Understanding and Managing Business Risks: Lessons from Hurricane Helene

Author: Tanner Leuellen

Understanding and Mitigating Business Risks: Lessons from Hurricane Helene

The financial devastation caused by Hurricane Helene in 2024, which led to $160 billion in economic losses, offers crucial insights into how business owners should think about risk management and preparedness. While natural disasters like hurricanes are region-specific, the types of risks and business vulnerabilities exposed during these events apply unilaterally to all business owners, regardless of industry or location. Recognizing these potential risks and planning for them can make the difference between a business’s survival or closure in times of crisis.

1. Physical and Operational Disruptions

Businesses often face physical risks from external events whether natural disasters, fires, or even vandalism. Hurricane Helene caused significant structural damage, particularly to small businesses along the Florida Gulf Coast or even as far inland as Asheville, NC – many of which were left inoperable. Regardless of the cause, physical damage leads to immediate operational disruptions.

Mitigation strategy:

Business owners must conduct regular risk assessments of their physical locations. This includes evaluating the likelihood of natural disasters, reviewing insurance policies, and investing in preventive infrastructure upgrades. For instance, businesses in flood-prone areas should consider floodproofing measures or elevation of key equipment, while all businesses should maintain robust property insurance with add-ons for disaster coverage​.

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Even businesses outside of high-risk areas should prepare for other physical disruptions, such as fires or earthquakes, depending on their geographic location. Physical disruptions can cause an irreversible effect on the ability to continue operations and create revenue.

2. Cash Flow Interruptions

A major financial risk during any crisis is a halt in cash flow. After Hurricane Helene, many small businesses were forced to close for weeks due to property damage, loss of usable water and power outages that lasted up to 10 days for millions of customers​.

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Cash flow risks are not limited to natural disasters; supply chain disruptions, pandemics, or political unrest can lead to similar revenue interruptions.

Mitigation strategy

Business owners should create contingency plans that include cash reserves to cover fixed costs such as payroll, rent, and utilities for three to six months. Establishing lines of credit in advance, as well as having business interruption insurance, can provide crucial financial relief during periods of revenue loss. Cash flow forecasting, which anticipates potential financial disruptions, should be part of every business’s financial planning process​.

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3. Supply Chain Vulnerabilities

Crises like Hurricane Helene also reveal the fragility of supply chains, with many businesses struggling to secure materials or products post-storm due to road closures, infrastructure damage, and delayed shipments. Supply chain risks apply to any business, whether due to natural disasters, economic sanctions, or logistical challenges.

Mitigation strategy:

Businesses should diversify their supplier base, avoiding over-reliance on a single source or region. Having multiple suppliers, both local and international, ensures that disruptions in one area won’t completely shut down operations. Additionally, maintaining higher inventory levels of critical goods or materials during risk periods can provide a buffer during supply chain disruptions.​

WUSF

4. Power and Technology Failures

In the aftermath of Hurricane Helene, millions of businesses lost power and water, some for up to two weeks or more.

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For any business, a loss of utility or technology infrastructure can lead to operational paralysis, whether caused by a hurricane, cybersecurity attack, or local grid failure.

Mitigation strategy:

Ensuring operational continuity in the face of utility outages requires investment in specialized supplies based on business function. This may include backup generators, water processing or storage equipment, or off-site data backups. Cloud-based storage can provide businesses with secure and accessible data even during physical site disruptions. For businesses who are heavily reliant on technology, cybersecurity insurance and redundancy in IT infrastructure are essential to mitigate risks from cyberattacks or power failures​.

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5. Legal and Regulatory Risks

In any crisis, businesses may also face legal and regulatory risks. Post-Hurricane Helene, many businesses were forced to contend with local regulations around rebuilding and insurance claims, while also managing employee compensation for lost work hours. Many owners were even stuck waiting on extra regulatory inspections to be able to re-open delaying operations further.

Mitigation strategy:

Staying informed about legal and regulatory changes is crucial, particularly in high-risk industries. Business owners should work closely with legal counsel to ensure compliance with state and federal regulations during a crisis. Having a business continuity plan those accounts for employee welfare, contractual obligations, and regulatory compliance is key to avoiding additional penalties or lawsuits during recovery. This also can go back to the need to have a contingency fund to be able to support baseline expenses while waiting on regulatory roadblocks.

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Conclusion: Proactive Risk Management

Business risks are inevitable, but how they are managed and prepared for defines long-term success. The lessons from Hurricane Helene demonstrate the importance of risk assessment, planning, and proactive mitigation strategies for all businesses. By addressing potential vulnerabilities in physical operations, cash flow, supply chains, technology, and legal responsibilities, business owners can better anticipate the financial needs of their companies in times of crisis. Preparation, rather than reaction, ensures that businesses can recover quickly, limit losses, and maintain long-term stability. Further it can emphasize the importance to not only prepare for these things ahead of time but also consistently review and understand the changing landscape that the business resides in, not only physically but in all aspects of operations.

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