Financial Planning In The Face Of Climate Change

Share via
Financial Planning In The Face Of Climate Change

The world is changing. Climate change means that natural disasters occur more frequently and that they’re more severe than they were in the past. For small businesses that already struggled to build a financial safety net, this is a real concern. How is your business meant to bounce back without substantial financial resources? It’s not easy, but it can be done.

If your business is concerned about maintaining continuity, making repairs, and supporting employees after a natural disaster, it’s time to develop a plan. Even when funds are scarce, knowing how you’ll respond and what resources you have at your disposal can make a world of difference.

Evaluate Your Insurance

Small businesses need many different forms of insurance to ensure they’re operating within the law, as well as for the protection these policies provide. Do you have all of the policies your business needs, though? And do you know what your policies cover? Along with standard policies like general liability and workers’ compensation, you might also consider business interruption insurance. This type of policy is specifically designed to protect your business from revenue losses if, for example, you have to shut down because of a flood or earthquake.

Well before disaster strikes, take a moment to review what your insurance policies cover, organize your documents, and spend time developing a continuity plan. Having a business interruption policy isn’t sufficient to keep things going – you need to know how you’ll get your operation up and running again. Talk to employees about what they’ll need in terms of support, what you’ll expect from them, and contact your vendors to find out what their plans are in the event of a disaster.

Learn About Recovery

Did you know that almost 40% of small businesses don’t reopen after a disaster? That’s because, while businesses in high-risk areas regularly develop continuity plans, very few develop recovery plans – and there are a number of important differences. In particular, continuity plans tend to focus on smaller events, as well as elements like maintaining vendor contacts. These are minor factors compared to those included in disaster recovery plans.

Disaster recovery plans look beyond basic continuity, and the question of “how do we keep operating,” to identify the mission-critical elements of your business. What can’t be compromised and what staff do you need to keep those functions online? It also involves identifying major infrastructural concerns. It’s hard to keep a business operating if your building has been demolished or your servers are damaged. Backing up your files will help, but that’s just the starting point. It doesn’t matter if your files are backed up if you don’t have electricity or water. This is the sort of landslide that follows a natural disaster and a proper recovery plan demands that you account for all of them.

Follow The Funding

Finally, and perhaps most importantly, any small business worried about the impact of climate change on their operations should make an effort to research emergency funding opportunities well before they’re needed. It’s hard to research grants when you’re dealing with infrastructural crises, but if you know who you should apply to – the Small Business Association, FEMA, or industry groups – you’ll be better prepared. These funds will be key to rebuilding because insurance companies are often slow to payout after disasters when they’re overwhelmed by claims. Additionally, insurance money is rarely enough to address all disaster-related expenses.

Climate change has already disrupted global markets and changed so much about how businesses operate, but that doesn’t mean small companies should give up and let the storms drag them under. No, it’s important for your business to stay active since communities will rely on local businesses more and more as international supply chains face environmental crises. Small businesses also have an easier time transitioning to sustainable practices that are better for the environment.

Make your small business a key part of your local economy – it all starts with being prepared.


Share via
Anna is the founder and CEO of Johansson Consulting where she works with businesses to create marketing and PR campaigns.