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

Disaster recovery is a “huge topic” for risk managers thesedays, especially in light of multiple disasters occurringworldwide, the latest being Hurricane Irene and the Virginiaearthquake.

“It's a huge topic and top of mind for a lot of folks because ofwhat 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 processof updating its business impact analysis. “We did it about fiveyears ago, but we feel now that with all the things that are goingon, it's an opportune time to get everybody's attention and torefresh that,” he says.

Montanez, also a member of the National UnderwriterEditorial Advisory Board, notes that his company recentlyimplemented a large SAP financial software conversion. The softwarewill be an enterprise-wide financial inventory.

While this is a good move for the company, he says, the downsideis 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 chainissues and how supply chains are so integrated, he points out. Forexample, U.S. manufacturing is dependent upon parts coming in fromany 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 movetowards enterprise risk management is a good one today.”

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

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

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

Because of the depth of the topic, he says, “It's always thebiggest elephant in the room that nobody wants to address. We talkabout it, but it's hard to get a handle on it, because it's notjust the domain of one department or one function within thedepartment.”

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

This is done all over the country, because there are regionaldistribution centers in 14 states, he notes. The process on thecorporate side is even more intensive, “because all the IT andsupport people are here,” he says, adding, “We think it is moneywell spent.”