Preparing for Disaster: From a Legal Perspective

Small business finance & accounting

In this presentation learn about the importance of having a formal disaster preparation and recovery plan.

Key learning outcomes:

  • Document Management
  • Review of Contracts
  • Adaption to Change

Preparing for Disaster: From a legal perspective

Preparing for Disaster: From a legal perspective

Hi, my name is Jeremy Streten and welcome to this presentation on Preparing for Disaster: From a Legal Perspective.

Before we get started please have a look and download the PDF workbook that is available at the bottom of this page. I'm going to be referencing that workbook. And it's really important that you have a look at that because in this preparing for disaster workshop, I want to make sure that you get something out of it, and that you have something that you can move forward with to help you prepare yourself for a disaster.

A little bit about me first. I'm a lawyer and I'm an entrepreneur. I'm one of the owners of SMS Law, which is based in Caboolture and also in Morningside in Brisbane. We started the law firm that back in 2011 and we really enjoy working with business owners and helping business owners to achieve the life that they want to live. My purpose is to help business owners to really achieve their goals, because if we can help them to achieve their goals and help them solve their legal problems, then they can build great businesses that makes their communities and the world a better place.

This talk is all about preparing for disaster from a legal perspective. I will also bring in a few bits of business advice and things that are also relevant for business owners.

Do you have a formal disaster plan prepared?

So I wanted to start out with this statistic. So we're recording this presentation in July, 2020. So if you're watching this in a few years' time, you may have forgotten or maybe we're still going through it that the COVID-19 crisis. Where businesses have been shut down. Whole industries have been told to shut down. The government is pumping so much money into the economy. And the reason I referenced that, even though that might be something that may have passed for you, is that these things happen.

No one saw this coming. No one saw that a virus was going to come and shut down the world economy. So few people were prepared for that. And that's where this statistic comes in.

Only 37% of business owners have a formal plan for disaster preparation and recovery.

Only 37%. And that was taken around the time of the COVID 19 disaster. There are a lot of people, and a lot of businesses that were stuck and caught short because they had no plan of what to do in the future. And they made some horrendous decisions that unfortunately will really cost them a lot of money in the future. If they don't follow a correct plan and they don't follow all the correct procedures, then that's when the lawyers can get involved and can sue people for lots of money.

What this presentation will cover

I'm going to talk about three different aspects today. I'm going to talk about:

  1. Document Management
  2. Review of Contracts
  3. Adaption to Change

I’ll also add this too. Whilst we're recording this in July of 2020, during the COVID-19 crisis, it is important to remember that different disasters have different elements. So everything we're going to talk about today is important from a disaster point of view, whether it be a flood, virus, or cyclone. Let's face it, all manner of things can befall businesses.

It’s really important to think about this, and don't think that it can't happen, because I think we all thought that the 2020 crisis wouldn't happen and this is where we are now.

Document Management

Document management is a really important thing to get right. Having documentation of where all your items are, where all of your assets are, what all your contacts are, is really important.

That's where the workbook comes in. So I'd like you to look at the workbook. If you have a look, we have a crisis plan template that we've included in this workbook. It is a 20 page document, and goes through a bunch of different information that you need to have in place if there's a disaster.

1. Record and store your business details

It talks about the details of your business, including:

  • emergency contacts
  • power of attorney
  • accountant
  • lawyer
  • bank manager
  • insurance broker
  • doctor
  • landlords

Here we have the space to write the company, name, the contact person, their email address, and their phone number. Having this information can really help if something happens. I started my business after the 2011 Brisbane floods, but I know plenty of businesses that didn't have this in place and that were drastically damaged in either the floods or one of the rain events that happened around that time. And they lost lots of documentation. I know lawyers who lost lots of documentation that were swept away into rivers.

Having this information is really important and it's important to store it somewhere that isn't on the business premises. Scan it into a computer and save it on a Dropbox or a Google drive if you've got it, because that’s really important.

We have things like letters of authority. If you want to give someone else authority to act on your behalf if something happens to you, this is also important. I won’t list everything but please refer to the workbook.

Information about any finance agreements that you've got, or your insurance details. I can't stress enough how important that is. Even if you've got a broker, have the details of your insurance set out.

The details of your lease, or your landlord contact details. This document (workbook) goes through and reminds you of all the different information that you need to have. If you have it in a central spot where people can access it, where they can see it and where they can refer to it, then that will help you if disaster strikes. Go through it and spend some time, lock off the next hour or two and fill it out, get it done.

Another really important part is the staff register. Having all of your contact details for you and your team. I can tell you from personal experience that we have a team member many years ago, who didn't turn up to work one day, and we didn't have emergency contact details. Unfortunately she had passed away overnight and we had no way of getting in contact with her. We made sure that we had contact details straight away after that. I think it's really important to have all those details written down so that you can contact people and that wasn't even a disaster scenario.

Also, contact details for your suppliers or list of your assets. If you're a company that has lots of vehicles, then you want to have all those details written down. So if something happens, you can track where they are.

2. The ‘Bus Test’

Please go through that template, fill it out, and save it in a safe space. Make sure multiple people know where it is. As a business owner, the worst thing you can do is hide all of the information about your business in your head, because if something happens to you, it's got to survive what I sometimes called the ‘bus test’. It takes one bus to wipe out a person and you want to make sure that you can survive the bus test.

3. Backup all documents

The second part of document management is to keep a backup of all your documents. There are many cost-effective ways of backing up your documents e.g. Dropbox, Google Drive. It doesn't cost a lot to scan things in these days. It might take a little bit of time. Might be a challenge for some people to work out how to use that the scanning software, but use the the backup facilities that are there to keep backups of your key documents.

The amount of times that we see people who don't do that, and then something, something goes wrong – fire, flood etc. – and they can’t find key documents is really sad because it ends up costing them a lot of money and they can't justify themselves.

In 2020 (when we're recording this) and into the future, it is going to become even easier to store documents and even cheaper. So make sure that you're doing that.

Review of Contracts

The second topic I want to talk about is reviewing your contracts. You might have all sorts of contracts. You'll have employment contracts. You might have supplier contracts. You might have client engagement contracts. You might have leases.

All of these documents are designed, and can sometimes be called disagreements, because they're designed to tell you what to do if there's a problem between the parties and they don't know what to do. They’re there to govern the problems that arise. I use the term ‘good contracts make great relationships’. And I see that all the time. If you've got a good, well-thought-out contract, it will help you to resolve any disputes and can often stop any disputes before they even arise.

So with your contracts, I want to go through three key things to look for in the contract to make sure that you're covered.

1. Force Majure

The first one is called a Force Majure clause. So that basically just means that if there's an Act of God, or something happens that stops you from being able to operate your business, those clauses step into cancel contracts, and give parties the right to suspend contracts or cancel them to help them go forward (e.g. business lease contract suspended due to fire or earthquake).

Have a look and see whether you've got those clauses. I know a lot of people in this COVID crisis didn't have those clauses, and it caused them lots of problems when they weren't able to operate their business.

2. Demolition clauses

What if something happens and demolishes the building e.g. a fire or a truck runs into the building and demolishes it. Most leases will contain what's called a ‘demolition clause’, which says what will happen if the premises are destroyed. Really important that you understand what that says, so that if that does happen that you know the process, and that you can have a process going forward. Rent should be reduced as a minimum, and there should be a process and a timeframe for a landlord to actually reinstate the premises and rebuild it in the lease. Have a look at your leases, make sure that stuff's in there because it will protect you going forward.

3. Supply agreements

And the final thing is to look at your supply agreements. Look at what your obligation is to buy. I think this is something that people miss quite often and they may have a contract that obliges them under a supply agreement to purchase certain amount of assets from here, or certain things from there. Then if disaster strikes they have still got that obligation and they've got no contract.

We are seeing this time and time again during this COVID crisis. So I think that reviewing your supply agreements is often missed, but a super important part of the contract review process. It makes sure that you're covered and makes sure that your business is covered.

Go through that. There is no part of the workbook for that. That's something that you need to do. And it's also something that if you don't know what a clause says or you're not sure, and you're worried, get advice. Talk to your lawyer. Don't go and get barbecue advice.

Almost every contract is different. Almost every contract has different terms, different facilities in it. So make sure that you get the right advice for your contracts to make sure that you're covered and make sure that you understand what your obligations are. It can't cover every single situation, but it can cover the big ones. And it can cover you if disaster strikes, so make sure that you review your contracts and make sure they're done right.

Adaption to Change

The last topic that I wanted to talk about was your ability to adapt to change.

In life in general, change happens. Things change every single day, whether they be minor or major changes. Your skill to be able to adapt to change as a business owner will be key to you surviving any disaster, and really your long-term success as a business owner.

There's a change curve that we all go through where we go through denial when it happens, we have to get angry about it, and then and move into acceptance. And there's a whole process that you go through, but being able to adapt to change is a crucial skill.

I know for myself that the businesses that I deal, help and consult with - the ones that were open to adapting to change, survived so much better than the ones that weren't able to.

1. Changes in legislation

I want to talk about one type of change that you need to be really mindful of, and that is changes in legislation. Without even thinking about disasters, legislation can change and that can cause all sorts of problems for your business. Even when a disaster does strike, legislation can change the way that you thought a relationship could be governed.

Again, using the COVID crisis as an example, everyone had leases and then businesses that were affected by the shutdowns were able to apply for rent relief from their landlord. That was a case of legislation that was being brought in to help businesses adapt to change. So you've got to be really willing and able to adapt to change, because if you can't, that's when things won't succeed.

2. Always get advice

You need to be willing to embrace change, and always get advice. Whether it be from a consultant, a lawyer, your accountant, whoever it may be, make sure you're talking to someone. When you're not talking to someone, you often get stuck in your own little bubble and you miss everything.

So adapting to change is so important. It's never going to stay the same. Sorry. It's not. And you need to be ready for that.

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