Hoping For the Best, Preparing For the Worst


After Hurricane Sandy ripped along the east coast last fall, many businesses found themselves scrambling to restore the power — and the income — they lost. Electricity was out for weeks in some areas. Normal transportation routes were inaccessible. Supply line schedules were disrupted. Some businesses survived, others shut down.

In Atlantic City, debris littered streets, from downed tree limbs to pieces of the iconic boardwalk. Tens of thousands of residents were without electricity. The barrier islands took the brunt of the storm.

For Charles Place, chief financial officer for Atlantic City Check Cashing, the key is to be flexible.

“You must know how to adapt,” he said. One of his stores is located on the barrier island. The store’s staff prepared for Sandy by setting merchandise up off of the floor but did not seal the backdoor to the store. Water damage resulted.

“We definitely learned that we must seal the door,” he says. “And make sure everything is up and away from the water. Water may kill rugs but it doesn’t have to kill our machines.”
“I’ve lived here 25 years. You learn how to prepare and you keep a generator handy.”

More People Affected

Natural disasters such as Hurricane Sandy, and more recently, the winter storm that dumped two to three feet of snow throughout the Northeast, can shut down businesses for days and even weeks. The loss of income can be crippling and some businesses may never recover.

Forecasting such events has improved significantly in recent years but it is still difficult for forecasters to project where a hurricane may make landfall or when a tornado may strike.

It is estimated more than half — 53 percent — of Americans live within 50 miles of a coast. As more people migrate to the Gulf and Atlantic coastlines, and more businesses follow, the probability of hurricanes and other natural disasters striking densely-populated areas will increase.

AIR Worldwide put the insured property of coastal property from Texas to Maine at $8.9 trillion in 2007. This is up sharply from $7.2 trillion just three years before.

Pat Ballis with Mesirow Insurance Services said planning for disasters requires looking at your business and thinking about what services you need to provide your customers. If your records aren’t on computers, you need to make sure they’re backed up and off premises, he says.

Ballis also cautions that where your backup system is located can be important. “If the vendor who provides your backup service is located in same area where the storm hits, both you and your vendor could be hurt. You should seriously consider having your backup services located elsewhere geographically,” he says.

But if a check casher isn’t on computer, there’s not much they can do for off-premise backup.” If you’re working with a ledger and you put it in a safe, you’re still at risk because a flood can destroy anything in a safe,” Ballis says.

Interruption Insurance

Planning for disasters includes having a business interruption insurance policy in place. Small businesses face the greatest risk because they many lack such insurance and are unable to survive lengthy periods without income.

Companies that own policies typically have insurance to cover losses caused by physical damage. Business interruption insurance covers claims for loss of sales.

Claims for business interruption insurance soared after Hurricane Sandy. But terms of each policy affects a claim, as Place explained. “Yes, we have business interruption insurance but we didn’t qualify because we weren’t so interrupted to make a claim.”

Still, such insurance is critical. “We do have business interruption insurance, but we’ve never had a fire,” Harry Newman, manager and owner of B & I Check Cashing in Lakewood, Wash., said. His store is located inside a mall that is still susceptible to the elements.

“Bad weather can still close us down. Not long ago, we had a really bad storm that ripped off part of the mall and the roof of a store, too. Who knows when that may happen? You need insurance.”

Ballis acknowledges flood insurance is unavailable to many businesses, though water damage from flooding is a common issue for locations near locations near rivers, lakes and oceans. “A business owner may be able to buy flood insurance through the federal government,” he suggests.

Employee Communications

Communications with employees is also a critical consideration when planning for a disaster. Kenny Luquis helps run his family’s check cashing stores in the Bronx. Before the February 8 snow fell, they were ready. “We watch the latest news updates on TVs in all five of our stores so we stay on top of the weather,” he said.

The morning after the snowstorm dropped more than two feet of snow throughout the Northeast, he felt relatively lucky. “We opened an hour late,” he said. “There were problems with frozen locks at one or two stores but otherwise, we were okay. Everyone is on email and we have fax. We fax stores to let them know.”

Luquis has also been fortunate with power outages. “One time, we lost power in our store and we couldn’t plug in anything, but I had an electrician in and we were back up and running by the middle of the day,” he says.

Some businesses have backup generators available in case of an outage, but Luquis said they’re not practical for his stores.

“Generators are expensive and besides, you have to have them outside because of the fumes. Having a store in the city makes it kind of tough — you don’t know when you’ll go outside and the generator’s stolen.”

His stores use backup drives to store their data. “We don’t have a central server,” he says. “With services such as direct deposit, it’s important to be on computers. We’re backed up on a hard drive, which we lock in a safe every night. This has worked for us. We have backup drives, plug in our modem and we’re ready to go.”

Store Cut Off

Place had disaster plans ready for ACCC when Hurricane Sandy hit Atlantic City, but still suffered temporary setbacks because one store is located on the barrier island. “Nobody could get to the islands,” he says. But they quickly adapted.

Posted in Spring 2013.