Government and business

By Larry Pearce

Does the government have a role in assisting small and medium businesses to recover from the impacts of a major natural disaster? Often the answer has been that government has little or no responsibility toward the business sector and that business should be prepared and able to shoulder the burden for its own recovery (e.g., businesses who suffered economic impacts on Cambie Street in Vancouver for the creation of the Canada Line subway). This, in a strict business model, is a fair assumption i.e., businesses take the risk of making it on their own and if they are successful they reap the rewards and if they fail (7 out of 10 new businesses fail after the first year) too bad!

Using tax payers’ dollars to help businesses has always seemed to go against the grain of the North American culture of government. However, Disaster Financial Assistance (DFA) to individuals and homeowners has, and is, the cornerstone of government aid after a major disaster event. Generally speaking, aside from mom and pop operations, small businesses were not seen as part of government’s responsibility. However, when one examines the economic fibre of the nation one quickly realizes that small and medium businesses account for over 99.7% of total employer business establishments in Canada,[1] and, therefore, without the financial support and sustainability of small business, the government and the country could be in dire straits.

If one believes in creating resilient vibrant communities, then the question becomes, that, after a major disaster, how do you achieve this resiliency without a sustained small business sector that can rebound and recover? Further, one should also ask who is it that builds these small businesses? Where do these people reside and what communities do they support with their taxes? Are they not the same John/Jane Does, whose houses will be destroyed, whose cars may be damaged, and whose children may need access to schools and medical attention? In essence, small businesses are core of the community versus those who work for big business industry and/or government. Fundamentally, small businesses represent the livelihood of people that make up the community.

Having a resilient community and taking the necessary steps to create such a community, usually ignores small business. Much is said about crisis management and business continuity planning and having response and recovery plans well prepared, tested and ready to go when the “!#%* hits the fan.”  These steps have become the mantra of big business and industry as they have realized the consequences of not being prepared and, for the most part, they have put in the effort, time, and resources required to achieve this.

However, small businesses have not had the knowledge and supports required to assist them in achieving this same state of preparedness. Governments have to come up with a fair and just system of disaster assistance that supports all members of the community and, in particular to the small business community. The system needs and must be self serving. After all, small and medium sized businesses are responsible for half of Canada’s economic activity[2] and if they fail, then so does the community. If no taxes are being paid then government finances are also drastically impacted the domino effect can be wide-spread and create unsustainable communities.

The dilemma for government is how to assist small/medium businesses to address Business Continuity Management (BCM) while at the same time to be seen as taking the conservative position of only providing limited support to the business sector. Does government walk away from BCM and the responsibilities for prevention, preparedness, mitigation, and response and only deal with the fifth pillar i.e., limited recovery? Common practice would suggest that the steps taken toward preparation, preparedness and mitigation pay huge dividends in creating sustainable resilient communities; robust communities that can emerge from major disasters more quickly and effectively and at far less cost to government.

Rather than just provide DFA governments should take reasonable steps to ensure that the small and medium business sector is given the wherewithal (information, education and resources) to enable them to achieve a high degree of readiness. Many argue that for every dollar spent on preparedness and or mitigation ten dollars is saved in recovery/resumption costs – thus ultimately reducing the cost to government.

Large business and industry have known this for some time and consciously fund, build and staff structures within their organizations to achieve business continuity and to protect their bottom line. Why?  Shareholders would not sit still for anything less. So why doesn’t senior government take the same approach in support of small business within their jurisdiction? After all small and medium businesses employ 65%[3] of the country’s work force and contribute large sums to the country’s tax base.

There are a number of reasons not the least of which is the current governance models in Canada dictate that for small business most of the responsibility lies primarily within the village, town, or city where they are located and directly taxed and licensed. This makes it more difficult for senior government to engage this sector in a holistic sense. Senior government through its existing regional district structure could put in place, in concert with its emergency management model a similar system to support small business.

Larry Pearce, Pearces 2 Consulting Corporation email: larrypearce@shaw.ca

 

[1] Holt, D. and I Rupcic. (2004). RBC Current Analysis. Retrieved June10 2009 http://www.rbc.com/newsroom/pdf/SME_Report-Oct_2004.pdf

[2] ibid

[3] Ibid