How Small Businesses Can Prepare for the Next Natural Disaster

As we have witnessed these past two months, Hurricanes Harvey, Irma and Maria devastated many parts of the south coast and the economies of Texas, Florida and Puerto Rico. The damage from the storms is expected to halt U.S. GDP by an entire percent. Recent estimates put the costs of recovery at around $85 billion and $59 billion for Harvey and Irma respectively.

While larger businesses have the resources to rebuild and recover, many smaller businesses do not. They will likely struggle to account for the cost of repairs, and even lose their companies in the process. According to FEMA, nearly four in 10 small businesses struck by a natural disaster are forced to permanently shut down. With more storms expected in the coming weeks as hurricane season persists through November, it is vital that small business owners prepare in the meantime.

The first step for any small business is to prepare internally. Here are three best practices that small-business owners can adopt to prepare for a future hurricane or any other natural disaster.

  1. Establish a recovery plan: Often, disaster recovery plans fall to the bottom of small-business owners’ to-do lists, especially if their business is located in an area that doesn’t typically experience high-risk weather. However, no business is immune from a harmful storm’s impact. So disaster preparedness starts with a formal plan that’s comprehensive and allows the company to quickly restore its normal operations following an emergency.
  2. Discuss your plan with all employees: It is crucial for your entire staff to be on the same page when it comes to what your disaster plan involves in order for it to be effective. So once small-business owners have a plan in place, they need to ensure that their employees know what’s included and what their responsibilities are should a natural disaster strike. Owners can share this information by emailing a copy to all employees and discussing the plan in detail at the next all-hands meeting.
  3. Back up your business’s data: Small-business owners should ensure their data is backed up both virtually and physically in a secure location. Doing so can prevent a natural disaster from turning into an even worse data loss debacle.

While following these steps can get small businesses on the right track toward hurricane preparedness, no company can be fully protected without insurance. With a plan in place, the next step is finding the right hurricane insurance plan. But there is often confusion over what proper hurricane coverage looks like.

Small businesses should take into account the specific rules and regulations of their industry when choosing an insurance plan to protect against hurricanes and other natural disasters. That said, there are two policies that are essential to businesses that need a defense against hurricanes.

Commercial Property Insurance is a policy that helps cover some of the cost to repair damages or restore your business property should a natural disaster cause harm. It is important to note, however, that many commercial property insurance policies only protect damages caused by hurricane winds, not flood damage resulting from rising water. If your business is located in an area prone to hurricanes, ask your insurance provider about “riders” (also known as endorsements), which can be added to your policy for more complete coverage.

Business Interruption Insurance is a policy that helps companies deal with the extended time (and business) they may lose as a result of hurricane damage. Often, this forced, lengthy pause in operations is what causes small businesses to permanently close, due to the high costs they incur and their inability to generate the revenue required to cover those costs. Business interruption insurance helps small businesses through by providing the funds for necessities such as taxes, loan payments, rent and salaries. Again, it is key to ask your provider exactly what a policy covers before purchasing it. Typically, business interruption insurance only protects your business if the circumstance that forced you to shut down is already covered by your commercial property policy.

This year’s Atlantic hurricane season has already been deemed the third worst on record. With more than a month to go, small businesses can ensure that they’re protected from damages through internal company policies and a thorough insurance plan. As far as hurricane insurance coverage goes, it’s crucial for businesses to do their research and find the policies that will provide the best protection. Although developing these plans will take time and effort, the risks mitigated and money saved as a result will be well worth it in the long run.

Hurricane Devastation Impacts Health Care Supply Chains

The destruction caused by Hurricane Maria in Puerto Rico last month has created major disruptions for the island’s pharmaceutical product and medical device manufacturing facilities. Days of interruption and damage to manufacturing plants are affecting international supply chains for products such as cancer and HIV treatments, immunosuppressants for patients with organ transplants, and small-volume bags of saline, which are necessary for patients who need intravenous solutions.

Puerto Rico is the fifth-largest territory in the world for pharma manufacturing and produces about half of the world’s top-selling patented drugs, according to a 2016 report from Pharma Boardroom. Short-term economic losses are being estimated, while concerns persist about the storm’s long-term effect on employees’ abilities to travel to work, the safety and efficiency of the machinery used and the ability to keep the facilities running on generators. In a statement issued by the Food and Drug Administration (FDA) on Oct. 6, Commissioner Scott Gottlieb detailed plans to help Puerto Rico recover its medical product and manufacturing base, which he said “are a key component of the island’s economic vigor.”

“[..]even the facilities that sustained relatively minor damage are running on generator power. They could be without commercial power for months…Moreover, most of the facilities that we know of, that have resumed production, maintain only partial operations. New shortages could result from these disruptions and shortages that existed before the storms could potentially be extended.”

Citing data from the Bureau of Economic Analysis, Gottlieb said that pharmaceutical products manufactured in Puerto Rico “make up nearly 10% of all drugs consumed by Americans. And that doesn’t even account for medical devices.” He noted that the FDA is keeping a close watch on about 40 critical pharmaceutical and biological drug products which, in the event of a shortage, “could have substantial impact on the public health.”

He added, “In urgent cases, when critical products are at issue, we’ve intervened over the last two weeks to help firms secure fuel to maintain production lines, get clearance to move logistical support into the island or finished goods to their recipients.”

The Washington Post reported that more than four dozen FDA-approved drugmaking facilities are in Puerto Rico, including ones owned by Pfizer Inc., Merck, Eli Lilly, Johnson & Johnson, Bristol-Myers Squibb and Amgen. Baxter International Inc., which the Post cited as being the “dominant player” in the IV market, issued a statement acknowledging the impact of the storm on its operations:

Our sites sustained minimal damage, and we’ve initiated limited production activities in all of our facilities. In addition, we are examining all opportunities to leverage Baxter’s global manufacturing network as we continue efforts to restore operations in Puerto Rico.

As it relates to product supply, in advance of the hurricanes, we implemented our hurricane preparedness plan to help mitigate potential impact. We have also been delivering products to customers in Puerto Rico to help address patient need on the island. And we are continuing to proactively communicate with our customers the actions we are taking to minimize potential disruptions, including closely managing product inventory.

Not all facilities have suffered damage, however. Amgen announced on its site that back-up generators are powering its Puerto Rican site and that, “No product nor in-process inventory has been lost, and … the inventory maintained by the Company and its global distribution network is sufficient to meet patient demand.”

Lawsuits Question Arkema Emergency Preparedness Plan

Last week officials in Harris County, Texas were granted permission to file a lawsuit against international chemical company, Arkema, Inc., in attempt to recover the costs of responding to the crisis at the company’s plant in Crosby during Hurricane Harvey in August into September. The County has asked a court to review the plant’s environmental practices and disaster preparedness plan and to determine how, if at all, it was updated to reflect the projections of 50-plus inches of rain in the days leading up to Harvey’s landfall.

The New York Times reported that in its risk management plan to the federal government, Arkema indicated that floods and hurricanes, as well as power failure and loss of cooling, were threats to its Crosby chemical plant. In its filing with the government, however, Arkema did not provide contingency plans to address those concerns, the Times said.

As previously reported, several feet of floodwaters caused a power outage which subsequently prevented Arkema plant staff from ensuring that nearly 500,000 tons of organic peroxides were kept cooled and stable. The chemicals eventually overheated and caused a series of explosions which started in late August into the first week of September. This led to a mandatory 1.5-mile evacuation of the area, affecting about 300 homes and many nearby businesses.

Local media reported that Harris County Attorney Vince Ryan is expected to file the lawsuit this week. “The company’s lack of preparedness caused a crisis on top of this horrific storm,” Ryan said in a statement. “Dozens of first responders were required by this emergency caused by Arkema when their services were desperately needed elsewhere.”

According to the County’s statement:

Investigations conducted by the Harris County Pollution Control Services and the Harris County Fire Marshal’s Office uncovered serious violations of the Texas Clean Air Act. Ryan will seek to recover the County’s costs for responding to the week-long incident.

This is the second suit to arise from the Arkema plant’s explosions. On Sept. 7, seven first responders filed a negligence lawsuit against Arkema, alleging they were not warned of the smoke and fumes and their effects prior to arriving. The responders claim they became ill shortly after they began working on the scene following the Aug. 31 explosion; many left vomiting, gasping for air and unable to breathe during and after rescue efforts.

The Texas Tribune reported that the lawsuit was updated in late September, swelling to include six additional first responders and a number of area homeowners. They claim to have suffered “upper respiratory infections, bronchitis, pneumonia, itchy, burning eyes, tight, burning throats and the like—illnesses and injuries that did not exist prior to the explosions and fires at the Arkema facility and illnesses resulting from and exacerbated by the explosions and fire at the Arkema facility.” Plaintiffs are seeking more than $1 million in damages, according to the suit.

The third lawsuit was filed Oct. 2 by nearby residents who claim their properties were contaminated with toxins. The federal suit details how residents are now suffering from medical problems ranging from scaling and rashes to respiratory problems.

“Based on testing results received to date, Arkema has not detected chemicals in off-site ash, soil, surface or drinking water samples that exceeded Residential Protective Concentration Levels established by TCEQ for soil and groundwater,” company spokesperson Janet Smith said in an email to Houston Public Media.

Harris County’s full statement can be found here.

Jones Act Waiver Granted for Puerto Rico

A request to temporarily waive the Jones Act for Puerto Rico that was denied on Monday has been approved. President Donald Trump waived shipping restrictions on Thursday to help speed up fuel and supply deliveries to Puerto Rico, devastated by Hurricane Maria, the White House said.
Maria wiped out power on the island and destroyed infrastructure and cell towers, leading to massive shortages. Even though a waiver had been granted to Texas and Florida after Hurricanes Harvey and Irma, the Department of Homeland Security initially said there was no need to waive the restriction for Puerto Rico, as it would not address the issue of the island’s damaged ports.

The Jones Act, or the Merchant Marine Act of 1920, was initiated almost 100 years ago to keep foreign-flagged vessels from shipping fuel and goods between U.S. ports. The last previous waiver was in December 2012 to allow petroleum products to be delivered for relief assistance after Hurricane Sandy.

Sen. John McCain, R-Ariz., disagreed with the initial decision to deny suspension of the act for Puerto Rico. He wrote to the Department of Homeland Security urging it to allow a waiver and ultimately “a full repeal of this archaic and burdensome act.” Without the waiver, McCain said residents of Puerto Rico would end up paying at least twice as much for food, drinking water and other supplies.

Supporters of the Jones Act, including ship builders, have maintained that it supports American jobs, including jobs in Puerto Rico and keeps shipping routes reliable, according to Reuters. They also contend that the issue in Puerto Rico is distributing shipments across the island once they are delivered.

The temporary waiver was not a surprise, as Puerto Rico Gov. Ricardo Rossello said on Wednesday that he expected the federal government to suspend the Jones Act. He said he had been speaking with members of Congress from both parties who supported an emergency waiver.