Risk Management

Lessons Learned

Hurricane Katrina showed many companies how vulnerable their disaster plans are.
Allan RichterAugust 24, 2006

Until Katrina, many Gulf Coast businesses thought their disaster-recovery plans were pretty solid. As the first anniversary of the hurricane approaches, some of those companies have renovated the old plans or built new ones.

Like other companies in the storm’s path, New Orleans–based Entergy has spent the last year making its plans more robust. “With an event of that size hitting so much territory, much of the infrastructure wasn’t operating. A lot of what we needed to improve [concerned] communication,” says CFO Leo Denault, who also spoke with CFO right after the tragedy (see “Regrouping after Katrina,” Topline, October 2005).

The utility has lessened its dependence on the local telecom network by contracting for satellite phone service and has moved its remittance-processing functions from New Orleans to Hammond, La. — “well out of harm’s way,” says Denault. Some critical IT functions have been moved to Little Rock, Ark. And while Entergy’s original plan allowed it to remotely close its books only four days late, its new version is “much more robust, much more codified,” he says.

Harrahs Entertainment, which operates several area casinos, has centralized its disaster-preparedness plans. “Last year, if you were the general manager of a facility, you made the decision when to close,” says CFO Charles Atwood. This year, someone who has access to information from a national database and from law enforcement makes that decision in conjunction with the general manager.

Like Harrahs, PetroCom’s updated disaster plan involves more centralization, but the telecom supplier actually created a health, safety, and environmental director post to oversee the plan. Says CFO Dennis d’Aquin, “Most things we were doing worked; we just did not have enough of everything in place.” For example, last year PetroCom had only enough diesel fuel to run its generators for three or four days; it has since installed extra fuel tanks in its parking lot.

Going into this hurricane season, generally firms with fewer than 500 employees or less than $100 million in revenues have not modified their plans, says Hank Chase, director of homeland-security programs for Smart LLP. “There appears to be an improved preparatory state at the bigger companies, with evacuation plans, satellite sites, measures to take care of employees, and the like,” he notes. “But when you get below the large companies, regrettably, there is not much difference.”