July 2009

ASK THE EXPERT SUBMISSION – FORENSIC INSIGHT

QUESTION

What tips can I give my policy holders to help them ensure they’ve got the necessary financial documentation readily available in the event their business is damaged or destroyed by a natural disaster?

ANSWER

The first thing business owners will naturally want to do when a catastrophe occurs is confirm the safety and well being of their employees. Knowing that their staff has weathered the storm gives owners peace of mind and allows them to focus their attention on the task of business recovery.

Because financial data is so essential to helping businesses get back on their feet, it is important to encourage business owners to think through the following questions when creating a back-up and recovery plan:

• What financial records will I need to substantiate my business loss claims?
• Who will back up and who will recover the files from the back-up location?
• What information needs to be backed up and what data needs to be retrieved immediately in order to continue or restart operations?
• Where is the back-up and recovery located?
• When and how often will back-up be performed?

While knowing where, when and how often financial data is updated will certainly help the claims process, in order to receive prompt resolution to a claim, business owners must also remember to do the following:

Capture data early and often - Rotate the back-up media frequently enough to ensure the most current data is completely captured. Only business owners can determine how often, based on how much data their company generates.  For some businesses it’s a daily or weekly process; for others, monthly might be sufficient. They should also maintain an archive of the business’ historical data.

Segment relevant data during back up - Create an electronic data file that specifically contains financial information essential to disaster recovery. This self-contained file will expedite the work of both the insurance company and the forensic accountant and could accelerate the insurance claim process.

Don’t forget software programs - Businesses need to create copies of all the software programs their company uses and store them off-site. This process isn’t as critical if the business uses "off-the-shelf" software that can be replaced, but if it uses customized software programs tailored specifically for its business needs, losing these applications can be fatal.  

Convert hard copies - If a business has a disproportionate volume of historic financial data in paper format, owners should consider converting this information to electronic means. This data should be stored in a safe, off-site location along with the more current financial documentation.

Test, test and then test again - All the effort a business puts into backing up data can be for naught if it’s not capturing the information properly. Business owners should regularly check the data to be sure the back-up media contains all the information most critical to their disaster recovery.

The days following a natural disaster are stressful for everyone.  Reminding business owners to provide as much information as they can to appropriately resolve their claims will not only make the process much less draining for them; it will also help them get their business up and running again as quickly as possible.