Magazine article Risk Management

Planning to Survive; Disaster Management Reaches Mid-Size Firms

Magazine article Risk Management

Planning to Survive; Disaster Management Reaches Mid-Size Firms

Article excerpt

Middle market firms have rarely given disaster planning much thought in the past, but Hurricane Andrew, the Northridge earthquake and the Midwest floods have changed that attitude. Traditional assumptions that the chances of a catastrophe striking are too remote to justify creating a disaster management effort have given way to a new recognition that recovery planning is crucial to companies of all sizes.

"We're seeing more interest in catastrophe planning than ever," says Jim Harper, president and CEO of Acordia Southeast, Inc. "We're seeing more catastrophic events, even in areas outside of Florida or California that haven't experienced a lot of major losses. In the past, when you looked at companies with revenue between $50 and $100 million, less than a third had any sort of disaster recovery plan. That started to change after Hurricane Andrew when people realized that some companies never got back in business."

Increased recognition of the need for recovery planning and the growing availability of disaster management resources, such as planning consultants and software, are helping companies evaluate not only what can go wrong but also what they can do to respond.

"The first thing companies must do is look at the kinds of catastrophes they face," Mr. Harper says. "California and Florida are more prone to earthquakes and hurricanes than other areas, but any firm can be damaged by a fire or an explosion. When they know what disasters they may have, we can help them figure out what to do to minimize the potential losses."

"When we discuss insurance and recovery issues with clients, we help them go into a 'what if mode," says Frederick J. Long, president & CEO of Acordia Northwest' Inc. "What are they exposed to? What are the critical elements of their business that keep them operating? These kinds of questions help businesses measure their needs for business interruption insurance and help them plan how to get operating again."

A critical element in reducing disaster-related losses is identifying not only the company's most important business functions, but also the resources that support them. Common operational considerations that companies must address include employee notification, evacuation plans and emergency communications.

"One of the biggest issues that a company must wrestle with is identifying what must be done to make sure its data center and computers remain operational. For a lot of companies today, losing the data center could mean going out of business," Mr. Harper says. To manage this exposure, he recommends that companies back up electronic data daily and contract in advance with a facility so access to key data can be restored promptly. …

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