Preparing Your Office Today for Future Risks

By Paula Schleis

RISMEDIA, July 29, 2008-(MCT)-What would you do tomorrow if a fire destroyed your office tonight? If a tornado took the roof off? If a fallen tree trashed your most critical equipment?

While most small businesses are content to know they’ve purchased insurance on their property, few go through the exercise of understanding what their real needs will be the morning after a disaster, said Steven Shechter, a risk consultant with Evans Insurance Agency Inc. in Akron, Ohio.

“When people are buying an insurance policy, they look at the amount of coverage and draw some comfort from a big number,” Shechter said.

“What’s missing is that diagnostic process,” he said-a process that could reveal some unexpected needs.

A business should be asking questions such as: Would customers or suppliers dictate a need to rebuild in the same spot or is the company free to move? Would it make sense to replace damaged equipment with new or used products? Is it critical for the business to be functioning the day after and, if so, how and where will it operate?

At Akron’s historic Stan Hywet Hall & Gardens, a recent review of the institution’s insurance policy was a painful but necessary drill.

Stan Hywet Vice President Mark Heppner said the organization decided to look at the policy in light of climbing premiums and declining income.

Shechter guided officers through a common sense discussion about the aftermath of different disaster scenarios.

“If we had a fire and lost a wing of the house, say the music room, would we rebuild that?” Heppner said.

A standard insurance policy covers loss for that very reason, after all.

But Stan Hywet isn’t just a building. The estate of Goodyear founder F.A. Seiberling is a one-of-a-kind historical artifact.

Some might argue that it should be restored, using labor and styling from the period. Others would say what is lost is lost, and spending an exorbitant amount of money to mimic it is financial and historical folly, Heppner said.

The debate follows the artifacts inside the home, which has been preserved as it was in Seiberling’s day. If a valuable clock is destroyed, for instance, does Stan Hywet really want to replace it with a clock no Seiberling has ever owned?

“Realistically, if you’re faced with this catastrophe, what would you do?” Heppner said officials were forced to ask themselves.

In Stan Hywet’s case, officials came to agree on the point at when something would be restored, and when the insurance money would be better spent on something else.

Then the insurance policy had to be written to allow those options, and the cost of the premiums fell.

Most companies won’t have the option of customizing an insurance policy — there are benefits to being a multimillion-dollar icon like Stan Hywet — but Shechter said many businesses might find the valuation terms and conditions of their own policies will fall short if they haven’t analyzed the aftermath of a disaster.

He used the hypothetical example of a business that loses a machine when a roof collapses. Perhaps the machine was covered for its cash value instead of replacement value, with the business owner figuring he’d find a used machine to replace it if he had to.

But a little homework might have revealed that used machines are hard to find, or that rebuilding an old one would take far more time than buying a new one, which could slow down order fulfillment and frustrate customers.

A disaster drill might also reveal other preparation strategies, Shechter said.

“There might be things you need to get written into your lease, or in contracts with suppliers or customers that address certain issues,” he said.

At the end of the day, the risk management process is about perpetuation, Shechter said. “It’s not just about the company surviving owner to owner, or generation to generation, but surviving from day to day,” he said.

And nothing will test perpetuation more than a sudden disaster.

“Not having a plan,” he said, “should not be an option.”

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