Preparing for Disasters Saves Money

Finding the most cost effective way in which to manage expenditures within a business is the goal of almost all company owners. Unfortunately, this can lead many of them to skimp out on disaster preparedness strategies due to the often expensive short-term costs of implementation. These company owners frequently fail to see that disaster preparedness can not only save them money in the long-term, but can be the difference between a business that fails and one that succeeds.

Disaster Management

Business destroying disasters can come in any way, shape, or form be it a major natural disaster or a human caused one. According to the IRS, upwards of 40 percent of businesses in a local area never reopen after a major disaster because of oversights or a lack of preparedness. For instance, if the company computers are lost in a flood will all of the company data be gone as well?  

The key to being prepared is to know the risks associated with the area in which the company resides. After that, make sure to assess risks appropriately and buy the necessary supplies. Furthermore, create an impact assessment that helps to determine the steps to be taken after a disaster depending on the type and severity. Identify the course of action necessary if the company must be closed for a couple weeks or even months.  

Supply Chains

According to research from Ohio University, the portion of companies most vulnerable to disasters is usually the supply chain. Often times businesses that are fully prepared for disaster at their main location forget the importance of clear supply lines. These lines can be blocked by nearly anything ranging from crop destroying natural disasters to labor riots in factories across the globe.

The study found that perhaps the best way to adequately prepare for supply chain disasters was to keep backup supplies in an off-site location. This was chosen because providing disaster management plans for all suppliers can be extremely cost prohibitive, especially for small to medium sized business owners. Choosing to keep additional resources in a secure off-site location can help avoid gaps in the supply line if one link in the chain is broken. It can also buy time to find a new supplier if necessary.

The Boston Example

The winter of 2015 in Boston provides a substantial example of just how costly disasters can be for businesses. During the height of the storm economists estimated that sales in Massachusetts fell over 24 percent with retailers and restaurants being hit the hardest (over a 50 percent decrease in sales). Many of the local businesses that were not prepared for a disaster such as this are still struggling to get back to business as usual; more than a few did not survive to reopen after the storm impacts were cleared.

The state is estimated to have lost over a billion dollars in profits and sales in a single month. Aside from the direct impacts inside the city, many businesses that have suppliers in Boston were also negatively impacted by the storm. Although, many of these losses cannot be avoided in general, the ability of businesses to bounce back quickly was largely due to their taking the appropriate precautions.


Preparing for the unexpected consequences of a disaster can be time consuming, and doing it right can be somewhat expensive. But ultimately, taking the time to make sure that both the local business and the supply chain are covered in case of disaster can be an extremely beneficial financial decision. For many small to medium sized companies, the risk of a natural disaster is too large not to prepare for.

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