Part of:Disaster recovery budgets, spending and insurance, simplified
Five tips for disaster recovery insurance and funding
Having a complete disaster recovery plan is essential. So is having DR insurance and the money available to fund the recovery. These steps will help you succeed with the latter.
Smart organizations have a carefully designed disaster recovery plan that's ready to launch the moment the unthinkable happens. A typical plan includes strategies for deploying temporary operations, rebuilding the IT infrastructure, restoring data and implementing a long list of other essential actions.
Yet, many otherwise complete DR plans fail to include a key element: how to pay for everything and make sure disaster recovery insurance covers the organization. Without enough money or credit on hand to fund the recovery effort, as well as proper insurance, business continuity (BC) will be delayed or come to a standstill.
"Managing your business in the aftermath of a disaster is stressful enough without having to worry about how you're going to fund your recovery operations," said David Orban, senior solutions marketing manager at Commvault, a data protection technology provider.
Here are five tips to ensure that any future DR effort will move forward rapidly and efficiently without being delayed by financial issues.
Build a disaster recovery insurance strategy into your plan
The faster an organization can get back onto its feet, the better. Having a good technology recovery plan will help in achieving this goal, getting cash flowing again to help pay for necessary repairs and replacements, said Tim Singleton, president of Strive Technology Consulting, an IT consulting firm.
Many otherwise complete DR plans fail to include a key element: how to pay for everything and make sure disaster recovery insurance covers the organization.
It's best to anticipate many different types of disasters, both natural and man-made, and to have a plan for each, advised Bob Necessary, president and CEO of VeriStor Capital, the technology financing and leasing division of VeriStor Systems, a virtual IT infrastructure provider. "Make sure your insurance covers each type of disaster and, most important, have a backup/business continuity plan in place."
Complete a regular inventory of your business's assets, especially the valuable ones, recommended Jay Kimelman, founder of The Digital CPA, a technology-focused accounting firm. "Document proof of existence for any potential insurance claim by keeping records of purchases, photos and videos," he said. "In this instance, a cloud storage service proves particularly helpful because you don't have to worry about storing or holding onto physical receipts or photos."
Almost universally, businesses underestimate their true capabilities to recover from a disaster and the duration of the disaster, observed Mark Jameson, vice president of strategic business development and global disaster recovery for Acronis, a data protection software provider.
"Businesses should consider the expenses associated with getting their business running again during a disaster and then returning their business to normal operations after a disaster," he said. "These types of expenses could include employee travel and overtime, temporary help, operating in a disaster recovery location, temporary facilities, new facilities, new equipment and marketing for brand repair."
One of the most useful things a business can do is purchase commercial property and business interruption insurance, advised Priyanka Prakash, finance staff writer at Fundera, an online business loans provider.
Many business owners mistakenly believe that a general liability policy will cover damage from natural disasters. "Commercial property insurance covers damage to your office, store or plant from fires, earthquakes, floods and other natural disasters, but your property isn't the only thing that you need to protect in the event of a disaster," Prakash noted. "You also need to consider lost income." Business interruption insurance can replace lost income while you're rebuilding your business.
Have funds or financing that can be accessed immediately
One big mistake businesses make is thinking that disaster recovery insurance companies will pay for expenses as they arise. Insurance doesn't work that way, however.
"You pay all of your bills, and if they are covered by insurance, you will get reimbursed," Singleton explained. "That reimbursement may take a long time to come in, so make sure you have a way to finance your company's skeletal operations with no income and no reimbursement for several months."
Develop a banking partnership
While times are good, meet with bank representatives, and develop a working relationship that includes a discussion around disaster recovery insurance. "They already know you and know your insurance coverages, including business interruption insurance and cybersecurity insurance," Necessary said. "Make them aware of your plan, go over it in detail with them and let them know how you will be conducting business in the aftermath of a disaster."
Necessary also recommended alerting bank representatives to the costs that will likely arise during recovery and to gain their preapproval of any additional loans that may be needed should an emergency occur.
Seek government assistance
In the aftermath of a widespread disaster, federal and local governments often provide emergency financing. The Small Business Administration (SBA), for instance, offers low-interest disaster loans to businesses of all sizes, as well as to nonprofit organizations.
"SBA disaster loans can be used to repair or replace items damaged or destroyed in a declared disaster, including real estate, personal property, machinery and equipment, and inventory and business assets," Kimelman explained.
Dig Deeper on Disaster recovery planning and management
