Are you ready for a catastrophe?

Disaster planning is critical for all companies to help ensure that normal business activities can resume as soon as possible after a disaster strikes. However, dealerships face unique risks when it comes to preparing for catastrophes.

Unlike most businesses, the bulk of your inventory is sitting outside, where it’s exposed to the elements. Natural disasters such as hurricanes, tornadoes and floods can damage or destroy all or part of your inventory.

Drafting your plan

The first step is to draft a disaster recovery plan. Assign a team of employees who’ll be responsible for drafting the plan and keeping it current. Include representatives from across the dealership — such as the sales, parts and service, and IT departments — to draw on a broad perspective.

Your plan will lay the foundation for resuming normal operations as soon as possible after the disaster to minimize downtime and lost sales. This would typically include reopening the physical store, restocking inventory (both vehicles and parts) that’s been damaged or destroyed, and repairing or replacing damaged or destroyed computers and other equipment.

Start the planning process by talking to your manufacturer and lender about how vehicle inventory would be replaced. For example, how long will it take for new vehicles to arrive on the lot? How will damaged or destroyed vehicles be removed to make room for new ones? And how will you protect inventory from thieves and looters post-disaster?

Reviewing insurance coverage

Also carefully examine your insurance coverage. A standard business casualty policy is only the starting point for dealership disaster insurance — it might not cover the damage caused by a natural disaster. For instance, many dealerships in Texas found out too late that they didn’t have coverage for the extensive flood damage caused by Hurricane Harvey this summer.

So talk with your insurance agent about what specific kinds of disaster damage would and wouldn’t be covered by your existing casualty policy. Also ask about business interruption insurance, which would provide coverage for non-property-related expenses stemming from a disaster. This may include covering payroll, mortgage, utilities and lost profits while your dealership is closed.

Of course, natural disasters aren’t the only kinds of catastrophes that can strike your dealership. Cybercrime, server crashes and terrorist attacks are among the manmade risks that should be included in your recovery plan.

The plan should detail how critical data stored by your dealership will be safely backed up. Offsite or cloud backup is usually preferred for such data as customer billing and contact information and vehicle sales and service records. This will help ensure the preservation of this information if onsite servers and computers are damaged or destroyed.

Arrange ahead of time for a generator that can provide power to your dealership until normal power is restored. And look into securing an offsite backup computer system that can be used temporarily until your onsite computers can be repaired or replaced.

Preparing for post-disaster communications               

Also decide how you and your managers will communicate with your employees, customers and vendors in the aftermath of a disaster. You’ll need to keep them updated on the status of reopening so employees know when to return to work and customers and vendors know when normal operations have resumed.

Your plan should describe what methods of communication, such as cell phone or email, will be used to accomplish these goals if landline telephone service is disrupted. It also should detail how cell phone numbers and email addresses will be gathered and stored so they’re easily accessible post-disaster.

It could happen

Don’t fall into the trap of thinking that disasters are something that always happen somewhere else to other businesses. Begin your preparation now to minimize potential disruptions and lost revenue if a disaster hits.

© 2018

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