NU Online News Service, Aug. 31, 3:10 p.m. EDT

Disaster recovery is a “huge topic” for risk managers these days, especially in light of multiple disasters occurring worldwide, the latest being Hurricane Irene and the Virginia earthquake.

“It's a huge topic and top of mind for a lot of folks because of what is going on in the world today,” says William Montanez, director, risk management for Ace Hardware Corp.

In fact, Montanez says, his company is currently in the process of updating its business impact analysis. “We did it about five years ago, but we feel now that with all the things that are going on, it's an opportune time to get everybody's attention and to refresh that,” he says.

Montanez, also a member of the National Underwriter Editorial Advisory Board, notes that his company recently implemented a large SAP financial software conversion. The software will be an enterprise-wide financial inventory.

While this is a good move for the company, he says, the downside is that because the system is integrated, “if one thing goes wrong, everything goes wrong.”

One thing that came out of the Japanese tsunami is supply chain issues and how supply chains are so integrated, he points out. For example, U.S. manufacturing is dependent upon parts coming in from any number of countries.

“And it's all just-in-time and it's really tricky,” he observes. “The world is becoming extremely complicated, so I think the move towards enterprise risk management is a good one today.”

Some particularly large companies, he says, are going the ERM route, “because again, it's difficult for one piece of the business to see around all the corners and make sure they understand exactly what the issues are” for divisions in other locations.

“We're really trying to make sure that we understand the exposures and the opportunities we have as a company and try to capitalize on that as well,” Montanez adds.

Part of their process will be to have in-depth discussions with business units on risks and exposures, he says. Topics include the impact if the business processes do not recover within a certain amount of time—“both the financial and the reputational impact,” he notes. “Because it's taken us 85 years to build up the brand and it's in the top 10-to-20 names in the world,” he says, adding, “And it's tough to get [the brand] back once you lose it.”

Because of the depth of the topic, he says, “It's always the biggest elephant in the room that nobody wants to address. We talk about it, but it's hard to get a handle on it, because it's not just the domain of one department or one function within the department.”

He notes that the company does a lot of testing and mock drills “to get the kinks out and make sure we learn from the exercises.”

This is done all over the country, because there are regional distribution centers in 14 states, he notes. The process on the corporate side is even more intensive, “because all the IT and support people are here,” he says, adding, “We think it is money well spent.”

Special Reports /

Disaster Recovery Top-Of-Mind With Risk Managers

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