Photograph by Victor J. Blue/Bloomberg

What CEOs Should Know About Planning for Disasters

  1. 1. Disasters, Natural and Otherwise

    1. Disasters, Natural and Otherwise

    Hurricane Sandy, which damaged offices and knocked out power to companies across the Northeastern U.S. in October 2012, is the latest in a string of disasters to disrupt businesses. Japan’s earthquake, tsunami, and nuclear disaster in 2011 impacted companies around the globe. American firms operating in Japan temporarily shut down, and those that depended on Japanese components like computer chips had to scramble to find alternate suppliers. And New York’s Sept. 11 terrorist attacks raised awareness of business continuity planning and prompted companies to consider an array of new dangers along with the possibility of longer disruptions. Companies also face problems from more mundane sources, such as software glitches, labor strikes, and backhoes that accidentally cut power lines.

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  2. 2. Getting Prepared

    2. Getting Prepared

    Developing a business continuity plan is one of the first steps in preparing for a disaster. The plans, which can be anywhere from a few dozen pages to thousands, spell out how a company should respond to various crises. Software designed specifically for creating business continuity plans is widely used. The plans must be constantly updated when companies start using new technology, lose or gain key employees, or add a new office.

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  3. 3. Ensuring the Plan Works

    3. Ensuring the Plan Works

    Testing disaster plans at least annually is critical, according to business continuity professionals. A recent survey of 685 executives by Continuity Insights, a media company focused on business continuity, and consulting firm KPMG found that 84 percent of companies had tested such a plan in the past 12 months. Interruptions can be expensive, the survey showed. Just over a quarter of the businesses said interruptions during this span had cost them at least $50,000, while 5 percent estimated the cost at more than $1 million.

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  4. 4. Generators

    4. Generators

    Backup generators are an important tool to keep businesses operating during disasters. There are around 12 million backup generators in the U.S., according to Carnegie Mellon University’s Electricity Industry Center. But during power outages, generators sometimes fail because of glitches and human error. During Hurricane Sandy, for example, generators at some hospitals failed because their fuel tanks were kept in basements that flooded.

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  5. 5. Moving to the Cloud

    5. Moving to the Cloud

    To guard against losing data during disasters, many companies store or back up their critical information in the cloud, technology industry jargon for off-site data centers maintained by third parties.

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  6. 6. Emergency Offices

    6. Emergency Offices

    In the wake of Sandy, several companies displaced from their buildings by flooding and electrical system damage have relocated to temporary office space. Some companies have made plans in advance with landlords who specialize in providing alternate work space in times of disasters.

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