Jansen International - Public Insurance Adjusters

Articles Of Interest

Disaster Continuity Planning For Gulf Coast Area Businesses
By Charles Dale, Vice Pres. of Operations for Jansen & Company

February 14-20, 1997

The recent tornado in Pasadena and the flooding experienced in neighborhoods during the last few weeks has brought a topic which is rarely considered to the forefront of homeowners and business professionals alike. In non-fatal events, the extreme inconvenience that homeowners endure when they have experienced a fire, flood, or other catastrophic incident is usually limited to emotional distress for lost belongings and the stress caused by being out of place while the home is being repaired or rebuilt. Financial impact on the homeowner is directly related to the insurance coverage on the home and contents and the way the claim is presented.

Business professionals oftentimes experience similar types of losses and undergo the same amount of emotional duress; however, the experience not only challenges the emotional limits of an individual it can also greatly affect a business person’s livelihood or at the very least, a company’s position in the marketplace. Consider several examples of businesses which have been affected by catastrophic events beyond their control; a hotel owner whose property was not severely damaged due to a hurricane suffers dramatic loss of income due to an area loss, which has impacted roadways and accessibility to the property, coupled with bad publicity which impacts tourism and the hotel’s customer base. A food manufacturer loses market share because they were unable to harvest a crop and the raw materials spoiled while the facility was being rebuilt. Another example is the impact a catastrophe has on your employees, their homes may have been destroyed and they may be unable or unwilling to devote their time to a recovery effort at your place of business after the incident has occurred. Catastrophes can dramatically affect businesses in the area as well as businesses outside the affected locale due to raw materials shortages, delivery and scheduling problems. Damaged inventories and parts used in manufacturing may have been destroyed which affects your share of the marketplace as loyal customers go elsewhere to fill their orders.

When a businessperson accesses the impact a catastrophic event has on his or her company, there are a multitude of issues other than the financial loss which accompanies the incident. A well prepared contingency plan which covers all of the areas which should be addressed can be a very valuable program for companies in the gulf coast region. A program which minimizes the down time of the organization and limits the disruption of the business during recovery, while carefully tracking financial exposure is not a luxury for gulf coast area businesses. Business professionals who have prepared their operations will survive the incident, those who are not prepared will suffer varying degrees of loss, including bankruptcy.

The Farmers almanac and our more advanced computer tracking mechanisms are calling for a greater than usual probability that a hurricane will land in the Galveston/Houston area in late 1997, increasing the likelihood that we may all face business interruption which is out of our control. A good insurance policy which addresses applicable exposures and business vulnerabilities is your first defense in protecting the business; however, the following plan ideas may offer assistance as well:

Pre-loss Planning - Business Impact Analysis

•	Understand your insurance coverage and its limitations.
•	Maintain alternate facility options.
•	Locate and arrange for alternative suppliers.
•	Appoint Recovery Management teams and drill as needed.
•	Establish and maintain safety procedures for various types of loss incidents, inventory necessary medical and repair supplies.
•	Prepare for alternate labor force requirements.
•	Develop a list of catastrophe service companies, public insurance adjusters and emergency service firms.
•	Have back-up data (off site), including current financial statements for business interruption claims.
•	Develop media and public relations plans.
•	Maintain proper inventory records and up to date property and asset valuations.

Post-loss Action Plan - Recovery Analysis

•	Engage recovery management team.
•	Notification process, management, employees, suppliers, insurance carrier.
•	Contact emergency/catastrophe service firms to protect property from further loss, looting, water etc.
•	Track and log all extraordinary expenses, increased cost of operations
•	Assess inventory damage and consider the impact the salvage sale of damaged inventory (with your logo) in the marketplace.
•	Assess business interruption coverage, what endorsements are applicable for this incident? What is the disruption period, is it covered by your insurance carrier?
•	Is business interruption a direct or indirect loss?
•	Coordinate insurance claim communications through one spokesperson or loss consultant, involving many can confuse the process, reducing the recovery and creating unnecessary delays.

Operations which have developed an effective contingency plan can minimize much of the mass confusion which many businesses experience following a catastrophe. The recovery plan when implemented properly can help retain tenants at multi-family properties, help maintain current market share (competitors will not sympathize your situation) and in the end, will reduce your loss of income. When income is affected, payroll and mortgage payments still come due, even with the additional expenses a business will incur for emergency services. Business professionals may consider the use of insurance loss consultants to handle the claims process as they focus on the operative restoration the business.

There are numerous service companies that are available to consult with risk managers regarding their services before a catastrophe and most welcome the opportunity to discuss their company and fee structure prior to a major event. There are also many software packages available which simply and organize the preparation of a contingency plan. The Gulf Coast region will inevitably fall victim to Mother Nature’s fury, it is simply a matter of time until she swings her mighty blow. Being prepared to brace for the blow may minimize the knock out of the punch.

Charles Dale is Vice President of Operations for Jansen International, The Southwest’s largest loss consulting firm. Jansen International operates offices in Dallas, Austin, San Antonio and Houston.

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