Archive for January, 2016

Should a Business in the Desert Buy Flood Insurance?

Wednesday, January 6th, 2016
Fine Print in the Policy

Fine Print in the Policy

If you owned and operated a small business located in a desert, would you purchase flood insurance?

Most people would say no and might learn, the hard way, that it is a trick question. Residents of Valley Park, Missouri declined to purchase flood insurance after FEMA, the U.S. Federal Emergency Management Agency, determined that the community is not located in a flood plain, such that the purchase of flood insurance is not mandatory. When their properties were recently submerged in flood waters three feet deep, they learned the hard way that in any given year, 20 per cent of the properties that flood are not actually located in flood plains and are experiencing flood for the first time. Homeowner’s insurance typically excludes flood coverage, which is why FEMA recommends that every homeowner have flood insurance.

There is an additional consideration that confounds many business owners – that of contingent business interruption coverage. In connection with developing teaching materials to support Prepare for the Worst, Plan for the Best: Disaster Preparedness and Recovery, I referenced a case study about a small business that makes sunscreens from organic ingredients. As the business is located in an area away from known hazards, the business believed it was relatively safe from weather-related risks. It discovered its vulnerability when it learned that the supplier of its principal ingredient was under eight feet of water in Cedar Rapids, Iowa following the epic flooding in that community. It could have mitigated its risks in one of two ways: diversify the supplier base so it was not entirely dependent on a single supplier of a key ingredient. Or, if the ingredient was unique and unavailable elsewhere, it could have added another form of insurance coverage to its policy.

Contingent business interruption insurance indemnifies the business against losses caused by disruptions to key suppliers, so, in theory, the sunscreen producer (located in the southwestern part of the United States) could have been paid for claims arising from the floods in Cedar Rapids, Iowa. But – here is the less obvious issue – contingent business interruption insurance is only valid against an underlying cover. In other words, the sunscreen producer would have needed flood insurance to extend the claim of losses under a contingent business cover to its supplier over 1,000 miles away. Would a business located in a desert climate have thought to purchase flood insurance? Probably not. So it is important to seek advice when considering commercial insurance coverage.

Arctic Chill in the Northeast Today!

Tuesday, January 5th, 2016
Special Needs in the Winter

Special Needs in the Winter

Last week, operators of New England’s ski resorts were devising creative ways to draw in customers during unusually balmy weather. Mountains lacking snow were transformed into fun trails for kids to descend by large rolling tires; it isn’t skiing, but it brings in some revenue. Today, it feels like winter is finally here with the National Weather Service warning of bitter cold wind chills of 15 below zero. If you are in the area, and you must go outdoors even for a short time, be sure to dress in layers of loose fitting clothing.

And give some thought to the special needs of the animals in your care at this time. If you have a pet-friendly office, as I do, consider that the paws of cats and dogs are sensitive to the salt used on snowy roads. I protect Coco’s paws with a thin layer of petroleum jelly before taking her for short walks in the snow season; Henry doesn’t seem to be sensitive at all. I also make sure to frequently replace the bird fountain with water before it can freeze over, so the birds have something to drink. I also leave suet for them as it may be more difficult for them to find food. They don’t all migrate to the south at this time of year.

It seems a bit jarring to go from one weather extreme to the other. Last weekend, people in my neighborhood were wearing shorts and T-shirts. Today, everyone has wool coats, hats and mittens. It seems volatile weather patterns are becoming the “new normal”.

Better Project Management to Minimize Risk

Monday, January 4th, 2016

In Prepare for the Worst, Plan for the Best: Disaster Preparedness and Recovery for Small Businesses, I wrote of the insights gleaned from examining the patterns of human error that impact your business. If your management style is to wait until the last minute to complete work and create needless stress, human errors will increase. Changing your management practices to allow for adequate preparation and response times will reduce the frequency of human errors – and improve your overall mental health! Today I learned the corollary to that piece of advice when I had difficulty accessing an online form for the Community College of Rhode Island (CCRI). CCRI’s website and applications were accessible only to those using terminals on campus. I am working with a non-profit organization that sought to apply to participate in CCRI’s Annual Day of Service in which students volunteer to perform a day of work for local charities. The deadline for application is January 6. Had I waited until tomorrow or the day after, my stress levels would have been rising with each hour that I was unable to complete the online application. Fortunately service was restored by the close of business and we submitted our materials two days in advance. But the next time, I will pencil the dates in my calendar for one week in advance of the actual deadlines.

Book of the Week: Katrina, After the Flood

Sunday, January 3rd, 2016
Catching Up Ten Years Later

Catching Up Ten Years Later

One of my favorite articles from Inc. magazine explored the decline of a Florida community ten years after it had been struck by Hurricane Andrew. As businesses lost revenues and had uninsured losses, they had to close, laying off employees, who no longer had discretionary income to spend at local businesses which sustained a loss of revenue….it was a vicious cycle and a number of residents were forced to relocate in search of jobs and other opportunities. I particularly appreciated the article, because typically disasters command attention when vivid images of physical damage can be broadcast. But when the news cycle has moved on to other stories, the people impacted by the disaster are left to rebuild without the sense of urgency conveyed by the initial media coverage. I know from my own experience of 9-11 that it is a long, long time before things return to normal – if they ever do. So I had Katrina, After the Flood on my list for some time and finally got around to reading it.

Gary Rivlin, a staff reporter for the New York Times, first went to New Orleans to assess the damage wrought by Hurricane Katrina. He observed that 80 per cent of the houses in the city had been flooded, schools and businesses were ruined and the city’s water and sewer system were unusable. In this book, he traces what happens in the aftermath of a major disaster. Boarded-up businesses, some 21,0000 of the 22,000 businesses registered in New Orleans, were still shuttered six months after the storm. Six weeks after the storm, New Orleans laid off half of the municipal workforce. With so many formerly economically productive businesses and workers unable to contribute to the tax base, the community could not possibly finance its own recovery.  What we learn is that life doesn’t go back to “normal”; people re-build or they move on, but the community is permanently changed. It is a gripping read; I highly recommend it.

Setting the 2016 Business Goals

Friday, January 1st, 2016
Fresh Start

Fresh Start

It is January 1 when motivation is high to comply with the ambitious set of New Year’s resolutions. This year, I decided not to make any resolutions after watching a Ted talk by a psychologist on the topic of motivation. He argues that resolutions are counter-productive and suggests setting goals instead. The trouble with resolutions, he argues, is that the first time you break the resolution (which is inevitable, given how hard it is to change established behaviors), you lose your commitment as you have already failed. But setting a goal allows for progress, even with the occasional slip-up. So I set one business goal and one personal goal and, even allowing for the occasional failing, I look forward to making progress over the next 365 days and being in an even better place next year – with a stronger, more resilient business for having achieved my New Year’s goals.