As of this writing, the wrath of Hurricane Harvey imposed on Houston and surrounding areas has not even begun to be tabulated and quantified. The question of how many businesses will survive remains to be determined.
Many of us compare Hurricane Harvey with Hurricane Katrina that curiously occurred during the same week in 2005 as Harvey did this year — from Aug. 23 to 31.
Why is this of concern to retail businesses and commercial operations in Kern County? We experience no hurricanes. We have only a flooding risk, especially if Lake Isabella’s dam should fail.
The answer is on two levels. First, if the “really big” earthquake that’s overdue should occur on the nearby San Andreas fault and, secondly, if an isolated disaster were to occur only to your business, or to another business on whose supply chain you heavily depend.
For these reasons, you need to read on.
Data from 17 years ago can reasonably be interpolated to this current disaster and can be transposed to other disasters such as earthquakes, wild fires, and — heaven forbid — an EMP or, even worse, a nuclear attack by another nation.
Here are data from the US Census Bureau about the “evaporation” of business during Katrina. You can reasonably extrapolate these data to any disaster in Kern County.
Metro New Orleans 2005 2006 % Change
Grocery Stores 573 430 -25%
Gas Stations 447 407 -9%
Drug Stores 221 165 -25%
Hotels 259 227 -22%
Restaurants 2,138 1,860 -13%
On the other hand, certain other industries benefitted from the disaster of Katrina – especially construction firms:
Residential Construction 535 652 +22%
Commercial Construction 189 220 +16%
The question is: if these businesses had disaster plans — and most usually do — why did 25 percent or so not survive Katrina?
As was vividly evident during the extensive media coverage of Hurricane Harvey, the purpose of disaster plans is to save lives, not to save any business. The outcomes so far are outstanding! Rescues and medical care clearly were effective and lives were indeed saved.
The missing link is an entirely different planning process. As stated, disaster plans save lives. It’s business continuity plans that save businesses.
Almost 95 percent of a disaster plan can be accessed in a template. This includes not only major events such as hurricanes, earthquakes, or other catastrophes. It also includes isolated events like single structure fires, bomb threats, harassing phone calls, workplace violence, etc.
Templates work. My book, “Quality Risk Management Fieldbook,” is replete with them. However, this is not the case with a business continuity plan.
A BCP is just the opposite, viz., 5 percent template and 95 percent individually unique. It begins with a standard process map that “sets the stage” for the unique plan elements that follow.
It requires meetings in which a “business impact analysis’ is defined, agreed upon and put into writing in simple worksheets.
The worksheets define the following:
How customer service is adversely affected during the first 24 hours, then 24 to 48 hours, followed by one week and then beyond.
Resources required during the same time frames for recovery and restoration of operations.
The content of each of these templates will vary from business to business. Of special importance are plans for restoration or replacement of supply chains — when the disaster occurs only at a vendor’s location for parts, inventory, etc. This was highly evident in the Fukushima earthquake and tsunami in 2011.
The key is to enable your business to be proactive. The ability to foresee what can “go wrong” is what risk managers do so well. Thinking through these scenarios requires an investment in time well in advance of any event. Once the earthquake or other disaster occurs, it’s far too late for a business without a BCP to survive the catastrophic event.
To initiate such critical planning, lots of assistance is available on the internet and otherwise:
Software packages are described and some are available for purchase while others are free.
Counsel is provided by risk management consultants for a fee and by insurance brokers — sometimes for a fee and other times as part of their service package.
Books on risk management (including mine) include these steps and templates.
The crucial point is for business owners to begin this process without delay. Although businesses in Texas had a week’s advance notice of Hurricane Harvey, that’s still insufficient time to prepare effectively. Other events usually offer no notice at all. Especially earthquakes.
Once you will have worked through this process, your business will be well-positioned to survive, especially if you update your BCP from time to time as changes occur in your operations.
You, unlike perhaps your competitors, will enjoy the long-term benefit of proactive risk management, viz., a quiet night’s sleep.
John Pryor is a risk management consultant, adjunct professor of risk management at CSU Bakersfield, and author.