs to be prepared so that it can survive even the most unexpected disaster. To protect your company against such dangers, it is imperative that you have a detailed response plan and practice it.
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Without prior planning, you leave your company exposed to economic turmoil, especially if you are forced to close operations for a period of time. In addition, without a proper plan to cope with a disaster situation, your company may face lawsuits from clients, distributors or employees claiming negligence.
Preparing for a Disaster Situation
It is hard to imagine a large-scale natural disaster affecting your area, but even a small snowstorm or heavy winds and rain can be catastrophic to your business. If your company is not prepared, does not have a plan or looking to improve upon its current preparation techniques, here are some tips:
- Have a time of year where you update your plan. This is a living document that must be consistently reviewed and adapted, especially as seasons change or additional threats come to bear, such as civil unrest.
- Include in your plan information and steps as far utilities backup, mutual aid, disaster recovery services, data backup, internal and external communications procedures, leadership team, business income if production is suspended, backup facilities. ... etc.
- Keep copies of insurance policies and other critical documents in a safe and accessible location, (e.g. a fireproof safe) and document that location.
- Evaluate which disasters are most likely to occur in your area, remembering to include the possibility for terrorist activity or civil unrest. Are you near water? Can there be a drought? Do you typically get snow? Be sure you are prepared for all of the risks you identify.
- Have call lists available for all key personnel so staff members can be contacted during non-working hours from any location. Review procedures for notifying employees that your facility is closed.
- Ensure proper signage is available to stop employees, visitors and the like from entering your facility post-damage.
- Consider establishing an alternate method for your phone service if the switchboard becomes unusable (e.g. forwarding incoming calls to a cell phone or remote number).
- Check available emergency supplies such as flashlights, batteries, emergency generators/fuel, patching materials such as plastic sheeting, wood 2x4s, duct tape, spare fire extinguishers, first aid kits, etc. If you anticipate that any personnel would stay at the facility during/following an emergency, consider stockpiling food and water for their use.
- Identify backups for essential operations and personnel. One of the most important considerations for a manufacturing firm is to have contingent plans for your supply chains. A disrupted supply chain can shut down your business, yet many manufacturing firms fail to plan for this potential problem.
- Test. Test. Test. Testing is essential to ensure that the disaster and continuity plan actually works and that it aligns with current operations and addresses all areas of response. The plan should be tested at least annually, although seasonally is recommended, as cold and hot weather present a wide variety of issues that could be missed.
Ensure you have the following procedures included in your plan if damage is sustained:
- Assess damage
- Make note of any structural damage to building(s).
- Note any damage to equipment, machinery or company vehicles.
- Note any lost or damaged inventory
- As they come to your attention, compile a list of concerns that must be addressed before you are able to reopen.
- Contact employees, suppliers and customers to inform them of any disruptions in operation and an expected date when they can anticipate it to resume.
- If you have concerns that damage to a building could pose a safety hazard to employees or customers, have the building professionally inspected.
- Properly secure the building while repairs are being made or if relocation of business activity is necessary.
- Ensure utilities are restored and in safe working order before resuming business operations.
- Properly repair and clean facility to ensure the environment is free of any hazards.
Here are a few financial considerations:
- File a claim with your business interruption insurance provider.
- Determine the amount of lost income the disaster has caused.
- Compile the following information to share with you insurance adjuster:
- Sales records and history
- Profits and loss statements or income tax forms
- Consider any financial responsibilities you may have, such as payroll or scheduled payments to creditors.
- Keep detailed records of all expenses incurred during the recovery process.
By following the steps outlined above, your food manufacturing company will minimize the risks and fallout from a disaster.
About the author
Jay Shelton is the Senior Vice President of Risk Management Services at Assurance. He is an expert in integrated and enterprise risk management across multiple business industries. He has hands-on experience in performing a full range of risk, insurance management, and compliance functions as well as extensive experience in emergency response, business continuity planning, cyber risk mitigation and breach management. He earned a Masters of Business Administration from the University of Notre Dame and Bachelor of Science in Criminal Justice from Indiana University. He is a member of the Risk Insurance Management Society.