Professional Service Firms Articles
What’s the Worst that Could Happen?

For businesses, lack of planning could be the greatest disaster

Target Audience: Legal Professionals, Professional Service Firms, Partners

Last year’s Hurricane Katrina served as a graphic example of how a single natural disaster can affect a broad range of industries, from oil drilling to retailing. And it prompted many business owners to take disaster planning more seriously.

As we head toward the one-year anniversary of that tragic event, let’s examine why disaster planning is (still) important and look at some of the big-picture issues you’ll need to consider in this area.

Protecting your people

If you question even in the slightest whether your business needs a disaster plan, ask yourself, “Why do we have insurance?” You buy policies to protect your employees and property from financial losses stemming from occurrences such as fire and job-related injuries.

But, as important as insurance is, it allows you to mitigate only part of the risk. Your coverage will presumably help you recover what is physically lost, but it can’t bring back the revenue shortfalls caused by a disaster.

Many tangible assets, such as computers, are replaceable. Yet the cash flow stymied by, and profits lost to, ruined intellectual property, nonexistent sales or undelivered products may be permanent.

That’s why, above all else, your disaster plan needs to account for your most precious assets — your employees. They are the key to maintaining both your company’s goodwill and its productivity during and after a crisis.

Therefore, you’ll need to formulate a plan that, initially, protects them physically and, eventually, ensures their continued compensation. After all, they’ll need to care for their families and remain available to work.

Thinking dark thoughts

So how do you get started? By thinking dark thoughts — that is, brainstorm scenarios, as many as possible, that could devastate your business. Ask yourself questions such as:

• What could stop us from operating for a day, a month or a year?
  
• What happens if our key supplier shuts down temporarily or permanently?
  
• What if a hacker or technical problem crashes our Web site?
  
• What if we suddenly lose power?

Dreaming up such calamities sounds like a job for a Hollywood screenwriter, but it’s actually one of your duties. And, as if weather-related and man-made threats weren’t enough, consider another type of disaster that could erupt on a global scale — bird flu.

Think about it: Sick or not, many employees would stay away from work. For this reason alone, you may want to immediately investigate telecommuting arrangements, because public health officials would encourage absenteeism. (Victims would generally be contagious for several days.)

The threat of bird flu should also prompt you to consider flexible sick-leave policies and crosstraining. If your ace software engineer can’t work, maybe an administrative staffer with an interest in computers could fill in for a while.

You may wonder whether your business insurance covers losses arising from a pandemic. The answer is “probably not.” So-called “contingent business income coverage” typically reimburses you for damages incurred after hurricanes, fires, other natural disasters and accidents, but the policy won’t likely cover bird flu losses.

Communicating effectively

Another critical factor during and after a crisis is communication. You and your managers will need to concentrate on restoring operations, so appoint and train an employee to speak on your company’s behalf.

This person’s job will be to keep stakeholders abreast of your recovery progress. These parties include staff members and their families, customers, suppliers, banks, and even community opinion leaders. Train your spokesperson to conduct a multimedia campaign, spreading the word through channels such as your company’s voice mail, e-mail and Web site, as well as perhaps newspapers and TV.

Of course, as the New Orleans crisis proved, you can’t always rely on technology to stay in touch. Yet this sobering fact shouldn’t stop you from anticipating crisis scenarios and rehearsing communication efforts.

Keeping it fresh

Whatever you do, don’t expect to create a disaster plan and then toss it on a shelf. Keep it fresh by revisiting the plan at least annually, looking for shortcomings. For instance, if you intend to move the company to a backup facility, you must set up and regularly test that location’s capacity to handle the sudden influx of people, supplies and equipment. And don’t forget to consider any new threats.

You’ll also want to keep it fresh in the minds of your employees. Be sure everyone — including new hires — knows exactly what to do by holding regular meetings on the subject or even conducting the occasional surprise drill. Also be prepared to coordinate with fire, police and government officials who might be able to offer assistance during a catastrophe.

Avoiding apathy

No business owner enjoys considering the prospect of ruination. But don’t let the unpleasantness make you apathetic about developing a disaster plan. It would be much more unpleasant for your employees to actually be harmed or your company to really be destroyed or severely damaged.

Learn from those who know: Red Cross advice for business owners

Name any disaster from the last hundred years or so and the Red Cross has been there to help. Here are some tips this organization offers business owners:

• Make phone lists of employees and customers, and keep the lists with yourself and your managers.
  
• Designate a remote voice mail number so employees can listen to and exchange phone messages.
  
• Get programmable call forwarding for your main business lines.
  
• Give a copy of your keys and alarm codes to an employee or friend who lives close to your business.
  
• Install emergency lights that turn on when the power goes out.
  
• Use surge protectors and battery backup systems for sensitive equipment.
  
• Buy a radio with a tone alert feature to alert you to severe weather.
  
• Maintain an ample supply of goods, materials and equipment you might need to keep your company running.
  
• Talk with your insurance agent about special needs your business may have.
  
• Keep food, water, medical and other emergency supplies on hand.
  

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