On October 17 I happened to be on a business trip in Florida for my California-based company. After a hectic day, I sat down to relax and watch Game Three of the World Series when the earthquake struck. Although I was obviously unable to assist during the disaster, my company responded quickly and efficiently during the tense and horrifying hours immediately following the quake.
Fortunately, we suffered minor damage, and all branches and communications were up and running within a matter of hours. Although we evaded serious setbacks, we know that next time we may not be so lucky. Preparing for a worst-case scenario is a crucial aspect of a job, and everyone must always be ready for one.
When an emergency occurs, be it small or large, your savings association has a responsibity to manage it competently. Employees and customers will want to know how you are handling the problem and who is immediately available to provide assistance.
The federal government, through Thrift Bulletin #30, now requires management and directors to develop a comprehensive contingency plan. The plan is no longer limited to potential computer problems. Just some of the other considerations to be included are preparedness for earthquake, flood, fire, explosion, power disruption failure, communications interference, riots, strikes, and the actions of disgruntled employees.
The comprehensive blueprint for each institution must also include third party contingency planning. A backup data processing vendor, for example, must also have an emergency contingency plan.
With a newly restructured set of regulatory authorities overseeing the industry, savings and loan executives should expect regulators to scrutinize contingency planning issues just as closely as capital compliance.
The issues involved are as varied as the many companies in our industry, but there are several central themes that must guide contingency, regardless of the magnitude of the emergency.
Nothing will work unless you have senior management’s buy-in to your plan. The most successful plans are those that promote a constant awareness among employees, who, in turn, influence senior management to put a plan in place.
Commitment without money, however, is not a real commitment. First Interstate took several years and $1.5 million to prepare its plan. Their foresight and investment were justified when a fire struck in the Los Angeles headquarters several years ago. Because they were prepared for the worst, they were able to recover quickly and successfully.
A person in charge of the planning must assume complete responsibility for putting the plan in place.
You need to learn where you are the most vulnerable, your cost versus risk, and how you are going to spend the proverbial $10 to protect $100. Prioritize your assets and protect them accordingly.
Ultimately, the most important consideration is the survival of your company and the attempt to minimize losses of the owners and shareholders. While it is obviously very important to protect both your people and your customers, do not forget about the shareholders who also rely on the prosperity of your company.
Strategies involve deciding how to implement your plan, from where you are going to operate, who is going to be there, and the services and equipment that you will need.
Agreements and Contracts
To complete a contingency plan properly, you must have agreements in place with firms who can assist you in an emergency. Without these, the only companies to get goods and services will be the ones willing to pay the highest price.
A good idea, for example, is to have several security guard firms under agreement or contract to protect your buildings until windows can be boarded and doors secured.
Testing and Maintenance
No plan will work if you have not practiced it. Although we are not quite finished with our plan, we are not waiting for an emergency to give it its first test. In an emergency, no one is going to pull out the plan and read it.
We visit all operations and tell employees first-hand how they should react in various situations. Practice the plan. It will never be perfect no matter how many times you go through it. Testing and maintenance must be constantly reviewed with each drill.
This is the final step in your planning process, and it is a requirement of TB #30.
Hopefully, you will never encounter a disaster in your company, but you will be more than adequately rewarded for the time you take to prepare if the worst should occur.
Written by Robert G. Lee, CPP, Vice President, Emergency Planning and Corporate Security, Great Western Financial Corporation.
This article adapted from Vol. 3 No. 1, p. 48.