WILL YOUR BUSINESS WEATHER THE STORM AHEAD?
Written on the 3 January 2012
WITH storm season encroaching, Queensland businesses must review their recovery strategy and update policies to best protect them from the impacts of natural disasters on their operations, according to the Chamber of Commerce & Industry Queensland (CCIQ).
Flood-ravaged businesses throughout Queensland lost on average 13 per cent of annual turnover in 2011 and as we approach storm season the message is clear – get your house in order.
CCIQ president David Goodwin has urged business owners to be extra vigilant and ensure they proactively review their insurance, financing and operational systems.
“If you’re not insured – get insured, it’s that simple,” says Goodwin.
“Business owners need to look at their exposures and put plans in place to minimise any potential impacts.”
Goodwin says while some businesses are yet to recover from the trenchant blows that cut their revenues by as much as 20 per cent, many ‘are getting on with things’ almost 12 months after storms ravaged much of Brisbane and its outskirts.
Eagle Street restaurateur Julian Mero suffered financial losses of around $1 million, despite kick-starting his Groove Train restaurant just 11 weeks after the flood.
Groove Train is insured with Suncorp with a policy underwritten by Alliance. Mero says there is one outstanding claim to be paid relating to loss of trade for the third quarter 2011. When insuring, he recommends others to ‘think outside the box’.
“There was a misconception on Eagle Street that no-one had flood insurance, but you just have to be smart enough to minimise the risk,” he says.
“It’s all about structure and business owners should not take it as gospel that you can’t get the type of insurance you need. It might be something like equipment cover that is not related to flood cover, but will allow you to get up and running again.”
Mero, who employs 20 staff at his Eagle Street restaurant, says he was fortunate that he could rely on three of his other Queensland restaurants to keep the business afloat, but concedes a shifting consumer dynamic post flood.
“It took us a while to understand that people’s habits had changed. The City Cat is right on our door step and when those commuters started taking the bus after the floods, they realised how much cheaper it was and many never came back,” he says.
Mero says the fact that City Cat services are still down by 17 per cent is hurting trade, but counts himself ‘lucky’ that his restaurant is now back to full capacity.
However, where Groove Train’s cloud has had a silver lining, others have been less fortunate.
BDO partner Marita Corbett says many businesses are yet to be compensated and encouraged operators to fully understand the insurance cover they’re paying for.
“Business owners need a clear understanding of their insurance cover, both for physical assets and any loss of profits or business interruption. If you are not 100 per cent sure, now is the time to contact your insurance broker or insurer. Don’t wait until you have to make a claim,” she says.
Corbett says business recovery plans should be reviewed frequently to reflect ongoing changes in internal and external environments.
“Many businesses reviewed their business recovery plans directly after the floods but probably haven’t looked at them since,” she says.
“Simple elements can bring down a plan if not continually updated and tested. Businesses need to update their database of contact numbers of key personnel, particularly in a mobile workforce.
“Do they know the location of all their critical contracts for services that may be relied upon during the disaster and recovery phases? Testing strategies in simulated environments can provide a valuable insight into how they may perform in a real-life situation.
“There is a cost involved in testing your business recovery plan. But what might be the cost to a business if its recovery plan remains untested and then fails during a time of disaster?”
Meanwhile, a business confidence study released by The Executive Connection (TEC) shows that Queensland business leaders are less confident than their counterparts in other states, with only 6 per cent predicting economic improvement in 2012.
Barry Upfold, Queensland Chair of The Executive Connection, says the results reflect the tough conditions Queensland businesses have endured.
“Queensland businesses have had to deal with the devastating natural disasters earlier this year and the subsequent financial losses that resulted,” says Upfold.
However, the good news is that 52.5 per cent of Queensland business leaders predict profitability to rise over the next year with 62.5 per cent expecting improved sales, while 40 per cent are planning to increase their staffing numbers.
“SMEs are the backbone of the Australian economy, and the fact that such a high percentage are confident of increasing their sales and profitability is a great sign for Queensland,” says Upfold.
The Index also reveals that Queensland businesses are planning to lay the financial foundation for future growth, with 26.5 per cent expecting to increase business expenditures over the next year.