CFOs Brace for Monster Storm

Concerns about vulnerable locations, property damage, and power outages worry finance chiefs as they wait for Hurricane Sandy to strike.
David McCannOctober 29, 2012

MIAMI — At noon, waves were already surging over the seawalls at the southern tip of Manhattan and near Quincy, Massachusetts. Meteorologists were predicting that the flood tide for Hurricane Sandy would exceed those of Hurricane Irene levels and could reach 11 feet. “Don’t be fooled; don’t look out the window and say it doesn’t look so bad,” Gov. Andrew Cuomo (D-N.Y.) reportedly said. “The worst is still coming.”

Here there was little sense of Sandy, other than a chillier-than-normal Florida day. Yet she was very much on the mind of senior finance executives attending the CFO Playbook for Private Companies conference. Clearly, a part of their mind was north, where their companies and clients were battening down and hoping for the best.

Paul Remington, CFO of document-management software company Westbrook Technologies in Branford, Connecticut, said he had “just called the office, and they’re closing the highways in Connecticut at 1:00. That affects us in terms of servicing our customers all over the country.”

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But he says Westbrook learned a valuable lesson last year. After Hurricane Irene hit the company hard last August, it moved its servers to a safer off-site location where they could continue to operate. As for this week’s storm, some of Westbrook’s support team is available from remote locations to help customers.

Richard Swarts, finance chief of Paragon Valuation Group, thinks his company would be affected by the hurricane “because we appraise properties, machinery, and other equipment for insurance purposes. Typically, after these kinds of catastrophes, there are lots of major losses.”

Further, there are always anxieties “that the adjustments offered by the insurance companies may not be fair and appropriate. So we’ll be getting a lot of inquiries to do independent appraisals to help property owners that have had losses determine whether the offers they’re getting from the insurance companies are reasonable,” added Swarts.

James McConeghy, CFO of Greek yogurt maker Chobani and a speaker at the conference, said he doesn’t think his company will be affected, even though one of the likeliest storm paths takes Sandy right through the central upstate New York area where the its headquarters and manufacturing plant are located. But there is still a potential for trouble. “We’ll watch what’s going on with this storm, and if there is a power outage we may close down the manufacturing for a day,” he said.

Perhaps worse, the plant is hard by the Chenango River, and forecasts call for record storm surges throughout the Northeast today and tomorrow. Finally, McConeghy said he was planning to travel to New York City from Miami for two days of meetings. But those will have to be postponed, as the city’s airports are expected to be closed until Thursday. He said that instead he’s now headed to Chicago, where he will wait until he’s able to get home.

A big concern is business interruption. “When you see a storm like this, the consumers are ultimately impacted because transportation equipment can’t get to the distribution centers of the Amazons and Wal-Marts of the world,” said Rick Collins, owner of AFMS, a supply-chain logistics consulting firm.

“For many of the CFOs here at the conference, because they are small and medium-sized, they fulfill through other companies. And if they sell direct-to-consumer products, they will certainly be impacted, because depending on the gravity of the storm and the storm surges, it could push everything back for weeks,” noted Collins. “And because November is the start of the holiday push for many e-commerce companies, this will require them to do some additional advance planning through Thanksgiving.”