Experts Say Small Firms Lag In Disaster Planning

NU Online News Service, Nov. 11, 3:24 p.m. EST

While a majority of large businesses have contingency plans for a pandemic or other catastrophe in place, many small to medium companies do not, which can result in their demise in the wake of a disaster, according to experts.

"Small businesses that don't have a plan in place generally don't survive after a disaster, whether it's a flood or a tornado. We see that anywhere from 40-60 percent of those that are hit like that simply don't come back to business," said David Paulison, former executive director of the Federal Emergency Management Agency (FEMA) in a phone conference with NU Online.

He added, "The truth is that it's not that difficult to put a plan together to survive any type of catastrophic event--a disaster or something like H1N1."

Mr. Paulison said FEMA and Homeland Security Web sites have detailed steps for putting a plan together as well as practicing the plan to make sure it works.

He recommended sites such as:

o www.ready.gov

o www.flu.gov

"These are easy to use and free," he said.

When he was at Homeland Security, he noted, their contingency plan was practiced with employees working from remote sites to make sure they could all communicate and do their jobs.

Bob Boyd, chief executive officer of Agility Recovery Solutions consulting firm, who also took part in the phone conference, said it is no surprise that smaller businesses trail larger ones in this respect. "Large enterprise companies have a program and maybe Sarbanes-Oxley requirements and a dedicated staff," he said.

Smaller companies, he noted, are "just now beginning to figure out how to get their arms around it, and they're potentially more susceptible to events than a large enterprise."

Mr. Boyd, by example, mentioned that a large bank with a branch closed can have customers visit another branch, whereas a small business wouldn't have the same options.

According to the 2009 Disaster Recovery & Business Continuity Survey from Charlotte, N.C.-based Agility:

o Ninety percent of smaller companies (less than 100 employees) surveyed spend less than one day per month preparing and maintaining their continuity plans.

o One in five (22 percent) spend no time maintaining their plans.

o Comparatively, 20 percent of larger companies (more than 100 employees) spend over 10 days per month on their continuity plans.

In exercising a plan, Mr. Boyd said, assumptions that have been made sometimes are not valid. "It's better to find that out."

Dr. William Lang, former associate chief medical officer at the Dept. of Homeland Security, said during the conference that in preparing for the H1N1 virus, larger organizations can begin with their existing disaster plan and apply it to the H1N1 risks. Small to medium size business, however, may not have an all-hazards plan in place as a starting point.

He added that smaller businesses often don't have a risk manager employed to implement a plan. "The risk manager is the owner of the business," he said. "And how much time is [the owner] going to spend on risk management versus operating his business?"

Mr. Boyd pointed out that smaller businesses--that haven't been mandated by a regulator to put a plan in place--may perceive that implementing an all-hazards plan is too time-consuming and costly.

Dr. Lang said a roadblock to putting a pandemic plan in place is what he called "pandemic fatigue," or apathy, caused by the perception that the H1N1 virus may be a "non-event."

While the likelihood is that we may be facing a "bad flu season" rather than a full-blown pandemic, some businesses may be hit with high absenteeism rates, he observed.

He explained that the effect to businesses is different than other disasters because it affects people rather than the facility, meaning that companies need to protect their employees.

Situations that need to be planned for include:

o Employees who may have used up their sick leave.

o Contractors who may come to work sick.

o Parents who might have to stay home to care for a sick child and need to be covered for in the office.

"A pandemic doesn't have geographic lines, unlike a hurricane or earthquake," he said.

He said insurance agents and brokers can play a big part in helping smaller businesses get up to speed in this area. "This is a perfect opportunity for agents and brokers," he said, adding that some insurers give discounts for recovery plans.

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