small
business
When
disaster
strikes
Having a plan
in place can
save the life of
your business
PREPARING
FOR
the worst

■ Develop a communication plan for employees.

■ Back up all critical data online.

■ Take digital photos of all valuables and information technology equipment.

■ Keep insurance data online.

■ Consider having two Internet providers, one for backup.

■ Do a role play with staff simulating a disaster.

For more information

Business Continuity Institute ( www.thebci.org)

Disaster Center

( www.disastercenter.com)

Risk Management

Resource Center

( www.eriskcenter.org)

paid in three days, while some unprepared businesses waited years for theirs.

Devising a recovery plan pays off whether or not a disaster happens. Childs notes that her company’s insurance costs were reduced in “double digits” because its recovery plan demonstrated that the company had decreased its risks. Moreover, because large businesses want to make sure that their suppliers can deliver during an emergency, having a disaster plan helped Childs Capital maintain business accounts and secure new ones.

Developing a business continuity plan also helps a company’s staff cope with the emotional difficulties triggered by a hurricane, earthquake, fire or other disaster. “Having a plan in place gave us a sense of competence. We anticipated disruptions. We had more of a sense of control and didn’t panic,” Childs says.

GAR Y CORNHOUSE/GE T T Y IMAGES

Childs advises small businesses to back up information technology and make sure the data is accessible electronically. One software company stored its intellectual property, necessary to complete a $25 million contract to develop code, in a safe deposit box in a bank near the World Trade Center, which was destroyed. Childs recommends that small businesses use a professional data center and have redundant sets of data online so businesses aren’t totally dependent on physical assets.

Most plans will cover almost any disaster. In case of a bird flu pandemic, however, businesses should encourage telecommuting, because staff shouldn’t work in urban centers, where the disease can be easily transmitted. Every business must develop its own unique business continuity and disaster recovery plan. Restaurants, for example, must consider endorsements (add-ons) to their insurance for food spoilage. (During the New York City blackout in 2004, restaurants lost $50,000, on average, due to food spoilage.)

According to a study by the Federal Emergency Management Agency, 90 percent of businesses that fail to reopen within five days of a disaster eventually close. Childs surmises, “You either recover quickly or not at all.”

A 2005 Red Cross study of 204 small-business executives ( 61 percent of whom said they were not prepared for an emergency) noted four reasons why entrepreneurs fail to develop a disaster recovery plan: ( 1) They think it won’t happen to them; ( 2) it’s too expensive; ( 3) it’s too time-consuming; ( 4) they don’t have enough access to information.

“Don’t delay,” Childs advises. “Even if you can’t get it all done, get some of it done. You can do it incrementally.” C

By Gary M. Stern

ON SEPTEMBER 11, 2001, Donna Childs, president of Childs Capital, a Wall Street–based eco-nomic-development company, was shopping at a drugstore at the World Trade Center. When police evacuated the building, she returned to her apartment in Battery Park City, a stone’s throw from the fated buildings, where she says everything “was in total darkness. All I saw was a streaming wall of gray soot and ash.”

Childs phoned her office, told her 13 employees to return home “because something terrible has happened at the World Trade Center” and was forced to flee her apartment, take a ferry to Jersey City and stay with a friend in Hoboken until the Wall Street area reopened a week later.

Nonetheless, her business was continually operating. And unlike the estimated 40 percent of lower Manhattan small businesses that closed due to 9/11, Childs Capital ( www.childscapital.com), which specializes in aiding poor countries, kept on humming like a well-oiled engine. Thanks to her experience as a director at Swiss Re, the largest reinsurer in the world, Childs, a Costco member, had her disaster recovery plan in place. That plan saved her business and sparked Contingency Planning and Disaster Recovery: A Small Business Guide