This summer's U.S. heatwave forced many businesses to close. Florida has experienced a number of damaging hurricanes and floods. Video footage of the California wildfires looked like a computer-generated rendering of the apocalypse.

If it seems like natural disasters are increasing, it's not your imagination. And those disasters have a very real effect on company's bottom lines.

According to a 2018 report by the United Nations Office for Disaster Risk Reduction, direct economic losses due to climate-related disasters have increased 150 percent over the last 20 years. During the period of 1998-2017, disaster-hit countries reported direct economic losses of $2,908 billion. The United States was hit hardest at $945 billion. As you might expect, floods and storms are the two most frequently occurring disasters.

Given these numbers, every business owner today may want to consider proactively developing disaster strategies to protect human and material assets and maintain a healthy amount of working capital should trouble strike. 

Let's examine four solutions for natural disasters you might employ to keep your business safe and increase your peace of mind.

1. Practice strong working capital management.

Working capital is the difference between a company's current assets like cash, unpaid bills and inventories of raw materials and finished goods, and its current liabilities such as payroll and taxes. Business owners use working capital to measure operational efficiency and overall financial health. 

Remember, solutions for natural disasters are most effective when they are flexible and comprehensive.

Just as smart business owners build working capital reserves during anticipated slow periods, you should develop a similar strategy to cope with natural disaster-related disruption. 

Ensuring that you have enough cash and liquid assets on hand to cover sudden expenses and/or loss of income can mean the difference between your business' survival and its demise.

2. Take a second look at your insurance.

Now is the time to review your insurance policies and assess how well (or not) you'd be covered in a natural disaster. 

Sometimes it isn't intuitive. Using the hurricane scenario as an example, your run-of-the-mill business policy might cover losses from broken glass that's the result of high winds and flooding that's the result of rain. But if you want to protect your location from flooding that comes from groundwater, you may require supplementary flood insurance. 

If you live in an area prone to hurricanes, you can expect to pay higher premiums, and some carriers may not insure you at all. For more detailed information on what's generally covered and where, review the Insurance Information Institute's website.

3. Create a small business disaster recovery plan checklist.

If you worry about every minute possibility, you'll drive yourself crazy. Instead, plan for the scenarios that are most likely to impact your organization. 

For example, if your business operates on a coastline, you may want to focus on hurricane preparedness. The Small Business Administration is an excellent resource for mitigating this specific type of threat, with checklist items including:

• “determine safe evacuation routes," 
• “check the integrity of the uninterruptible power supply,"
• “survey for safety hazards such as live wires, leaking gas or flammable liquids, poisonous gases, and damage to foundations or underground piping" and 
• “notify contractors to start repairs, asking them to share responsibility for establishing fire-safe conditions."

4. Develop a corresponding communications protocol.

Your small business disaster recovery plan checklist is only as good as the communication behind it. Promote business continuity during and after a natural disaster by outlining how you will inform essential internal and external parties.

Will you provide employees with emergency alerts via texts? Will you send emails to customers? Will you make a media announcement? How will you notify supply chain partners in real-time? 

Soliciting feedback on your protocol among key team members prior to the moment you need to use it can help prevent important omissions and facilitate a smooth recovery.

Remember, solutions for natural disasters are most effective when they are flexible and comprehensive. Taking the time to consider these issues now may pay off later.

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