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Prepare for the aftermath of hurricane season

Fallen trees and electric utility poles are seen around Coconut Grove as Hurricane Irma’s heavy winds pounded South Florida on Sept. 10, 2017.
Fallen trees and electric utility poles are seen around Coconut Grove as Hurricane Irma’s heavy winds pounded South Florida on Sept. 10, 2017. pportal@miamiherald.com

The 2018 Atlantic hurricane season looks to be as challenging as 2017, which was the costliest year on record for weather disasters with $344 billion of global economic losses. Fourteen named storms are expected this year, putting it above the annual average of 11 storms recorded between 1950 and today.

This growing trend of catastrophic storms demands implementing a business continuity plan to combat property damage and income loss. A successful business continuity plan should protect and preserve company assets, ensure the safety and well-being of personnel, and allow your company to resume normal operations as soon as possible to mitigate losses.

To accomplish these goals, you need to first establish an advance team with a designated leader to prepare for and respond to the situation. Second, identify key persons within your company that should remain employed and actively engaged to keep the organization running or resume normal operations as soon as possible. Third, evaluate your business’ most vulnerable areas and design strategies to maintaining relationships with customers and vendors, professional service providers and contractors in the event of physical damage. This includes protecting assets like plant equipment, computer servers and electronically stored information like customer account records.

Your plan should also have a communications protocol with employees and customers in the event of power outages. In addition, consider going paperless and backing up your computer files regularly or using cloud storage services to preserve key business documents. Alternatively, you may want to secure important paper documents in a location separate from your business as these financial records will be essential when preparing a proof-of-loss claim.

Additionally, you should maintain records about which business functions were most affected and when they were restored.

Finally your plan should address options for temporarily continuing your commercial operations until you can return to normal business activities and establish an accounting system to record continuing costs, repairs and extra expenses incurred during the period of indemnity.

Companies should routinely evaluate whether their commercial insurance coverage fits their business needs before a catastrophic event occurs. This will help mitigate potential economic loss and let your business recover as quickly as possible. Simply relying on the insurance company’s broker or its accountants could cause an incorrect assessment of your cover and business interruption loss calculation.

Since insurance policies contain coverage deductibles and exclusions, make sure to work with a qualified insurance professional to identify insurance coverage that can safeguard your business property and income. For example, many businesses impacted by Hurricane Sandy realized belatedly that their property insurance did not cover flood damage but covered wind losses. Therefore, select insurance coverage that best suits your business needs and budget.

During my conversation with Walter Andrews of the Hunton Andrews Kurth Insurance Practice Group in Miami, he stressed that policyholders should be particularly aware of the need to have robust business interruption insurance during hurricane season given the potential impact on businesses. More important, Andrews wants companies to know that they may have contingent business interruption coverage even if their business stays open but their clients and suppliers, for instance, are more severely impacted by the hurricane, or the government has closed key business areas because of the storm. That is an area of insurance coverage that is often overlooked and misunderstood by clients, according to Andrews, and he encourages companies to obtain assistance from insurance counsel and their forensic accountant.

In advance of the next catastrophic weather event, develop a business continuity plan to help your company recover and mitigate potential loss.

Steven A. Wolf, CPA, CFF, ABV/CFF, ASA, leads Cherry Bekaert’s forensic and litigation practice and specializes in matters involving complex litigation, insurance claims, business valuation and transaction advisory services. He is an expert in the assessment of commercial economic loss matters involving catastrophic and general liability insurance loss claims.

▪ This is an opinion piece written for Business Monday’s “My View’’ space in the Miami Herald. The views expressed do not necessarily reflect those of the newspaper.

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