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How FEMA is helping small companies prepare to cope with natural disasters.
Marielle Segarra, CFO Magazine
September 1, 2011
September is National Preparedness Month, and as we reach the peak of hurricane season, the Federal Emergency Management Agency is taking on a new role: that of corporate ombudsman. Under a relatively new program, it is working with large companies to learn how they approach business continuity, and passing that expertise along to smaller companies.
Several years ago, FEMA officials noticed that companies like Waffle House, the national breakfast chain, rarely closed during emergencies, thanks to having detailed plans in place that addressed their supply chain and electricity concerns, as well as other aspects of continuity. When FEMA realized that Waffle House was serving up pancakes in disaster-stricken communities even before FEMA officials hit town, it decided to work with the company and other preparedness pros.
Starting last November, FEMA began to invite a range of private-sector companies to work with the agency for three-month rotations. So far, Target, Big Lots, Brookfield Properties, and Verizon have participated. Dan Stoneking, director of FEMA's private-sector office, says that large companies have the resources needed to develop strong plans ahead of emergencies, and small companies may be able to extract valuable lessons from them at relatively little cost.
Following last spring's violent tornado in Joplin, Mo., FEMA helped the local Chamber of Commerce connect small businesses there with Wal-Mart, Home Depot, and other large companies that agreed to mentor them during their rebuilding efforts. FEMA also placed private-sector liaisons in each regional office.
Small companies typically lag on business-continuity planning simply because they lack the resources. But some steps, such as meeting with employees to go over a disaster plan, cost almost nothing. And there is a strong ROI argument: a recent study of large companies by property-and-casualty insurer FM Global found that losses after a natural disaster were seven times more costly for companies with weak preparation plans than for those with strong ones. "The return on investment, one could argue, makes preparedness something that most businesses cannot afford not to do," Stoneking says.
For companies just starting to develop emergency-response plans, or reviewing the plans they have, FEMA and the Small Business Administration recommend focusing on the following questions:
• Who is responsible for backing up critical records, including tax, accounting, payroll, and production?
Store these records, including a copy of the business-continuity plan, site maps, insurance policies, and
bank-account information, both on-site and at a second site at least 100 miles away.
• How will the company protect its computer hardware, software, and databases?
• How will the company communicate with employees during an emergency?
• Has the CFO or risk-management chief met with the company's insurance providers to review coverage?
Most policies do not cover flood damage, for instance.
• Does the company have a shelter-in-place plan to protect employees in the event they need to remain inside
the building during an emergency? Do employees know the plan? — M.S.