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Spring Journal

Volume 31, Issue 1

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The U.S. Gulf Coast suffered a one-two punch when Hurricanes Katrina and Rita barreled onto the populated coastline. Katrina, which struck August 29 near New Orleans, packed the biggest blow, with extensive damage along 90-miles of coast in Louisiana, Mississippi and Alabama. Rita roared ashore near the Texas/Louisiana border on Sept. 24, causing flooding and wind damage.

Katrina, a Category 4 storm when it hit landfall, has become the costliest natural disaster to occur in the United States. Experts say Hurricane Katrina caused about $35 billion in insured damage. When flood damage is included, the number could jump as high as $60 billion. Nearly 1,300 people died and thousands more were injured.

Early estimates for Hurricane Rita, a Category 3 storm, set the insured property damage at about $5 billion. This does not include flooding or offshore oil rig damage.

The business community was especially hard-hit when Katrina struck. Louisiana Governor Kathleen Blanco said the flood wiped out 40 percent of businesses. While some businesses may be operating in temporary quarters, many are in a holding pattern as they wait for federal assistance and insurance estimates.

Industry service provider Sungard Availability Services reported 128 alerts and 32 disaster declarations from Hurricane Katrina. With Rita, they had 153 alerts and 26 disaster declarations.

 “We had significantly more customers declare from Rita than Katrina which we speculate was because of the catastrophic damage the first hurricane left on New Orleans,” said Belinda Wilson, CBCP, executive director, Business Continuity Services, Hewlett-Packard. “No one was gun shy in their level of reaction to declare with Rita, including a Fortune 50 manufacturing company who declared for multiple divisions.”

While some of the affected businesses had service providers to help with recovery, others are finding their continuity plans were insufficient or non-existent.

Glen Curole, CBCP, director of business continuity for International Paper in Memphis, said businesses should always plan for the worst-case scenario. Ideally a plan should be written under the assumption that (1) your building will be damaged, (2) you can’t take anything with you and (3) you can’t gain access back into the building. If planners follow this example, their business is protected in any disaster or interruption.
“A lot of people forgot that premise,” said Curole. “As a result, plans weren’t written to address a disaster of this magnitude.”

In New Orleans and other affected regions, businesses are facing two scenarios. One is that their structure is fine, but their client-base is gone. The other is that their primary site is inaccessible, but their client-base is available. Businesses such as restaurants or service industries fall into the first category.

“In that case, you are going to need comprehensive business insurance to carry you through until your clients return,” he explained.

For businesses with clients and customers outside their region, the revenue can continue if the correct planning is in place.

“You need to have a designated place to go, with designated people to run your business. You need to plan for the equipment, data links and other necessary components,” said Curole.

Myles Falvella, director of corporate communications for TelCove, said one option many displaced business owners used was implementing a virtual business.
“We helped a customer who had moved most of their people towards Houston,” said Falvella. “They were looking to build a virtual business. We were able to provide voice and network services and get them back in business.”

A virtual business can be implemented in many locations – a remote site, a hotel room or even in employee homes – as long as data is available.

“If you have your data, you can have a virtual business almost anywhere – or several of them if necessary,” said Falvella. “Data is a core asset.”

When protecting data, companies should make sure their backups are stored outside of their geographic region, said JoAnne Evans, senior marketing manager for BC/DR and data storage services for TelCove.

Personnel issues should also be addressed in a business continuity plan. Many organizations in the hurricanes’ path were unable to reach their employees.

“Because of Katrina, we are requiring that our plans now list non-corporate email addresses for all employees and an out-of-region contact,” said Curole.
During Katrina, many employees evacuated from the area or remained focused on personal issues, not their jobs.

“Depending on how severe the incident is, you may have a number of workers not returning to your business,” said Curole. “Usually, you expect to recover with only 75 percent of your workface. But I think after Katrina, that number may change.

“Katrina will force people to examine what happens if x number of people can’t or don’t return to their positions. What happens if key personnel is unavailable?”

Evans said organizations should make it a priority to focus on their employee needs.
“A lot of people were questioning how we kept our employees focused on their jobs,” she said. “We had communications and planning in place to make it possible for employees to take care of families first.”

Curole recommended that plans be examined to see where the weak links – or single points of failure – are, whether it involves personnel, equipment or telecommunications. You need a backup for each position and for each strategy. Having good alternatives is the best way to protect your organization.

Evans reinforced this point by recommending businesses implement redundant vendors for services. She said several companies had telecommunications carriers that were not able to provide service. Because redundant coverage was engaged, they were able to get service through an alternate provider.

“It is yet to be seen whether Katrina will spur more companies to implement this option,” said Evans. “But the value has been demonstrated.”
Practitioners also expect awareness of business continuity to increase because of Katrina.

“More conversations are occurring by companies now interested in protecting their organization,” said Curole. “After every large disaster, there’s always a period of time where awareness is raised. The test will be to see how many remain interested and work to protect their operations.”

Falvella said his company has been very busy because of increased awareness since Katrina struck. “None of our customers lost service. But we have numerous new companies coming to us needing help.”

For companies that employ service providers, several points should be considered.
“What we saw with Katrina was that many companies are going to have extended recovery periods,” said Curole. “Planners should examine their hot site and cold site contracts. Many contracts allow six weeks in a hot site and six months in a cold site. Most contingency plans don’t address what needs to happen in order to move to a cold site in six weeks.”

Plans should be in place to order necessary equipment, install it, test it and synchronize it with the hot site.

“You can’t wait,” said Curole. “During assessment (at International Paper), we look at the period we will be down. If we’re not comfortable that we will have our primary site back in six weeks, we pull the trigger on our hot site and pull our cold site contracts to start ordering the necessary equipment.”

Planners should also check with their alternate site providers to see if it is “first come, first serve” when declarations are made. Curole said it is rare to find that scenario in today’s environment.

Other considerations when choosing a vendor include asking for references, checking their track record and asking if service level agreements are backed 100 percent, said Evans.

“You should also ask a vendor what their disaster recovery plan is,” said Evans. “Will they be able to have employees in place? Will they have necessary plans and supplies in place to help your organization?”

Although price is important, protecting your business should not equate to bargain shopping.

“People start to look at these services as a commodity. I can get this service for $1, but it’s only 90 cents over here,” said Evans. “At the end of the day, when talking about disaster recovery, any link in that whole chain of recovery plans needs to be equally strong.”

“You need to make sure you are using cost-effective solutions, but not putting the recovery at risk while doing so,” agreed Curole.

Many businesses affected by Katrina are learning businesses continuity lessons the hard way.

“Unfortunately, for many businesses that didn’t have proper planning or insurance coverage, they are not going to be able to get back into business,” said Evans.

 



Janette Ballman, the senior of the Disaster Recovery Journal, has written numerous article covering business continuity and disaster recovery topics. Ballman holds a bachelor’s degree in journalism and has been published in a variety of newspapers, magazines and other medium.