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Even though small and midsize businesses may not have the same resources as large companies to finance and implement extensive emergency response and business continuity plans, neglecting to put basic precautions and procedures in place to protect against hurricanes can mean crippling financial losses, experts warn.
“You have to look out for all contingencies,” said Victor J. Sordillo, vp and global technical services manager, loss control services, at Chubb & Son Inc. in Whitehouse Station, N.J.
For example, following Hurricane Irene, “the power loss had a huge impact. Millions were without power for more than a week. That was one of the most easily predictable scenarios, but the one for which most small businesses were the least prepared,” Mr. Sordillo said.
In addition, “most businesses learned that the government can, in fact, impose limitations on your ability to conduct day-to-day operations,” he said, referring to the extended period during which local authorities ordered businesses to shut down before the hurricane made landfall. “So many global companies are located in the Northeast. The hurricane may be hitting New York, but you still have obligations around the world.”
Loss mitigation is especially important for catastrophes that cover a large geographic area, such as Irene, since it can take days or even weeks before claims adjusters will reach affected properties, said Alice V. Edwards, a partner in the Atlanta office of Dempsey Partners L.L.C., a firm that provides post-catastrophe forensic accounting services to businesses.
“In Hurricane Irene, it took days for adjusters to get out to some people's businesses,” she said.
“Regardless, you have to do the best you can to protect your business. For example, coverage for mold is quite restricted. So it's important to have a contractor come out and prevent mold from growing” following flood or water damage. “If you and your insurer have already agreed on a local restoration contractor or roofer, it's going to save you a lot of heartache on the back end,” Ms. Edwards said.
Small and midsize businesses often “haven't thought about who in the business is going to take charge of a claim, especially if they don't have a risk manager. One of the most important things you can do is to put a team together and decide the roles and responsibilities of the team” before a storm occurs, Ms. Edwards advised. The team should include someone with project management expertise, which is important to meet timelines.
“These are the types of things people in Florida know, but we haven't had enough practical experience in the Northeast to take these things for granted,” Ms. Edwards said.
“Flooding and loss of utilities were the two biggest issues” that businesses confronted, said David H. Gluckman, senior risk control consultant in the strategic outcomes practice of Willis North America Inc. in Morristown, N.J., who spoke last November at the Morris County Chamber of Commerce's “Lessons from Irene” conference that was designed to educate local businesses on disaster preparedness.
“Businesses came to a halt. There was no planning in place for backup generators, emergency response and communication with employees to tell them not to come to work,” Mr. Gluckman said. With the power out, cellphones could not be recharged and there was no Internet access. “Generators weren't readily available after the event. It was just like trying to buy snowblowers after a snowstorm.”
But at least one midsize business in Hurricane Irene's path was adequately prepared, said Mike Lebovitz, senior vp of Affiliated FM, the division of Johnstown, R.I.-based Factory Mutual Insurance Co. that serves the middle market.
“We had a retail client with a number of locations exposed to the area of Hurricane Irene who prepared in advance of the hurricane by providing emergency generators for their locations...and trained employees how to ring up purchases without all of the usual electronic cash registers and communication in place.” As a result, the retailer “had very minimal damage” and “very little loss,” said Mr. Lebovitz, who declined to identify the business.