Tampa – Whether it’s terrorist attacks, earthquakes, hurricanes, or any number of disasters, businesses are unable to recover unless the business owner makes good decisions about recovery. The largest losses to the business come in the years after the disaster and not from the direct damage of the disaster itself.
“Fundamental changes in the community will already have begun,” said Dan Alesch, professor emeritus and director, Center for Organizational Studies, University of Wisconsin. “Neighborhood trends that had started before an event such as Sept. 11, are likely to speed up. The neighborhood will change forever, even if the buildings are put back just the way they were before the disaster. A new set of relationships, new neighbors, and new business patterns will develop. The businesses that survive will be those whose owners and managers understand and adapt to the new business environment.”
Alesch, who spoke before the 2002 Annual Congress for Natural Hazard Loss Reduction, sponsored by the Institute for Business & Home Safety, said some businesses close during or immediately after an event and never reopen. “Most reopen for a few months or a few years, but eventually fail when the owner runs out of savings, credit, options and hope.”
Alesch said that often businesses, such as those affected by Sept. 11, fail because of the adverse effects on customers. “Many people who lived in the damaged area and either lost their homes or experienced other losses moved away, many of them permanently. Volunteers and others were there to help clean up, but they, too, disappeared as the physical evidence of the disaster was trucked away,” he said, adding, “Often the customers are no longer there to purchase the firm’s goods or services or there are losses to property, process or inventory that cannot supply customers’ needs. Some of these companies may not have been in good financial shape before the disaster and this was just the final straw.”
Among the factors that significantly contribute to business failures are:
- The effect the disaster has on the customer base.
- The kinds of products or services the business provides.
- The businesses’ inability or unwillingness to respond appropriately to the new, post-event environment.
- The overall financial strength and stability of the business before the event.
- The owner’s inability or unwillingness to recognize the options available.
According to Alesch, businesses must do a simple risk assessment before disaster happens. “Cover your assets to protect your options,” he said. “Practice smart management including developing a simple disaster plan, back-up of critical information and protection of critical business systems and the ability to restore them.”
According to Alesch, it is possible if an owner takes the right steps to not only survive a major disaster, but to achieve real business viability in the post-event environment. “Companies must keep their options open. Do not rush to reopen unless it makes very good business sense,” he said. “Beware of political rhetoric, group influence or cheap advice. There is often social pressure from other business people in the damaged area to get back into business and make things like they were before.”
“Perhaps the most difficult factor for a business owner to deal with is recognizing the available options. Many owners fail to see that they have alternatives available to them; in doing so, they severely limit themselves and their potential responses to the disaster,” he said. “Too many business owners, like those in Manhattan, simply continued to do what they had done before the disaster. Their failure to consider the available options made it difficult to respond appropriately to the new environment.”
Alesch noted that some entrepreneurs did consider the options available to them. “In doing so, they were able to devise or, in some cases, they just happened upon, recovery strategies that enabled them to avoid almost certain failure.”
Alesch said business owners need to identify and think through all their options. “You can walk away, liquidate, sell or transfer your business, retire, work for someone else, start a new business with a new plan or reopen with a new business strategy and a new plan,” he said. “Only you know how strong your business was before a disaster. If you were losing out to the competition before the disaster, there is no reason to believe you can do better after the disaster,” he said. “If your firm was doing well, becoming more profitable each year, chances are you can do well after the disaster, provided you can retain customers in the unsettled times after the event.”
“It takes a lot of energy and commitment to start a new business,” said Alesch. “Following a disaster, it usually takes that same level of commitment and energy to revitalize a business that has suffered. Business owners need to ask themselves whether they still have the drive needed to do it again. Decide on your options, develop a strategy, make an action plan – and move on.”
IBHS is an initiative of the insurance industry to reduce deaths, injuries, property damage, economic losses and human suffering caused by natural disasters. Free disaster planning and protection information is available on its web site, www.disastersafety.org.
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