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Disasters proving to be terminal for many small firms

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Nearly half of UK small firms that experience disasters such as system failure or fire damage never properly recover, yet less than 50 per cent have any back-up plan to use if things go wrong, according to new research.

The study, conducted by insurance firm AXA, found that despite recent scares such as the Sobig computer virus and the London power cut, many companies don’t have measures in place to deal with potentially catastrophic events.

The survey revealed that a massive 90 per cent of firms that lose data from a disaster are forced to close within two years, while eight in ten companies without a contingency plan go bust if they suffer fire or flood damage.

Despite the terrible effects of unforeseen disasters on small businesses, less than half had a contingency plan to fall on, such as backed-up computer systems or alternative working processes.

Preparing for disasters is becoming increasingly important for small firms, who have had to deal with rising business vandalism and theft, various floods and the threat of terrorism over the past few years.

AXA stresses that a comprehensive risk assessment and contingency plan is essential to small firms and offers the following top tips to help avoid disaster:

When prioritising your plan, think about the cheque you can’t afford to write.

  • Run regular rehearsals.
  • Create a ‘first hour’ plan of action.
  • Back up computer data regularly and off-site.
  • Consider how you will contact your customers and suppliers.
  • Identify the nearest person that can help you – how is your relationship with your neighbours?
  • Role-play your attacker – if you wanted to ruin your business, what would you do?
  • Share vital skills amongst your employees.
  • Ensure the safety of your people first with an appropriate evacuation plan.
  • Manage your risk through appropriate insurance.

AXA has published a free guide especially for small firms, advising them on how to deal with calamities.

The Business 4 Tomorrow guide is available on CD or can be downloaded from www.axa4business.co.uk.

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