January 18, 2012

Cover Story

Featured Articles

Alicia Ridley

Fair or Fraud

Best of Business


Alicia Ridley

Fair or Fraud

Best of Business

Good Design, Good Business

Legal Briefs
Iron-clad Non-compete Agreements

Legal Briefs
Crossing the Border?

Robert Hatch

Living Well
Last Hurrah

The Big (or Small) One

Industry Outlook
Human Resources and Staffing

Lessons Learned
Moving Forward

Heidi Walker

Small Science

Business Trends
The Bad News Bearers

2010 Fast 50


The Big (or Small) One

Would Your Business Survive a Catastrophe of Any Size?

Peri Kinder

January 18, 2012

Scientists predict an earthquake with a magnitude of 7.5 or greater will hit the Wasatch Front at some point. To mitigate this likely catastrophic event, buildings are constructed according to seismic standards and city-wide drills are held routinely. But it might not be an earthquake that will destroy your business. A disaster might strike in the form of something as innocuous as a water filter. It was a customer making a deposit at a Zions Bank branch on a Saturday afternoon who first noticed the water dripping in the drive-through lanes. A phone call to customer service alerted the company to a potential problem. Immediately, customer service contacted the proper people on a regional and branch level. But in a very short amount of time, a leaky water filter in an upstairs bathroom had caused thousands of dollars in damage. In the branch location, computers had to be dried out, part of the ceiling was replaced and waterlogged drive-through tubes had to be serviced. Utah Disaster Kleenup was called in and, at the end of the crisis, a broken water filter had cost the company nearly $30,000 in repairs and clean-up. If not for an alert customer, however, it could have been much worse. Zions Bank routinely implements, updates and practices disaster preparedness and business continuity plans—and that one phone call from a customer started a chain reaction that led to a quick response, saving the branch thousands of dollars in damage. Fortunately, the branch was open for business the Monday following the incident. “That quick turn time is a testament to the fact of the importance of a continuity plan,” says Brian Garrett, Zions Bank vice president and business continuity manager. “We get so focused on that large, disastrous event, but the more day-to-day events are the ones we should be [prepared for].” Prepare for the Worst Whether it’s a magnitude 7.5 quake or a long-term power outage, companies need to be prepared for every form of disaster. Natural, manmade or technological upheavals could occur at any time, but business owners can take steps to ensure the survival of their company. “Pre-planning your disaster preparedness can be the difference between being shut down for a few days with little effect on your business operations to losing all your employees, your customer base and your livelihood,” says Daniel Hannaher, Small Business Administration regional administrator. “Disaster preparedness starts by developing an emergency plan that fits your company’s needs while addressing the full scope of the disaster scenarios.” The first step is setting up a communications arrangement and a continuity of authority that will maintain leadership should the CEO or president be incapacitated. With the possibility of in-state phone lines and cell phone service being tied up, businesses should set up an out-of-state contact where employees can check in and get information. Current phone lists for employees, customers and vendors are invaluable and should be backed-up in an offsite location. Efficient communications can reduce panic, confusion and misinformation that could make the situation worse. Zions created a calling tree so everyone from CEO Scott Anderson to a bank teller in the most rural of branches can be kept in the communication loop if necessary. The calling tree is tested yearly and is used along with e-mail updates and regular content posting on Zions’ website. “Get the proper contact information and get the right people involved at the right time—and get them involved quickly,” Garrett says. A vulnerability assessment based on the size of the company, location, neighboring businesses and production materials can help determine the risks and hazards associated with the business landscape of the area. Do neighboring companies use chemicals that could leak? Is the vicinity prone to flood, wind or wildfires? What about pandemic control? A plan for controlling a widespread virus will be vastly different for a company with 300 employees as opposed to three. Employee Involvement Human resources could be the most important asset in an organization. Employees with specialized training or skills could stave off serious injuries or even casualties. Before a disaster occurs, identify internal resources by determining how much (if any) instruction employees have received in first aid, CPR or community emergency response team (CERT) training. To bring your staff up to speed, arrange a drill with the local fire chief or provide CERT training courses for employees. Attend city council meetings to meet emergency response managers. The more human resources there are available to a company, the better the chance for recovery after a disaster. Also, contact neighboring business owners so resources can be shared and utilized in the event of a disaster. Nearby owners might have access to a generator, first aid supplies or survival equipment that can be used to the benefit of all companies in the locale. Helping employees be prepared in their own homes will make their return to work quicker and less stressful. “We’ve seen in other disasters that if employees aren’t prepared at home, they don’t come back to work,” says Ryan Longman, section manager for Be Ready Utah. “Once they make sure things are OK at home, the employees can get back to work.” Like many companies, Zions provides preparedness information to employees. With 130 branches in Utah and Idaho, and 2,700 employees, service at Zions could definitely be disrupted in the case of a serious calamity. But preparing employees for many different disaster scenarios decreases the time it takes to get business up and running again. “There’s nothing more important to us than the safety of our employees and their families,” Garrett says. “We want our employees to be as prepared as they can at home. “It is the responsibility of every employee who works for every company to ask about a [continuity] plan. Don’t leave it up to the employers. Bring concerns to your CEO or boss,” Garrett adds. Along with educating employees, companies should create a simple evacuation plan and hold regular drills so workers can respond automatically during the confusion and panic of an emergency. Assign responsibilities to specific individuals to ensure everyone leaves the building safely and meets at a pre-determined location. Understand the layout of the building, know where fire alarms and extinguishers are located—and teach employees to use them. Learn when gas lines should be shut off—and when they shouldn’t. Only the gas company can reconnect a gas line and a company could cripple itself by shutting off the gas when it isn’t necessary. Employers should also organize a sheltering plan in the event employees are not allowed to leave the building. What if a tanker truck filled with toxic chemicals overturns near a business? What if a major snowstorm locks the entire city down? The continuity plan should include provisions for shelter and necessary supplies for up to 12 hours if necessary. Have sheets of plastic on hand to cover windows, vents and doors in the event of a chemical disaster. Provide 72-hour kits for each employee with ample food, water and hygiene supplies. Local fire officials are more than happy to help companies create and implement an evacuation or shelter plan. If the company has vehicles on the road, are those vehicles supplied with emergency kits? Are drivers trained to survive in the event of a disaster? Once a plan is in place, update new employees and 72-hour kits on a regular basis to ensure safety for everyone involved. Covering Your Assets The next step is establishing the essential business functions that will determine how fast a business can resume operations. “After a disaster, each business is going to want to get back online as soon as possible. Take time to establish your critical mission,” Longman says. For instance, a bread baker will need ovens, ingredients and power to make his product. Creating an emergency plan that will get freshly baked bread back on the bakery shelves in the least possible time could make or break that business. Deciding what is most important to a business can help prioritize recovery efforts to get companies back on their feet. Proper insurance can help companies regain lost assets and restore business functions. Insurance coverage needs to be reviewed on a regular basis to make sure businesses have the correct levels of insurance in the event of a catastrophic event. Longman says less than 5 percent of Utah business owners have earthquake insurance coverage. He cites past incidents where more than 25 percent of uninsured or underinsured businesses couldn’t recover from a disaster. Of those remaining, 50 percent went out of business within the next two years following the event. “Underinsured businesses suffer the greatest economic losses after most natural disasters,” Hannaher says. “Small business owners should evaluate their insurance before a disaster hits. The insurance must be tailored to the individual business and take into consideration not only property damage, but loss of revenues and extra expenses that occur when business is halted by disaster.” Employers are strongly encouraged to sit down with their insurance agent and make sure coverage is adequate. It’s a meeting that could literally save a business. Another critical asset is your company’s data. Fire, human error, power failure or utility malfunctions could result in the loss of significant information. If a building is destroyed, could that owner provide insurance information, tax records, bank statements and other vital records necessary for recovery? Cyber security is one way to safeguard important documents and records from hackers or cyber terrorists, but storing vital information in offsite locations is a simple solution that could pay off big following a disaster. “Consider storing critical financial information offsite or upload to an online storage facility,” Hannaher says. “Have alternate suppliers lined up in case your normal suppliers are closed due to the disaster. Always back up important data in multiple locations so customer lists or other important information is not lost.” Longman agrees, saying, “A lot of our bigger organizations have back-ups not only in Utah, but back-ups all the way to Texas. So if everything in the state goes down, they still have access to information.” Once a continuity and disaster preparedness plan is in place, employers should expect to evaluate and re-evaluate, train and retrain, and practice, practice, practice. A plan is only effective if participants know their roles, understand procedures and have a relationship with those involved. Communication is key, and even minor disasters can be used to help train employees. Garrett describes a time when the computer network went down at one of Zions branches, leaving employees unable to help customers. At the time, the manager didn’t think the “disaster” was important enough to enact the continuity plan. But Garrett says if the manager had contacted him, he could have moved the employees to a different location and gotten them back online until the problem could be resolved. “The manager got into a mindset that a disaster is only something big,” Garrett says. “He didn’t even think to call. If you can’t do the small things, you won’t be able to handle the big one … I think you learn something from every single event. If you don’t learn something from every event, then you’re not being honest with yourself.” Invaluable Resources Many resources are available for business owners to help create plans, evaluate readiness and train employees. Be Ready Utah offers classes to prepare businesses and identify procedures that can reduce losses during a disaster. CERT officials can instruct employees to be first-responders to emergency situations in the office, neighborhood or business community. In March 2012, the Federal Emergency Management Agency will conduct a full-scale emergency earthquake drill to test disaster readiness along the Wasatch Front. This will be a good time for businesses to practice their plans by setting up their own drill utilizing emergency operations and continuity plans. “Most companies say they have no time to organize an emergency plan,” Longman says, “because they haven’t been ‘scared into it’ enough. Then their system crashes or they have a fire.” “Disaster preparedness should not be an afterthought,” Hannaher says. (Possible sidebars below) Hope for the Best, Prepare for the Worst 12 Point Program to Business Continuity Planning Source: Be Ready Utah 1. Create a Planning Team / Continuity of Authority 2. Organize Communications 3. Define Risks and Hazards 4. Determine Internal / External Resources and Capabilities 5. Conduct a Vulnerability Assessment 6. Identify Essential Business Functions 7. Organize Human Resources 8. Create a Workplace Evacuation and Sheltering Plan 9. Purchase Workplace Emergency Supply Items 10. Evaluate Insurance Coverage/Reviews 11. Protect Vital Records 12. Protect Data /Store / Recover
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