Disaster recovery planning Featured

6:17am EDT May 17, 2006
“Plans are worthless. Planning is essential.”

Those words were spoken by Gen. Dwight D. Eisenhower during World War II. They are just as true now, especially where natural disasters are concerned.

“Think of getting hit by a disaster as taking a trip,” says Mike Kiouses, vice president at Hilb Rogal & Hobbs in Tampa Bay. “A disaster recovery plan is your itinerary. If you don’t know where you’re going, how can you get there?”

Smart Business spoke to Kiouses about how businesses can prepare for disasters and what can be done after they’ve been struck.

What is a disaster?
When you mention disaster in Florida, especially after the last two years, the first thing that comes to people’s mind is hurricane. We have lost sight of fire and other occurrences.

A disaster has three elements: suddenness, unpredictability and significant destruction. Disasters are events of unexpected timing resulting in consequences that are seriously destructive.

Why is a disaster recovery plan so important?
A commonly noted statistic is that more than 60 percent of all businesses that suffer a disaster don’t recover from it. We only have to look at the aftermath of two horrible storm seasons to give the statement credence.

No matter how good a plan is, you can’t predict what will happen if a disaster strikes. And although it is a rare occurrence when everything goes as planned, the planning process accomplishes some important things.

First, it gives a business a road map to get from Point A to Point B, allowing it to navigate the many detours that pop up along the way.

Second, the process of planning makes people think, putting all ramifications of a disaster into a clearer perspective.

Finally, a company that has a plan is a better risk for insurers to underwrite and can positively effect the cost of insurance. A plan will certainly pay off in mitigating claims and uninsured costs.

What should a business plan for?
First and foremost is life safety. The most important asset a company has is its people. Look at what has happened in New Orleans; they are still looking for their people. How can you get back into business without your employees?

Secondly, customers need to be protected. How can you fulfill your obligations to your customers? We all like to think we have customer loyalty, but if you provide widgets and you can’t deliver, your customers may have no choice but to go to another supplier. And you may never get them back.

The planning process is like peeling an onion. Once you start the process, it leads you in many directions. Disaster recovery planning touches on every aspect of your business, from employees to customers, suppliers, bricks, mortar, logistics and the balance sheet.

Another question to ask yourself is if your supplier has a plan. You may not get hit by a disaster, but your supplier might. Where will you be able to get the goods and services that you need?

Where do you begin with the disaster recovery plan?
Small businesses, which usually think they don’t need a plan, will differ from large corporations that already have plans. For those that do have one, when was the last time it was reviewed or updated?

Every company will have different needs since every one has different amounts of exposure to risk. A single-location manufacturer is going to have a different risk than a multiple-location manufacturer. If you’re in the service sector, your plan is going to look different from a hotel or restaurant chain’s plan.

Many companies believe they have built-in redundancies in their operations; they believe they can make up for any losses at another facility. The president thinks that sounds like a good idea, but when it comes time to switch over, nobody knows what to do. This is an excellent example of how a good disaster recovery plan can ease that transition and save the company tens of thousands of dollars.

How does insurance fit into the plan?
Your insurance program is an integral part of your disaster recovery plan, but insurance is not designed to cover everything. Understanding how your insurance program will perform in the event of a disaster is crucial.

Two of the most important areas of your insurance are ‘business interruption’ and ‘extra expense.’ Most companies are underinsured, especially when it comes to extra expense. Some company leaders think all they need to get back in business is a phone and a computer.

The insurance process is really a matter of risk transferring, a service for which you pay a premium. Disaster recovery planning is really about identifying the risk and you ability to mitigate it or assume it. The more risk you can intelligently retain, the lower your cost of transfer, and the more attractive you are to underwriters.

MIKE KIOUSES, vice president at Hilb Rogal & Hobbs in Tampa Bay, can be reached at (813) 261-7973 or Michael.kiouses@hrh.com.