Good Recovery Plan Will Help Your Business Survive a Disaster
If El Nino has you worried about severe weather this winter, take it as an opportunity to put together something many small-business owners ignore: a disaster recovery plan.
Every small-business owner recognizes the threats posed by disaster in Southern California--earthquake, severe winter rain, wildfire, riot--but few take the time to plan for trouble. Fewer still commit their plans to writing.
Every business owner needs a plan, even though disaster recovery plans don’t come cheap, as a rule. A good plan can make the difference in coping with an emergency. It can even affect the cost of your insurance coverage, and sometimes the availability.
What makes for a good disaster recovery plan? In simple terms, a good plan:
* Identifies your most critical business functions and the risks they face.
* Anticipates the impact of those risks on critical functions;
* Explores the ways in which you may eliminate or mitigate those risks (for example, via insurance coverage or loss control planning).
* Details what you and your employees must do to get your business running again in the event of disaster.
“A disaster can be tough even on a big business,” says Tom Repking, a vice president and senior property loss control consultant at the big insurance brokerage J&H; Marsh & McLennan in Century City.
“If you ask small-business owners what they would do if an earthquake devastated their building, they always have an idea, but it’s rarely documented or fully drawn up,” Repking says.
“But is that the best way to do it--coming up with a plan after the fact? I don’t think so. You need to give this a great deal of thought beforehand.”
It’s easy to identify the disasters that can strike Southern California, Repking says. But no hazard presents the same risk to every business, he adds, and the risks themselves are not always apparent to the eye.
For example, earthquakes threaten the whole region, but not every building shows the same vulnerability to a quake. And even if you occupy an earthquake-resistant building, your key suppliers may not--and if they shut down, you do too, unless you have alternative sources for key items.
Repking cites computers as critical to many companies, and he argues that natural disaster threatens not to destroy computers but rather to interrupt the power that runs them.
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To cope with this threat, every business should back up its computer data at least weekly, if not daily, and store the data off-site. The business might also contract with an equipment-rental company to make portable electrical generators available in the event of an interruption in utility service. As another option, the business might contract with a supplier of “hot sites”--safe, fully equipped locations to which the business might move its computer operations on short notice.
Cole Emerson, president of Cole Emerson & Associates of Fair Oaks, Calif., made his name as a disaster planner by doing something like that for First Interstate Bank a decade ago.
Fire raced through the bank’s tower building in downtown Los Angeles on a Saturday night in 1988--and by Monday morning, Emerson and his team, who had spent five years developing a disaster recovery plan for the bank, had relocated 1,400 bank employees to predetermined sites away from the tower. Business resumed with barely a hiccup.
“There are certain principles that apply in disaster planning regardless of the size of your organization,” Emerson says.
“You identify your risks and mitigate those you can,” he says. “For those you can’t mitigate, you ask: ‘How will this risk affect my business? Will it put me out of my building? If so, how long can I tolerate being out of the building? How much business will I lose in a week, in a month? How much of my customer base will I lose?’ ”
Once you know what loss you can tolerate, you also know how much of your risk to finance through insurance coverage--and here, too, a disaster recovery plan can prove crucial.
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For starters, insurers may refuse business interruption coverage--which insures against lost income--to businesses lacking a disaster recovery plan. Similarly, it’s hard to buy extra-expense insurance unless you have a disaster recovery plan. Extra-expense insurance reimburses a business for unforeseen expenses incurred to service customers in the event of a disaster--for example, the manufacturer who must ship goods via air express when fire shuts down the trucker who usually hauls the goods.
If you have a disaster recovery plan in place, you give comfort to your insurer no matter what coverage you need, making it more likely that you can get even routine coverage at a good price.
Do you need help in putting a disaster recovery plan together? It’s not hard to find. Most big insurance brokerages field experts on disaster recovery planning--for example, Repking of J&H; Marsh & McLennan in Century City. You can also contract with consultants such as Emerson.
The cost depends on the complexity of the plan, but you can easily spend $10,000. Big companies spend hundreds of thousands of dollars developing disaster recovery plans.
For do-it-yourselfers, the words “disaster planning” bring up no fewer than 42 citations on the Yahoo Web page search engine (https://www.yahoo.com), including one for Strohl Systems Group Inc. ([800] 634-2016), which sells a software package covering disaster recovery plans. In addition, the Federal Emergency Management Agency (https://www.fema.gov) publishes useful booklets on the subject, as do many business and professional trade groups.
“But if you’re going to do your own plan in-house,” says Repking, “be careful not to give it to someone who has no time for it. You have to develop a plan, implement it, test it and routinely update it. You want a living document--because you want to survive disaster.”
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Freelance writer Juan Hovey may be reached at (805) 492-7909 or by e-mail at jhovey@compuserve.com
