Insurance and Environment and Manufacturing & Technology and Technology and Media & Marketing and Real Estate & Retail and Small Business

Are you prepared for DISASTER?: Despite warnings, many businesses fail to plan for the worst

September 26, 2005

Are you prepared for Despite warnings, many businesses fail to plan for the worst Frank Hancock didn't have a disasterrecovery plan when a tornado tore past his east-side printing company two years ago, causing $5 million in damage.

Severe wind gusts from the Sept. 20, 2003, storm shredded Sport Graphics Inc.'s 5-month-old warehouse and manufacturing facility and tore 13 1,800-pound air-conditioning units from the roof, dumping them on the parking lot below. One was never recovered.

Amid the mayhem that followed, Hancock regrouped enough to move his undamaged products to a printing supplier. But he lacked the planning experts say is essential to continu- ing operations with limited interruption.

Businesses of all stripes need to plan for the unthinkable, of course. But it is typically small businesses that do the least to protect themselves.

"To say I had a formal plan in place," Hancock said, "the answer would be no, none, zip, unlike my neighbors at Finish Line, who had a complete disaster plan in effect."

Hancock nevertheless survived the ordeal and is constructing a 10,400-square-foot building on his east-side property. But some businesses never recover from a disaster.

One in five companies suffers a major business disruption every year, according to the Institute For Business & Home Safety, a not-for-profit insurance industry initiative. And one-quarter of those experiencing a problem never reopen because they failed to prepare for the consequences, the institute said.

The five twisters that ripped through the southern and eastern parts of the city in 2003 caused $38 million in damage to homes and businesses. They spared Duke's Earth Services Inc. in Mooresville, but debris was scattered throughout the environmental remediation firm's parking lot.

Still, the close call did not sway company President David "Duke" Brown to consider creating a plan, even though recovering hazardous materials is a large part of his business.

"It's kind of like the mechanic who drives a bad car," he said. "You would think we would be on top of it. There's definitely a heightened sense and priority to have a recovery plan in place."

Especially after Hurricane Katrina. Brown traveled to New Orleans to help a client with cleanup, and now he is making disaster recovery a priority. He plans to purchase fireproof safes and is exploring off-site data-storage options.

Pat Lockwood, CEO of locally based MindGent LLC, a development consultant offering disaster-recovery services, said smaller companies often ignore the threat of a catastrophe because they don't believe it can happen to them. But more are beginning to address the issue as they become dependent on technology, he said.

"It sounds obvious," Lockwood said of the need for a plan, "but it is amazing how people put it off."

Planning for disaster

Disaster-recovery plans come in all shapes and sizes, and can be tailored to meet the needs of any type of business. Planning can take as little as a few days to as much as several months, said Dan Millar, who runs a public relations practice with his wife, Kay, that specializes in crisis communication planning.

Local expert Peter Beering, who serves as Indianapolis' terrorism preparedness coordinator, advises business owners to appoint a "preparedness evangelist" to handle emergency planning.

Responsibilities include identifying types of disasters that could happen and determining how long the business can afford to be inoperable under different scenarios.

Developing relationships with people who can offer outside assistance is another necessity. In Hancock's instance, he moved his undamaged products to Unisource, the printing supplier that rented him warehouse space.

The danger is that some business owners who spend the time and money to develop a plan never revisit the procedures, said Kevin Hanni, director of systems consulting at local accounting firm Katz Sapper & Miller LLP.

"Periodically, you just do a dry run to make sure that your plan is practical to execute, and so people understand it," he said. "It's something you have to make a commitment to."

More often than not, Lockwood said, a disaster is much more localized than a tornado or flood. A power outage or a hardware failure might be enough to trigger an interruption.

Insurance helps

Coverage Hancock had from his business-continuity insurance made up for his lack of a disaster-recovery plan. He upgraded his policy as the company grew and had more than enough protection to cover the losses, he said.

His neighbors at The Finish Line Inc., where the tornado ripped a gaping hole in a massive distribution center, collected $20 million from insurance, including $14 million for inventory. The apparel and footwear company had insured inventory at its retail price, rather than at cost, which boosted its recovery by millions of dollars.

Federal help often is available from the U.S. Small Business Administration, which offers loans up to $1.5 million to repair disaster-related damage to real estate, machinery and equipment and inventory.

Despite the benefits of a professional recovery plan, Hancock remains without one. He instead chooses to handle the details himself, keeping a folder filled with contacts and information he needs should such a disaster strike again.

"What you personally experience is probably better than getting someone to show you it," he said. "I know the issues I ran into at the time."

The strategy might suffice, Beering said, but he recommends business owners seek outside assistance. To bolster his point, he used the example of a husband who paints a room and thinks he is Michelangelo, until his spouse points out the spots he missed.

The lesson is that those who are so familiar with something are bound to miss details, he said.

"Plans are all part of good business practice," Beering said, "because we know that emergencies are going to happen."
Source: XMLAr00302.xml
ADVERTISEMENT

Recent Articles by Scott Olson

Comments powered by Disqus