Over the years, we have known several manufacturers who treat technology as an afterthought and of secondary importance. We are in the business of helping companies realize the importance that technology can offer companies by making them more efficient, more accurate, more competitive, and so on. Well, technology is just one important factor that will usher a company into the future.
Another facet for continued longevity is disaster planning. You never know when or how your business may be put in harm’s way. Disasters can strike at any time, and the best plan for a business of any size is to prepare for the worst. Yet like technology, disaster planning is often treated as an afterthought as well. We’d like to tell you why the smart companies plan ahead for worst-case scenarios and why your company should consider planning for the worst.
This is a two-part blog wherein Part I, we tell you the different type of catastrophic disaster that can happen to your company. In Part II, we tell you how to best avoid or deal with those disasters when they occur.
Fires • Floods • Tornadoes • Blizzards
Houston, Texas, late August of 2017, thousands of business were devastated by Hurricane Harvey. With winds measuring up to 130 mph and constant heavy rain when the storm stalled over southeast Texas, mass flooding occurred along with electrical utility outages caused at least $125 billion in damage to destroyed vehicles, homes, buildings, properties, schools and businesses. Approximately 32,000 people were displaced and in Texas alone, 336,000 people were left without electricity.
Hurricane Harvey is just one example of a disaster that can take a business down, and depending on those who had prepared in advance, meant the difference between surviving or dying.
Companies must be prepared to deal with disasters and have a real-world emergency plan in place to protect their employees, and their ability to continue business operations.
Business Interruptions Resulting From Disaster
In the case of Hurricane Harvey, despite a demolished landscape, many business structures remained intact and safe to occupy, yet most of these businesses remained non-operational because employees and customers could not get to the business due to inundated streets and closed roadways. Many business owners filed insurance claims but were rejected because their business was not physically damaged. Believe it or not, many business interruption insurance policies require “direct physical damage.” Other companies have been denied claims due to power outages which can last days and destroy many types of businesses.
Blizzards • Hurricanes • Earthquakes • Tsunamis
Know What’s Covered and What’s Not
It is imperative that you understand your insurance coverage. For example, The National Flood Insurance Program (NFIP) does not offer a business interruption component. According to risk modeling firm AIR, Hurricane Katrina in 2005 caused about $25 billion in insured commercial losses, of which $6 billion to $9 billion had been attributed to business interruption, according to information posted on AIR’s website.
Insurance Payouts—Prepare to Wait
Business owners should understand that insurance payouts may not be fast and friendly as portrayed in insurance company TV commercials, In some cases hiring an attorney should be on your possibilities list.
Many businesses who filed claims resulting from Hurricane Harvey found themselves subject to forensic accounting autopsies hinging on factors such as whether the storm hit during a slow season or if the business could make up for lost time in another quarter. The fact is, that it can take months, and sometimes years, for a policyholder to receive monies owed.
The bottom line is, businesses need to know what’s covered by their insurance providers, what’s not, and how payouts are handled. A long sit-down with your insurance agent accompanied with many well-thought-out questions is in order to uncover your policy’s limitations and exclusions, along with waiting periods and procedures for how the insurer measures a company’s lost income so that your organization is not caught off guard.
Disasters Know No Boundaries
Disasters can occur at any time and anywhere on the plant. Consider Flash Flooding. We hear about it all of the time on the radio and TV but do we really understand what it is and why it can be so lethal?
On September 15th-23rd of 2009, the 2009 Southeastern United States Floods were a group of floods that affected several areas throughout northern Georgia, Tennessee, Alabama, Mississippi, and Arkansas. Continuous rain, created by moisture pulled from the Gulf of Mexico, fell faster than the local watersheds could drain the runoff. The worst flooding occurred across the Atlanta metropolitan area where damages in Georgia alone were estimated at $500 million with some 20,000 homes, businesses and other buildings received major damage.
The ingredients for a flash flood can read like a recipe. Combine a low-level or flat-ish area + lots of water + time (less than 6 hours–fast enough to overwhelm sewer and drainage systems) = FLASH FLOOD.
Flash floods can occur as the result of heavy rain associated with a severe thunderstorm, hurricane, tropical storm, or meltwater from ice or snow flowing over ice sheets or snowfields, just to name a few examples.
What makes flash floods so dangerous is their rapid appearance and fast-moving water. According to the U.S. National Weather Service, more people die yearly in floods, than by lightning, tornadoes or hurricanes combined. The U.S. Weather Service gives the advice “Turn Around, Don’t Drown” for flash floods. That is to say, it recommends that people get out of the area of a flash flood, rather than approaching it or attempting to cross flood waters.
Biological, Chemical, and Radioactive Events • Cyberattacks • Industrial Espionage
Disasters In Technology
Disasters are becoming more commonplace in technology. Consider Target Corporation, the nation’s third-largest retailer, which was the victim of a massive cyber attack in 2013, where approximately 40 million credit and debit card accounts were impacted in a credit card breach.
As Reuters describes it, “The hackers worked at unprecedented speed, carrying out their operation from the day before Thanksgiving to December 15th. Target did not detect the attack on its own, according to a person familiar with the investigation. The retailer was alerted its systems might have been compromised by credit card processors who had noticed a surge in fraudulent transactions involving credit cards that had been used at Target, according to the source, who was not authorized to discuss the matter.”
Besides millions in damages to Target, the company suffered a brutal beat-down by the media and customers alike with comments like “Shop at Target, become a target.” It’s still unknown how many customers were affected and aftershocks extended right up to the top with the eventual dismissal of the CEO.
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In Part II of our blog post, “Disaster Plan: Why Planning For Catastrophe Can Make the Difference Between Staying in Business or Losing Everything” we tell you how to best avoid or deal with catastrophic events when they occur.