Parents, teachers and doctors are right: Prevention is the best cure. Printing pros with disaster plan experience agree.
It's easy to downplay the likelihood of fires, weather disasters, explosions, thefts, power outages, the loss of key suppliers or customers, and illegal acts by disgruntled employees, but the impact on cash flow or your company's image can be devastating--unless you're prepared. And preparing takes relatively little time and money, according to the five industry pros and two emergency planning experts who spoke to Print Solutions. They say the best plan optimizes your response to any unexpected event, and the basic elements are the same regardless of your firm's size.
1. Conduct a prognosis. Close your eyes, take a deep breath and imagine the worst that can happen to your business. "You just have to think about it," says Michael O'Hara, Ph.D., chairman and CEO of McLean, Va.-based distributorship AB&C Group, and DMIA's 1986-87 president. "As a businessman, think about liabilities, staff, customers and think about which things can happen. Theft, check fraud, loss of a major customer, fire...these things are very real," says O'Hara, who has been in the industry for 33 years and whose company has experienced many such incidents.
In 1995-96, when Randall C. Eubanks joined Suncoast Marketing Inc., a distributorship in Fort Lauderdale, Fla., his memories of Hurricane Andrew in 1992, the most destructive hurricane of record in the U.S., were still fresh. "I had never witnessed such destruction," says Eubanks, who then worked for another company. At Suncoast Marketing, Eubanks was among the first proponents of a disaster management/recovery plan for the distributorship.
A senior director at a distributorship that was victimized by check fraud in 2001 (criminals forged a check for $92,358 and tried unsuccessfully to forge checks for $119,102.89, $70,000 and $30,000) says, "companies out there may very well run into the same thing as we did."
2. Diagnose your thought process. Do you think it can't happen to you, or if it does, you can handle it easily? "It's just the thinking that a disaster can't happen to me, and if it does, then I can avoid it" that stops companies from preparing ahead of time, says the senior director. Small- and medium-sized business owners are busy running their companies, he says. "Given a choice between creating a recovery plan and getting a large order, what would you do?"
Peter L. Tourtellot, CTP, managing director of Greensboro, N.C.-based turnaround management firm Anderson Bauman Tourtellot Vos & Co., says companies from all industries believe that they can overcome financial crises even if they don't have plans. They are driven by the belief that "next month will bring them sales," he says. "Many companies sell only commodities and believe that by selling more, they will gain a profit margin." They continue this approach until it's too late and swing into action only when they face an extreme situation such as banks foreclosing their properties.
"The delay-related damage caused by lack of planning can easily double or triple the time and cost of damage control," says Jonathan L. Bernstein, president of Bernstein Crisis Management LLC, Pasadena, Calif. "Delay also can result in irreparable harm. At the same time, it takes only a one-time plan, with minor updating, to serve as a template and operating basis for all future crises."
3. Perform a vulnerability operation. Consider emergencies that could affect your business. What's your local history of fires, floods, hazardous material spills, earthquakes, hurricanes, tornadoes, terrorism and utility outages?
Consider your geography. Are you close to flood plains, seismic faults, nuclear power plants or companies that produce or store hazardous materials? What might happen to your business if there were a local failure in telecommunications, power, heating/cooling system or emergency notification?
What emergencies could be caused by employee error? According to the Federal Emergency Management Agency (FEMA), human error is the single largest cause of workplace emergencies resulting from poor training, poor maintenance, carelessness, misconduct, substance abuse and fatigue. What emergencies might result from the design and construction of your offices and plants? Consider the layout of equipment, lighting, evacuation routes and exits. Also, what emergencies or hazards are you required to deal with?
Bernstein says vulnerability audits aren't just focused on potential disasters. Rather, they identify threats to the company that may arise during normal operations in addition to those resulting from extraordinary events.
4. Create a primary planning team. Depending on your company's operations, requirements and resources, assign a person or team to develop the plan. Find out who can be an active member and who can serve as an advisor. In 1996, Suncoast Marketing, which now has 38 employees, set up a 3-member team to figure out what was required to protect employees, customers and offices from natural disasters and emergencies, Eubanks says. One team member focused on the offices, the second looked at the staff and the warehouse, and the third studied financial operations.
The senior director and the human resources manager of the distributorship victimized by check fraud are working on a plan to respond to hurricanes, floods, rains, power outages, computer and accounting systems outages, fire and water damage in the warehouse, and loss of key accounts.
5. Seek advice from a qualified board of directors. Many companies face financial crises because of poor management. According to a study by the Association of Insolvency and Restructuring Advisors, Medford, Ore., 52 percent of companies face business failure because of internal management and only 1 percent because of bad luck.
One way to prevent a financial crisis is to form a board of directors, Tourtellot says. Choose people who work at other companies as members, and avoid choosing your friends. Instead, seek people because of their expertise. Look for a mix of people from sales, manufacturing and administration. "They bring fresh perspective and have no emotional baggage," Tourtellot says.
But having a board isn't enough. Meet regularly and discuss the opportunities and threats your business faces. "Look at the last quarter results, where you stand financially, discuss it with them and then listen to their advice," Tourtellot says. "Companies do not like to hear advice, but that's not the way to go."
6. Seek second opinions from specialists and colleagues. If developing a crisis management plan seems overwhelming, there are plenty of helpful resources. The Small Business Administration (www.sba.gov) and the Federal Emergency Management Agency (www.fema.gov) have detailed information on preparing for floods, earthquakes, hurricanes, fires and terrorism, as well as tips on financial preparedness.
Associations such as the American Red Cross (www.redcross.org) contain preparedness information on blackouts, chemical emergencies, tornadoes, winter storms and more. The Business Continuity Planners Association (www.bcpa.org), St. Paul, Minn., and companies run by Tourtellot (www.abtv.com) and Bernstein (www.bernsteincrisismanagement.com) offer expert advice.
A few years ago, Andrew S. Kohn, president of St. Louis-based Jerome Group, which employs about 250 people, led a senior management team that created a disaster recovery plan. Kohn said his team studied another printing company's plan. After his company was hit by check fraud, the senior director consulted with his company lawyer and accountant.
Tourtellot says companies have a tendency to seek help when it's too late. "They contact us when they're facing liquidation," he says. Recently, a printing company sought his company's help. Eighty percent of the company's business came from one client in a dying business, Tourtellot says. "We've been trying to diversify their product mix. The company's trying to target the food industry now. It was almost too late for them to reinvest in quality control and employee training."
7. Write the treatment options. Written procedures help restore business quickly. Assign team members who participated in the vulnerability assessment to write procedures on how the company will respond to events. Write down the purpose of the procedures, the authorities and responsibilities of key personnel, types of emergencies that can occur and how response operations will be managed. Every employee should know their role and where they should go in emergencies.
Suncoast Marketing's employees keep in their offices a manual of procedures on less threatening events such as thefts. In their homes and offices they keep a red folder on facing severe events such as hurricanes, Eubanks says.
Questions to include in the plan are: How will you contact employees during a crisis? Who will be in charge? Will the person call employees or meet them personally? Do employees know how to contact management? What must be done to protect the office building? Who will take care of equipment? Do you have a plan and timeline to backup data and switch off the phone and computer systems? Who will do it? How will the company operate during an emergency and until it resumes normal operations (business continuity)?
After writing the plan, establish a schedule for its review, creating a final draft and printing and distributing it among employees.
8. Apply the plan. This means more than exercising the plan during an emergency. It means acting on the recommendations made during the vulnerability analysis, educating and training personnel, and testing procedures. Implementation includes periodic employee discussions to review procedures, technical training in equipment, evacuation drills and emergency shutdown procedures. For instance, AB&C Group regularly conducts fire drills, and a safety committee inspects the company's four locations.
Also, every employee involved in implementing the plan should receive basic orientation on its content and purpose. "You need to train employees like you train schoolchildren," Tourtellot says. "Employees may hate the fire drills, but deep inside it shows to them that you care about them."
Bernstein says most management employees know how to prevent or respond to crises operationally, but they are likely unprepared to handle public relations issues. A 2- to 4-hour training session on crisis communication with clients and the media can better prepare senior staff, he says.
9. Examine your insurance. Is your insurance adequate to get the company back in operation? Know what's covered and what's not. Can you pay creditors, suppliers and employees during a prolonged shutdown (business interruption insurance)? How long can you survive if your company is shut down?
Tom Tabor, vice president at distributorship Data Supplies Inc., Duluth, Ga., says it's critical for companies to know if they need printer's errors and omissions insurance, a specialized and expensive insurance that has recently undergone changes. The insurance pays for damages the company is legally obligated to pay due to negligent acts or errors in providing printing services. For example, a company is liable for printing the wrong dates on an ad for a customer's sale, which results in the customer's loss of revenue. "If your company is printing 5,000 coupons, but a coupon is misprinted, then somebody is liable for that," Tabor says. "You want to make sure that if you are doing this in-house, then you have this insurance."
The senior director whose company was a check fraud victim says it's important to know who's liable if a janitor employed by an outside contractor is injured or if a courier has an accident while delivering your company's package. Tabor cautions that it's possible to buy too much insurance. "You need to know which insurance is required and which isn't," he says. "Find an insurance agent who will work as a consultant and understands your business."
10. Maintain healthy relationships with alternative vendors and grow your customer base. Consider a scenario where your key supplier shuts down, or your largest customer suffers a disaster and no longer needs or can afford your product. "We certainly want to have preferred relationships with suppliers," says the senior director, whose company is expanding its list of suppliers. "But it's wise to have a core group of suppliers so that if you have problems with the main supplier, you can work with someone in the group." Set up relationships in advance and maintain them by placing occasional orders so those suppliers view you as an active customer.
It's equally important to diversify your company's offerings and target new customers, even if the current customer base seems fine. It's likely that smaller companies will quickly run out of capital if they lose a major customer. "You need to retain more earnings," O'Hara says. "When you lose big customers, you can bank on retained money. You've got to have the financial wherewithal."
Preeti Vasishtha is an assistant editor at Print Solutions magazine. Email her your comments at pvasishtha@PSDA.org.
