Who’ll Stop the Rain?

Mother Nature is business's biggest saboteur.

It’s hard to fault ATA executives for failing to prepare adequately for four Category-4 hurricanes making land in one season, an extremely rare occurrence (in fact, a 50-year event). Still, the Florida hurricanes were typical of the unnatural natural disasters that ravaged the planet last year. The massive tsunami that struck southern Asia in late December, for instance, was the third worst natural disaster of the past 100 years (see “But Could It Happen Here?”).

Domestically, blizzards, frigid temperatures, floods, landslides, and wildfires struck with unusual ferocity. In fact, according to insurance-industry data collector ISO, property/casualty insurers paid out more in catastrophic claims in 2004 ($27.3 billion) than in any year since that group began keeping statistics (see “Riders on the Storm”). Around 80 percent of the total insurance bill came from hurricane-related claims. Even communications specialist Sprint, a company known for its detailed contingency planning, was buffeted by the succession of hurricanes. “Those hurricanes played heavily on our resources,” says Greig Fennell, director of business continuation at the Overland Park, Kansas-based company. “For six weeks, everybody was working weekends.”

Sprint began preparing for the 2004 hurricane season the same way it always does: by conducting exercises before the season commenced to assess the company’s preparedness. Once Hurricane Charley made the radar screens in early August, the telco began dispatching power generators, batteries, extra food, and cell phones into the region. Fennell says Sprint, which reported sales of $27 billion last year, also dispatched extra technicians into Florida ahead of the storm. That move, like most of Sprint’s actions during the devastating event, followed an internal script created by Fennell’s team while Charley was still forming. “You have to have an appropriate process already in place to handle the situation,” he explains. “Without the process, you’re just reacting. And in a Category-4 hurricane, you don’t want to be shooting from the hip.”

Like Sprint, some companies conduct dress rehearsals of their business-continuity scripts. Each year, FedEx Corp., for example, prepares for hazardous winter weather by testing the time it takes to get its aircraft ready for cold-weather takeoffs. “We need to know how long it will take to de-ice, then wheels up,” explains John Dunavant, managing director of the cargo carrier’s global operations control center in Memphis.

Similarly, a growing number of businesses have begun to war-game emergency situations, usually in conjunction with a consulting firm or insurance carrier. FM Global, for one, conducts a workshop for clients in which the heads of a simulated corporation with five business units are charged with protecting the mock company’s profits, market share, and stock price during a simulated disaster. And how are those disasters determined? “We roll dice,” says Morganti. “A six or seven means your company has been hit by a fire. Snake eyes, it’s a volcano.”

Admittedly, few companies in the continental United States are in danger of being buried beneath a magma flow. And as any insurance vendor or risk manager will concede, it’s impossible to prepare for every natural disaster. “Ultimately, business continuity is a business decision,” notes Sprint’s Fennell. “It’s based on cost—how much are you willing to spend to protect the enterprise?”

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