Risk Management

What to Do When the Lights Go Out

An effective response to a power outage can boost a company's revenue, especially if it's the only local business with the lights on.
Helen ShawFebruary 9, 2006

The California brownouts of 2000, the August 2003 blackout in the Northeastern United States and central Canada, and Hurricane Katrina have shown how risky long-lasting electrical power interruptions can be.

Prompted by such awareness — not to mention the heightened reporting pressures under Sarbanes-Oxley and an increased sense of directors’ fiduciary responsibilities — more and more companies have been drawing up plans for responding to power outages. Simply put, there’s less tolerance for downtime these days, according to Ted Gaasche, the interim chief executive officer (as well as chief operating officer and CFO) at SunGard Availability Services, a Wayne, Pennsylvania-based company specializing in disaster recovery.

Just as a football coach begins a game with a plan to handle contingencies, so businesses should develop a clear and cost-effective contingency strategy for blackouts, brownouts, and other power emergencies, says Alexander Tabb, a partner in charge of the crisis and continuity practice of consultancy The Tabb Group. He advises that companies test generators, maintain them well, and negotiate contingency contracts with fuel suppliers.

Brownouts — partial losses of power that may or may not be planned — can be especially hard for companies to recover from because they can last for hours and recur over weeks and months, possibly leaving significant losses in their wakes. Such interruptions present companies with the logistical challenges of acquiring generators and fuel during an outage and the engineering challenge of having an uninterrupted power supply, says Tabb. In such circumstances, he adds, “power is not a constant.”

From small shops to large hospitals, organizations must plan for power interruptions by testing scenarios, conducting mock drills, and adopting a flexible response, according to Gaasche. “The two components to an effective plan are information technology and people,” he says.

Indeed, a company’s response to a brownout could make or break the business. For example, an effective response by a restaurant could save the inventory and gain revenue — especially if it’s the only one in an area with power, remarks Eric Johnston, senior vice president of Americas Generators, a Miami-based supplier of power equipment. Businesses can rent or purchase generators to sustain them during a power loss, he adds. Although generator sets aren’t cheap — they start at $10,000 — they’re supposed to last at least 20 years.

To be sure, brownouts can be rare occurrences in the United States. But in the developing world, they’re a way of life. Global companies that operate there frequently must deal with lengthy and rolling brownouts, according to Tabb.

Last year, one of his company’s heavily power-dependent clients on the Caribbean island of St. Kitts experienced power interruptions for almost one year. Ultimately, the company consulted with the local power company to adjust its work schedule and close during the brownouts, which were scheduled and sometimes occurred three mornings a week. Nevertheless, the company incurred a great deal of expense by acquiring generators, setting up uninterrupted power supplies for the computers, and importing fuel at a time when oil prices hit record highs, according to Tabb.

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