IN THE aftermath of Hurricane Katrina last year, many chemical distributors with operations in the Gulf Coast area learned their employees had evacuated and could not be contacted. Phones were down, computer data was disrupted, transportation was interrupted, post offices were closed, supplies were unavailable, and customer business was lost.
It was a time to turn to a disaster impact and business recovery plan in order to return to normalcy. “After a loss from an unforeseen event, management's primary objective is to restore business operations,” said Larry Knight of Aaxia Chemical Insurance Service.
Knight was part of a panel that included Steve Stanfield of Sullivan Curtis Monroe Insurance; Kelly McCabe of Ideal Chemical and Supply Co; Freddie Duhon, Gulf Coast Chemical; and Sean O'Donnell of Datacor Inc. They discussed disaster impact and business recovery plans at the Operations Seminar and Trade Show (OPSEM) sponsored by the National Association of Chemical Distributors September 13-15 in Indianapolis, Indiana.
In addition to business interruptions prompted by hurricanes, floods, and tornadoes, companies should plan for emergencies connected with pandemic illnesses, the group said. For example, in the worldwide flu outbreak of 1918-1919, the virus disproportionately killed young people in the prime of life, and more than 675,000 people in the United States died, according to the Center for Disease Control and Prevention.
To be prepared for such eventualities, whether by storm or disease, O'Donnell emphasized the importance of having plans in place before a disaster occurs, updating those plans on a regular basis, and considering the various levels of disruption that may occur.
McCabe pointed out that even if employees return to work, they may be without a place to live and may have acquired additional family responsibilities. “Some may not come back at all,” he said.
At the same time, employees who do return to the job often have skills that can be used in the recovery program in addition to those they use in their work assignments. Some may be short-wave radio operators who can communicate with others when telephones aren't working. Some may have first-aid training. All personnel skills should be noted and listed in a disaster plan, said Knight.
Turning from personnel to equipment, the speakers noted that loss or damage to computer data, including e-mail files, is a major concern. Managers often think that they have information backed up, only to find that data has been lost because the backup program had not been reviewed properly.
“Just because you have a disk doesn't mean there is anything on it,” said O'Donnell. “So verify.” He recommended storing data with a third-party provider and reminding employees to back up their e-mail files. Several people also should be trained to have access to the computer system in case employees are scattered after an event.
Stanfield noted that deciding what insurance coverage should be included in a disaster plan requires interaction with agents and brokers, particularly while discussing what contingent income would be needed if suppliers or customers are lost.
Duhon, whose company had to contend with the 2005 Gulf Coast hurricanes, agreed. He emphasized that plans should be in place to handle problems that arise when customers are affected by the emergency, and to acquire equipment and other supplies when supplier business is shut down in the disaster area.
Knight said brokers must understand how a business operates in order to provide adequate insurance. He noted the costs involved in facility reconstruction, which is more expensive than new construction, and the costs involved in debris removal, especially if the material is hazardous, such as asbestos or lead. Hazmat disposal carries increased costs from documentation, permits, and handling and dumping fees. All of these factors, as well as the rising cost of raw materials, should be calculated for a disaster recovery plan, he said.