NFIB

Worst-Case Scenario: Hurricane Floyd
05/ 27/ 2003

When Hurricane Floyd destroyed Christine Mary Maggio's home-based technology consulting business, the company was destroyed. But in the midst of the trauma, a new idea was formed. After dealing with the problems associated with disaster recovery, Maggio decided other small businesses could use the same help. So she launched Prepare Respond Recover (www.PrepareRespondRecover.com), a consulting firm specializing in safety planning, risk management, disaster response and recovery.

Below Maggio answers questions about her experiences.

In regards to you experience with the hurricane: How did it impact your business? How long did it take to recover?

After more than a decade as a computer consultant and technical trainer working for some truly wonderful companies [including Sony, Apple Computer, and many others], poorly engineered storm runoff flooded out my consulting practice. Insurance claimed "Act of God" and paid nothing. We went from six figures in annual billing to zero dollars in billing, practically overnight. Coupled with the early stages of the slowdown in the technology sector, things were extremely difficult.

But in terms of recovery, for me Hurricane Floyd is really more a story of rebirth; I decided to build on what I learned through those long -- and, frankly, miserable days -- and it brought me to a brand new life that I love.

After Hurricane Floyd -- which hit in September of 1999 -- I began publishing a Web site to assist other individuals and small business owners in their own disaster mitigation, response, and recovery. In time, I began working with local police departments and community organizations planning Polaroid KidCare ID events and working with businesses and non profit organizations to provide documentation by photography services that would allow them to store digital photographic inventories of their equipment and assets offsite in case of a loss. This new line of business was developing nicely -- and then came September 11. At the time we were located in New Jersey, less than an hour from the World Trade Center. Some of the companies I was working with were in the Twin Towers. At that point I decided that I needed to develop a breadth and depth of knowledge that my own limited experience did not allow, so I scaled back on client work and eventually enrolled full time at Rochester Institute of Technology to pursue a Bachelor of Science degree with concentrations in Disaster & Emergency Management, Health & Safety Technology, and Environmental Management.

You can't stop natural disasters, so what CAN you do to prepare your business for the possibility of a hurricane, tornado, fire, earthquake, etc.?

Know Your Surroundings

Identify all of the risks you are exposed to. Know what the likelihood is of hurricane, tornado, flash flood, landslide. One little known fact is that, on average, more people die in the United States from floods and flash floods than from any other natural disaster. Federal government agencies such as FEMA, NOAA, USGS, EPA, and others are all excellent sources of information that is free of charge. Remember that the phrase "10 year flood" does not mean that an area will flood only once every 10 years! "10 year flood" refers to both the historical average record and the statistical probability of a flood in a given year; for example, 10 year floods have a 10 percent (1/10) probability of occurring, 40 year floods have a 2.5 percent (1/40) probability of occurring, and the meter restarts every year. In addition, remember that climate change is afoot; what was true 20 years ago in terms of average rainfall, snowmelt, and other factors that influence flooding may not be true for your locale now.

Protect Yourself from Both Natural and Environmental Risks

Remember to distinguish between a natural disaster -- such as a hurricane -- and an environmental disaster -- such as a chemical spill, industrial fire, and the like. As difficult as natural disasters are to predict, environmental disasters in my opinion are even more difficult; You have to be vigilant and constantly aware of what is going on around you. What businesses (such as manufacturing, chemical plants, even large bakeries), facilities (such as airports) or utilities (such as power or sewage treatment plants) are in your immediate area? Do they have necessary licenses and permits? What is their safety record? Their environmental compliance record? Are they using machinery or equipment that could pose a life safety risk if used improperly or not maintained well? Is their use of equipment a violation of zoning ordinances or building codes? Do trucks or railroad cars travel through your area? What are these carrying? Get to know what is in the immediate area within at least five blocks of your site. Identify fire stations, police stations, schools (which are often used for mass sheltering during a disaster). Identify multiple routes out of the area, be sure that you don't get boxed in.

Take a Top-to-Bottom/360 Degree Approach to Identifying Risks

You might think that you are not at risk of flooding because your home or business sits above a water body or because water has never risen "that high." But don't just look down -- look up and out as well! If a torrential downpour comes, rain falling uphill from your site must flow past you on its way down to lower elevations, and this can leave you suddenly sitting in the middle of a river. For this reason, issues such as storm runoff flow and the potential for mass movement (landslides, mudslides) should be looked at carefully.

Find Out What Your Insurance Is -- and Isn't -- Going to Cover

Do more than just send your premium checks to your insurance agent or company; meet with them in person at your location and have them go over with you all the risks you are subject to and the specific coverages that your insurance policies provide. Include business interruption coverage in addition to your property, casualty, and liability coverages. Get everything in writing! Take notes of conversations and include full names, titles, contact information, and dates. Attach meeting attendants' business cards to your notes, which can be extremely valuable down the road if you need to establish who attended the meeting. If you need clarification on any point, send a letter stating "based on our conversation, it is my understanding that my policy will cover the following risks; please explain these terms by return correspondence." Be sure that any hidden clauses or conditions that would void your coverage are identified well before you need your insurance. If appropriate, explore self-insurance. And if the worst-case scenario happens and you find yourself needing to file a claim, consider hiring a Public Insurance Adjuster. PIAs are independent professionals who work for you -- the party who is filing a claim -- and they will handle the negotiations with the insurance company and its adjusters on your behalf. This can be a tremendous benefit for a small business owner, but as with all things, buyer beware! The best time to identify the Public Insurance Adjuster you'd like to work with is, once again, before the disaster strikes.

Manage Your Resources Well!

Maintain a stash of cash or readily convertible assets to tide you through times when you're not bringing in income. Avoid debt that does not carry itself, for example, credit cards that are not purchasing assets but rather are used to cover operating expenses.

What's the best way to handle customer/clients/employees immediately following the disaster?

Be open, be straightforward, but remember: business is business. If you will not be able to deliver, or if you need time to regroup, say so. You may lose short-term business, but you'll be able to focus on your recovery and your clients will respect the fact that you were thinking about their needs at a time when your own were needs were significant. Employee retention may become an issue; if you have liquid assets or savings or if you qualify for disaster loans, you may be able to maintain payroll. If not, you may risk losing key staff members. Unfortunately, this can become another casualty of your disaster experience. But as difficult as it may seem, remember that the disaster was a single event and you can prevail! Remain steadfast, act with integrity, and always err to the side of caution when under stress -- don't overextend yourself. If you do, your quality of work will suffer. Your relationships will suffer. Your health and well being will most definitely suffer. And the long term implications of this will be harder to recover from than disaster itself -- even if the disaster recovery takes six months or a year.

What's the hardest part about recovering from a disaster?

I would say the hardest part of disaster recovery is dealing with the business interruption. If your clients are primarily local and they too have suffered from the disaster, your business interruption may not only be caused by damage to your infrastructure but also compounded by a severe decline in customers / clients / income. This is what happened to the restaurants and service establishments in the area surrounding the World Trade Center, and sadly, some never recovered. On the other hand, mitigating this risk by building a clientele that is geographically spread out can help, but this may not be appropriate for all businesses. Also, keep in mind that "business interruption" can be classified many ways -- as an Income Interruption (no customers/clients/income), a Communications Interruption (no telephones, no Internet access), a Facilities Access Interruption (cannot get into the building or warehouse).

Maggio recommends links to these federal agencies for more info:

Federal Emergency Management Agency, www.fema.gov

National Oceanic and Atmospheric Administration, www.noaa.gov

US Geological Survey, www.usgs.gov

Environmental Protection Agency, www.epa.gov

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This Web extra is supplement to the article "Worst-Case Scenarios," which appears in the June/July 2003 issue of MyBusiness magazine.

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