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March 12, 2019

Preparing for Disaster: The Importance of a Business Continuity Plan

Jennifer M. Kanady

No Business Location is Safe from a Natural Disaster

We have all seen the devastation caused by recent hurricanes and wild fires along our coasts. Depending on your location, you might be lulled into thinking that type of disaster "doesn't happen here." However, no matter where you are located, your business is not safe. On August 20, 2018, Southwest Wisconsin was swamped with such record setting rainfall that a state of emergency was declared.  It impacted our affiliated team's office as well as their design and fabrication site.

When we think about preparing for disaster, we think about the project site. But what if the disaster happens back at the office? What have you prepared in advance so that you can keep the business going - even if the lights go out?

An Ounce of Prevention v. A Pound of Cure

Understand that when a disaster strikes you are in survival mode, not business as usual. Business disruption costs money. In the short term, it means loss of revenue and extra expenses for every day you are out of business. Other potential impacts include the inability to preserve client relationships and the loss of talented employees. Further, insurance coverage may not be available to make you whole. To survive, you need a different mindset and a different strategic business plan.  Take the time now to think about the potential impacts to your business if a disaster strikes and putting a plan in place to respond. Below is a preliminary list of issues to think about as you begin to put together your own business continuity plan.

Identify Potential Business Impacts

 Are your employees safe and can you communicate with them?

  • What is your office closure policy ahead of weather emergencies?
    • Has leadership made clear that safety is first and that employees should leave or not come in during adverse weather?
  • How are you going to be able to communicate with your employees if the office network is down and you cannot use the office phones or emails?
    • Depending on your size, you may be able to have a basic phone tree with personal contact numbers & emails or there are more sophisticated systems available such as Preparis that sends mass SMS to employee cellphones.
    • Have you identified and informed your employees of an off-site location and time to meet following a disaster to gather information?
  • What have you planned for employees trapped on-site?
    • Are employees able to control access to building? Can they safely leave if power goes out? Can the locked doors be unlocked in an emergency?  Do your employees know how to do this?
    • Do you have emergency kits (water, food, radio, batteries, and flashlights) stored at the office? Do your employees know where they are stored?
  • Have you made it clear to employees that for their safety they are not to return to the site until authorized?
    • There should be one designated representative to be in communication with emergency services and to share with your company’s disaster recovery team.
    • No one should return to the site until cleared by authorities (including utilities) as being safe. There is a possibility of electrified water, gas leaks, structural issues, and depending on the business, chemicals hazards.
    • Only allow the minimal amount of employees necessary to the site. There could still be other safety issues (slip-and-fall hazards) that may be an issue.

What is the recovery plan?

  • Where is your information/data stored?
    • Do you have paper or electronic files?
    • Do you have backups of your data and information accessible off-site?
    • Do you have a plan for restoration of electronic data - for example, a plan to purchase a server to get your network back up?
    • Do you have a plan for the restoration of paper data - for example, employee files will need to be restored by professionals.
  • Do you have established contacts and resources in place for recovery services such as:
    • Temporary office space
    • IT Services
    • Payroll
    • Remediation
    • Temporary storage
    • Moving
  • Are these contacts and resources outside the geographic area of a potential occurrence so that they are also not going to be impacted by the disaster and/or responding to other customers?
  • Do you have a process for employees to recover personal property?
  • Do you have contacts and records for the property site?
    • Contacts to deal with utilities, mail delivery, internet, etc.
  • Do you understand the responsibilities of the property manager or landlord?
    • Which party is responsible for demolition, removal, or repair?
    • Do you have a copy of the applicable property agreements?
    • Do you receive rent abatement from the landlord due to a disaster event?
    • What are your options under the agreement if you cannot return to your location?

Are you prepared to deal with insurance?

  • Do you know who to call (insurance agent or carrier) and have the necessary contact information for filing a claim?
    • Do you have copies of your applicable policies available off-site?
    • Do you know what your policy says?
    • Do you understand how your coverage works?
  • Do you understand the best way to get your business back up and running and still be covered by the claim?
    • Is your insurance going to cover the costs of hiring outside help/recovery services?
    • Understand your coverage and that potentially employees working on clean-up and not on business projects are not considered by insurers to be included in the claim of loss of profit/loss of productivity.
  • Inventory and documentation of a loss takes a lot of time and labor.
    • Do you have an up-to-date inventory of office furniture, equipment, and contacts for rented/leased equipment, including copiers, computers, coffee, etc.
      • Be prepared to show original purchase orders, replacement cost, and photos of the damaged property.
    • Do you have documentation of building and building improvements?
    • Do you have the equipment available to document?
      • You should have at least a camera and a spreadsheet.
      • You should also have a way to retain and share information, for example, Dropbox. 

What is the plan to keep the business running as much as possible?

  • Understand contract obligations on current and future projects and if there are any impacts by delay.
    • Do you have access to copies of these agreements?
    • Can you create a spreadsheet or document to identify critically impacted work?
    • Do you have clients’ contact information accessible?
    • Draft and approve a consistent message to be shared with clients.
  • Have you created special project numbers to allow you to track project employee hours?
    • Separate numbers are needed for the insurance claim to track additional work completed or rework completed due to disaster.
    • A separate number should be used to track clean-up recovery efforts of the business in general.

Utilizing Your Business Continuity Plan

Have you pulled all the important information above together?

  • Is there a business continuity plan in place in writing?
    • Who has a copy and where is it easily accessible?
    • Is it stored, paper file, online, off-site?
  • It should be in at least one location that is outside the potential disaster area.

Practice Makes Perfect

Do you know your plan works and that your employees can follow it?

  • If you have multiple locations, do a survey of what is in place for disaster response.
  • Have key personnel participate in a table-top exercise of a disaster scenario to walk through the response and verify the plan works.
  • Perform office drills to verify that employees can be contacted, know the response plan, and know how to stay safe (i.e., where emergency supplies are).

Finding the Rainbow after the Rain

Unlike some businesses in the area following these historic rainfalls, our people were back up and running in a safe location within seventy-two hours.  This was due to understanding that this was survival mode and that teamwork beyond the normal course of business was necessary. For a similar positive outcome, take the time to identify potential impacts on your business if a disaster strikes, create a business continuity plan to minimize those impacts, and prepare by testing its effectiveness.

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Jennifer M. Kanady

Senior Counsel, FAC Services, LLC, Madison, WI, Division 11-Corporate Counsel