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Mon January 30, 2012
Businesses Fall Behind On Disaster Planning
The end of January is gut-check time for anyone who’s made New Year’s resolutions. Many experts say top of the resolution list for small businesses should be a disaster recovery plan. After all, the incredible list of weather emergencies in Connecticut last year drove many businesses to the brink. WNPR’s Harriet Jones reports.
Ken Swanson is showing me around the West Hartford manufacturing business that was begun by his father and grandfather some 48 years ago. Swanson employs 25 people in this 20 thousand square foot facility making cutting tools and gaging products. But back in October and early November last year, this building would have sounded very different.
“We were out of power for nine days, and that is unprecedented in the history of the company.”
Swanson Tool Manufacturing ships products all over the world – increasingly to Asia - and that nine-day interlude set off a domino effect of practical and financial consequences.
“We had to increase our overtime dramatically to try to catch up from the lost production. Also to keep up with the new orders coming in we had to quote long deliveries, so I don’t know what type of business we lost, because we didn’t have the capacity, because we were catching up with the lost work. Also I had to buy back some vacation time from people in critical areas because I couldn’t afford to have them out.”
Swanson says in November, his revenues were down 20 percent over the same month in 2010 – not a mortal threat to his business, but a hit he did not need in these lean, post-recessionary times. Despite that, he admits, aside from an updated cell-phone list, the business hasn’t yet put a disaster preparedness plan into action.
“We’re pretty lean, we’re all running 110 miles an hour. Even though we’ve talked about it in our meetings, and we want to be able to have some kind of system put in place, what happens is, it becomes something we can talk about next week. It’s just one of those things that’s put on the backburner.”
But is Ken Swanson alone in being too busy to attend to a proper business continuity plan?
“I hate to say it, but no.”
That’s John Rose. He’s director of risk management services for People’s United Insurance Agency in Hartford.
“For that time element, when everybody was out of power, everybody thought about it and we were getting a lot of questions, provided a lot of information. Now, I have one client on my desk interested in disaster recovery, business continuity. That's one.”
It’s Rose’s job to persuade his clients to take a long, sober look at the risks they face.
“In our business what we call sleep insurance. You’re the owner of a business, what keeps you up at night? Anything that keeps you up at night jeopardizes your business.”
And he says it’s a mistake for business owners to close their eyes to the all the possible ways they can go under.
“If a client is selling a product, and they have a disaster and they can no longer produce that product. If I’m a customer I’m going to go elsewhere to buy that product. When they finally get back into the swing of things, they could have lost their customers. Those kind of things are not insurable. They could go bankrupt, and a lot of them do.”
In fact, according to the Insurance Institute for Business and Home Safety, some 25 percent of businesses hit by a disaster subsequently do go bust. But a small business owner with limited time and good intentions has to have a starting point. Rose has this advice.
“Play the ‘what if?’ game. That’s what’s called a table-top discussion. Senior management sits around the table, and somebody throws out – what if we lost telecommunications – if it’s very critical, they have to understand that if that goes down and it goes down for X amount of days, what it’s going to cost them, and are they going to lose customers.”
A recent national survey showed almost a quarter of small businesses spend no time maintaining a continuity plan. 90 percent spend less than one day a month. That sounds familiar to Mark Soycher, a human resources attorney at the Connecticut Business and Industry Association.
“People have short memories, and as a result, they struggled through this, the difficulty fades into the background, and they get caught up with business demands of day-to-day tasks and crises.”
Soycher is planning a seminar for his members on business continuity this spring. He says many people simply don’t know about potentially free resources out there, such as help from municipalities and emergency services.
“Many times have the local firefighter organization out to your organization to do a walk-through, so that when they come they’re not knocking on doors and saying what’s on the other side of this door, what kind of chemicals are used in this facility.”
The state too, has resources. In widespread disaster situations, temporarily idled employees can be eligible for state unemployment benefits at no additional cost to the specific business, something Soycher says would have helped many companies he spoke to in the wake of the October storm.
“They view their workforces in many cases as extension of family, and were stretching their own budgets and the business’s finances to get some money to employees who they recognize are being paid hourly and only paid if they work.”
In West Hartford, Ken Swanson says he’s still trying to balance the need for risk management with the feeling that an event like last October really couldn’t happen again.
“After 40 years, this has never really been an issue. That’s not a good answer to that, because when it is an issue, you don’t want to be caught shorthanded. As we assess everything we’re trying to figure out what we can do in a cost effective way.”
Perhaps what he’s really talking about is the price you can put on peace of mind.
For WNPR, I'm Harriet Jones.