In North America, it is hurricane season. And this season has had more storms hit land, thereby affecting people, property and businesses, than any in recent memory. But not your company. You are safely hundreds or thousands of miles away. So while you grieve for those suffering, you can still rest easy knowing that the storms will have no effect on your business. Are you sure?
Stephen Ward, Vice President | East Coast, USA & EMEA, and Richard Gurley, Vice President | Response Services, ask that question often as they consult with clients as part of a risk assessment. “One thing is clear, ” says Ward. “Natural disasters are affecting many more businesses than ever before because of our global economy. And more companies are becoming aware of the risks they pose to business continuity.”
A Holistic View of How Natural Disasters Affect Businesses
Whether it is an earthquake in Thailand, floods in China, or hurricanes on the East Coast of the U.S., a natural disaster can quickly cause severe damage, crippling businesses for days, weeks and even months. And while the impact is greatest to businesses in the immediate area, companies globally have to determine what affect it will have on their businesses, too.
“We’ve seen natural disasters become far more important in security planning for global companies, ” says Ward. “No longer do they just look at the impact to their own facilities and personnel, but they have to understand their supply chain and where it is at risk.”
Gurley says that mapping your supply chain is a critical first step. “If you are a manufacturing company, do you know where each key component is coming from? Are your main suppliers in areas vulnerable to a natural disaster? What are the weather patterns and history? Asking these questions annually is a good way to begin preparing for contingencies.”
Gurley further suggests the following questions should be answered with regard to your supply chain:
- If a key vendor’s facilities go down due a natural disaster, how long can you go without having product from them?
- Where else can the product come from?
- Can you build up a surplus of the product in advance of a vendor’s plant closing?
- If you have no choice but to slow your own production, how will this be communicated? How will this affect your brand’s reputation?
“There have just been too many incidents in the past five to ten years to ignore the effect these disasters have had on the global business world, ” say Ward. “Companies are starting to pay much more attention. We are seeing more of them willing to add disaster recovery as a key priority to their security plans, even if they don’t have facilities in high-threat regions.”
Is Your Business’ Bottom Line Vulnerable to the Effects of Natural Disasters?
The physical impacts a natural disaster can have are clear, especially when they affect your facilities or your supply chain. Planning for the financial impact is less easy to predict.
“We had a client that had budgeted for a complete IT upgrade for the following fiscal year, ” noted Ward. “This was a significant investment. Then the earthquake in Thailand hit and many computer component manufacturers were knocked offline for months. It created a hard drive shortage, driving prices far higher than they had been. Now all of sudden, that upgrade was significantly more costly and it hit their bottom line pretty hard.”
While that event, and its bottom line impact, would have been difficult to predict, other situations are not. “If a company is preparing for a large financial transfer on a specific date, the success of it hinges on their bank’s ability to complete the transaction, ” Gurley note. “Is that bank in the path of a storm or prone to other natural disasters? If so, what is the backup plan if their systems are not available? It may seem like minutia…until something happens and then it is mission critical.”
The Big One Is Coming, Who Is Ready?
Weather-related natural disasters are, unfortunately, common and many companies can prepare in advance for them. When and where an earthquake will hit is far more unpredictable. But companies are planning for at least one of them already.
Mention the Cascadia subduction zone to most people and they won’t know what it is. However, mention “The Big One” and far more people will relate it to the West Coast of the United States and what many believe is an impending, and hugely devastating, earthquake. While the San Andreas Fault, and the earthquakes it has produced, is more well known, the Cascadia subduction zone is capable of producing a quake 30 times greater than the San Andreas can. Extensive research has been done in an attempt to predict when this earthquake, and the 700-mile tsunami it will produce, will take place but no one can be certain. But they can be prepared.
“Far more companies are aware of the zone than ever and have asked us to work with them to create a recovery plan should their facilities and people be affected, ” said Ward. “Forty or fifty years ago, no one knew this fault line even existed. Now it is the single biggest pending threat to stability on the West Coast.”
Further demonstrating the importance this natural disaster will have on the zone, which stretches from just north of San Francisco to the center of Vancouver, Canada, the Federal Emergency Management Agency (FEMA) conducted earthquake training exercises this summer to prepare for wide-spread devastation. These type of “tabletop exercises” are also part of Pinkerton’s preparedness planning.
“A natural disaster plan for something of this magnitude cannot just be developed and then sit on a shelf somewhere, ” says Ward. “It has to be run through, tested and adapted often so that it matches the current environment and situations. Being caught with an outdated plan is pretty close to as bad as not having a plan at all.”
Natural disasters have forever been a part of the earth’s history. Thinking that they cannot affect your business simply because of geography is short-sighted and can result in deep impacts to your business and its employees. Taking a holistic approach to these events by knowing how these events can impact your supply chain, business continuity and employees is the prudent and responsible tact to take.