Will A Hurricane Blow Your Business Down?

By Patricia Eggleston

For U.S. clean tech companies with global operations, events such as tornadoes, hurricanes, port

strikes and civil unrest, can shut down suppliers for months and threaten the financial resiliency of a company that does not have a business continuity and recovery plan. According to the Chubb 2012 Clean Tech Industry Survey, three out of four clean tech companies operate internationally, leaving them exposed to these very risks which may quickly threaten the financial stability of their business.  In addition, 40 percent of clean tech companies surveyed depend on foreign businesses for their supply chain, yet 59 percent do not have an up-to-date business recovery plan and at least 50 percent are not proactively planning for or protecting against disruptions caused by weather-related events.

Why is there a disconnect?  As innovators, clean tech executives are accustomed to the risks and constant changes that are a part of their industry. While clean tech executives are busy developing technology, securing funding and increasing sales, some may miss the global risks, such as supply chain resiliency, that could threaten their business.  For instance, earlier this year China reportedly shut down numerous factories due to heavy smog—a move that could quickly create costly production delays for clean tech firms awaiting the delivery of components in the U.S.

Developing a business continuity plan can mean the difference between long term survival and succumbing to a catastrophe, especially for small to mid-size businesses. According to the Federal Emergency Management Agency (FEMA), 40 percent of small businesses do not reopen after a weather-related disaster. Begin by assessing all parts of the supply chain—including your supplier’s supply chain—to expose any weaknesses.  If your company obtains a key component from a single location, that’s a red flag and could indicate potential trouble. A global property and business income insurance policy can help bolster strong supply chain management by providing a firm with a financial cushion for loss of income and extra expenses if operations are halted due to property damage caused by natural disasters or other causes.

Not sure where to start? Talk to your insurance agent or broker to learn how you can develop or update your business continuity plan. Some insurance companies may also offer online or print resources to help clean tech companies develop a plan.  Clean tech companies that prepare now may be able to avoid a costly loss in the future.

Patricia Eggleston, a vice president and commercial underwriting manager for the Chubb Group of Insurance Companies, is based in Englewood, Colorado, and can be reached at peggleston@chubb.com.