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January 2006 — Vol. 83, No. 11
COVER STORY
Can your business survive
a calamity?
Being prepared in the event of a disaster can save lives,
and your business, too.
By Debra Susca
Freelance writer in Portland, CT
You’re open, but your customers can’t get to you —
the main road to your business is shut down for an extended period of
time because unprecedented amounts of rain have caused a nearby river
to flood and have collapsed a large portion of the road.
A winter nor’easter dumps three feet of snow with a topcoat of
ice that downs power lines over half the state. Roads are impassable.
Plus, you can’t run your refrigerators, and thousands of dollars
of product is ruined.
A virulent flu outbreak has not only decimated your employee ranks but
is keeping your customers at home, for fear of mingling with others and
catching the deadly virus.
So, what do you do? What’s your plan?
If you’re a small-to-midsize business, chances are you don’t
have one, or at least a comprehensive one that gets you through the initial
emergency as well as the business recovery period.
“The numbers tell us that when true disaster strikes, three out
of four businesses will never open their doors again,” says Chip
Darius, president of Safety Priority Consultants in New Britain, which
works with clients to bring about culture changes and develop safety management
and business continuity plans. “That’s because many small-business
owners say they are so busy running the day-to-day operations that they
don’t have time to consider all the different scenarios and develop
a plan.”
But businesses can’t afford to be complacent about the possibility
of natural or man-made calamities. Even a minor interruption can hurt
a business’s profitability, while major Katrina-like disasters or
9/11 tragedies can wipe out years of toil. Being prepared in the event
of disaster can save lives, and your business.
“Every business should have a plan,” says James Thomas, commissioner
of the state Department of Emergency Management and Homeland Security.
“Small businesses account for 99% of all employers in the country
and employ more than 50% of all private-sector workers. Clearly, ... planning
today supports employees, customers, the community, and the local, state
and national economies. It protects your business investment and gives
you a better chance for survival.”
Thomas was speaking at a Nov. 15 program on disaster preparedness and
business recovery sponsored by CBIA’s Small Business Advisory Council.
He was joined by John Kauffman, technical manager for general liability/products
liability at The Hartford Financial Services Group.
Kauffman outlined the three phases every plan should follow for the business
to survive an emergency or disaster:
- Preparedness phase: This includes conducting a business-impact
analysis and doing assessment planning to determine where the biggest
impact of an emergency will be; what the critical assets to survival
are (staff, customers, vendors) and how to protect them; setting up
your coordinator/team, command center and mutual aid center; and providing
for the continuity of computer operations and the protection of vital
records.
- Response phase: This part of the plan lays out the
steps you will actually take and who will have authority to take them
at the time of the emergency. It covers such things as how communications
will flow; how and when facilities will be shut down or evacuated; where
employees will go; and the roles and responsibilities of the emergency
coordinator/team, command center and emergency notification personnel
who make the decision to activate the plan.
- Recovery phase: This outlines how you will recover
your employees, facilities, vendors and customers, and how you will
engage your insurance company.
“Historically, businesses are better at the first two,” says
Kauffman, explaining that these are the emergency planning phases that
include the immediate steps businesses take to protect their people and
property. “But when they get to the recovery phase, small businesses
lose traction. They haven’t thought about how they will get back
to viability.”
Says Darius: “There’s no question that every business that
wants to recover after a disaster needs to have a plan in place. And it
should be flexible so that it provides you with enough continuity to make
sure customers are still getting served if you’re going to have
even a chance for survival.”
Mary Pavone, president of Prospect Machine Products Inc., knows firsthand
the challenge of coming back from a disaster. In March 1977 a large portion
of the family’s manufacturing plant burned to the ground when wiring
in the oldest part of the plant couldn’t handle an electrical surge.
“We had to make a decision whether to go forward or fold up our
tent,” says Pavone. She said they had no contingency plan other
than to rely on the community and friendly competitors to help them meet
customer demand. “Thank God for insurance. We had not anticipated
the possibility of this happening. But it did, and now we’re very
aware that it can happen. We’ve established safety measures that
include keeping the fire department informed of the whereabouts of hazardous
materials at the plant, running drills, and having safety committee meetings
to deal with possible issues, like this bird flu pandemic.”
In 1977 Pavone, her brother and father decided to rebuild the plant and
some equipment, but they realized that to remain viable they would also
have to shut down one of three departments. “We couldn’t keep
it,” she says, a fact that doesn’t surprise either Darius
or Kauffman.
“If a business survives, oftentimes it will be a different company,”
says Darius. “In some cases a disastrous event gives a business
the opportunity to completely retool and reinvent itself.”
Says Kauffman: “After a disaster, nothing will be the same, and
you’ll have to work around the situation. You’ll have to plan
for that. ‘Will I have the same customers? Will my suppliers be
there? Can I get new inventory?’ There’s a lot to consider.”
So much so that many company owners, working nonstop to keep their businesses
running now, don’t believe they have the time, energy or resources
to devote to developing so comprehensive a plan, says Susan Strand, president
of EEW Management in Torrington, environmental and safety consultants
who, among other things, help companies develop programs to meet OSHA
requirements. “These kinds of disaster and recovery plans don’t
have any critical meaning to many company owners until they have an emergency,”
says Strand. “It doesn’t contribute to the bottom line, and
they figure they don’t have time to do it.”
It is a daunting task, concedes Diana McClure, assistant vice president
for business protection at the Institute for Business and Home Safety,
a nonprofit organization funded by the property and casualty insurance
industry whose mission is to help reduce the social and economic effects
of natural disasters and other property losses. IBHS offers disaster-planning
tool kits for small-business customers of its member insurers.
Adds McClure: “You don’t want to lose what you’ve invested
years of your life and money and reputation to build. You want to be ready
and resilient in case of a disaster and be able to remain competitive
and viable. That requires planning ahead.”
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