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With only 1 in 4 small or family-run businesses equipped with a business continuity plan and highly vulnerable to disasters, they stand to be the biggest losers in disaster events, a new report finds.

Small and family-run businesses are not only more vulnerable to the effects of a natural disaster, many of them are completely unprepared and uninformed about accessing support resources, a recent report has found. The research was conducted by the Australian Small Business and Family Enterprise Ombudsman which canvassed more than 2000 respondents with businesses employing less than 100 people, that had experienced a natural disaster in the past five years.

The purpose of The Small Business Natural Disaster Preparedness Resilience Inquiry Report was to discover what information is received by small and family businesses, what mode of communication they prefer, differences in recovery according to urban or regional location, and differences in experiences and outcomes by state and territory.

The findings have been grouped into topics such as community preparedness, barriers to preparedness, resilience enablement and clarity and certainty.

The smallest businesses emerged as the most negatively affected by a disaster event, suffering the most financial loss and the longest recovery times. They are also the least likely to have preparedness plans or to be aware of available support resources.

Only 1 in 4 small or family businesses surveyed have a business continuity plan in the event of a disaster, and 50% have no plans at all. Only half of respondents could recall receiving any information on or assistance with responding to or recovering from natural disasters.

The report concluded that lack of preparedness and awareness of available support resources contributed to the most negative outcomes experienced by the smallest businesses canvassed.

Pandemic responsible for biggest impacts to businesses

As at February 2022 the COVID-19 pandemic was the most common disaster impacting small and family businesses, according to 90% of the respondents, followed by severe rainfall (16%) and bushfires (12%). COVID-19 was responsible for impacts to urban businesses, while those in regional areas were more likely to have been affected by natural disasters.

In terms of severity of impacts COVID-19 (67%) still led but was almost matched by drought (63%), then bushfires (47%), severe rainfall (44%), cyclones (37%) and heatwaves (26%). The primary business issues across all causes are reduced revenue and customer demand, with the biggest impacts occurring during the pandemic and drought compared to other types of disasters.

Small and family businesses receive most essential disaster information from state governments or emergency services, with local governments, industry bodies and professional advisors also referenced.

Emails and websites are the preferred channels for communications, with blogs, brochures or face to face meetings least likely to be remembered.

Lack of trust in government complicates recovery and resilience

Community preparedness and resilience post disaster is strongly linked to how small and family businesses fare in the face of disasters, and the economic health of the community at large is closely connected to economic solvency.

An important factor is the level of trust between the business community and authorities such as the local council and other levels of government. In communities that have been hardest hit or repeatedly affected by natural disasters there is marked distrust of governments due to past responses and reluctance to deliver mitigation measures.

Key causes for complaint included too much red tape, lack of understanding of small or family businesses' situations, lack of local knowledge and tardiness in taking action.

The respondents were more likely to trust community led sources of help and support, pointing to disaster preparedness and response at a local level providing greater efficacy.

How small and family businesses can build disaster resilience

The report identified some small business best practices for building resilience for weathering disasters. These include

  • identifying, managing and mitigating risks
  • appropriate insurance cover
  • cash reserves and contingency capital
  • pre-planning a crisis response
  • scenario planning
  • taking stock of current recovery ability
  • development of disaster resources networks
  • considering ways to diversify income streams.

How Gallagher can help

With 30+ urban and regional branches throughout Australia, Gallagher is well positioned to provide appropriate insurance cover and risk management guidance relevant to local conditions for small and family businesses.

In addition to offering a small business insurance cover package that can be personalised to individual needs, Gallagher is a proud sponsor of Family Business Australia.

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