Cost managers agree that a properly developed 'disaster contingency and recovery plan' (hereafter referred to as a contingency plan) will enable a company to respond to a disaster without suffering irreparable damages. However, agreement to the concept of a contingency plan does not necessarily result in the development of such a plan. For example, businesses operating in coastal areas are aware of the disastrous effects of hurricanes. This article will show, however, that awareness of potential harm, did not lead to preventive action in many companies which were in the path of either Hurricane Hugo or Hurricane Andrew.
Hurricane Hugo inflicted at least $5 billion in property damages in South Carolina. Four years later, Hurricane Andrew struck Louisiana and Florida, causing more than $8 billion in property damages. This article compares the results of two separate surveys of controllers in businesses located in the path of these hurricanes. The study was limited to those businesses using computerized processing. Each survey examined whether these businesses had prepared for such a disaster by developing contingency plans for their computerized operations. The effectiveness of existing computer contingency plans was then determined by measuring the ability of these businesses to process accounting information in the aftermath of each disaster. The final section of the paper examines the five major subcomponents of a comprehensive contingency plan.