Disastrous Effects

Putting the Pieces Back Together

Dealing with disaster is a multipronged project. It may involve everything from assessing immediate needs to planning for new facilities, counseling grief-stricken employees, locating insurance policies, hiring interim managers to fill positions vacated by death or injury, and, if all goes well, communicating the news that you're back in business to concerned customers.

The first thing to do is take stock, says Marian McGovern, president of M Squared Inc., a San Francisco consultant clearinghouse that provided pro bono assistance to organizations dealing with the aftermath of the terror attacks. Recovering from a disaster requires first that you know as precisely as possible what has been lost in the form of buildings, equipment, furniture, information systems, data and, of course, people.

"Go through every aspect of the business and understand what has backup, what needs to be repaired, what has been totally destroyed," says McGovern. Department heads should come up with their own damage assessments, then present them to the CEO, so he or she can come up with a companywide tally.

In the real world, that can get messy. Gruzen Samton's offices, which the company had just paid $2.5 million to renovate, were unusable, with the building likely to be condemned. Computers and the phone system were destroyed. All paper records, including marketing materials, customer lists and the photo library, were burned or waterlogged beyond repair. A fireproof safe full of backed-up computer files survived, but the CD-ROMs it contained had melted from the intense heat, and the data was unretrievable.

There was some good news, however. Fire-resistant file cabinets containing computer tapes with additional backups survived. "There is a certain amount of reconstruction of data because we don't back up daily onto those tapes," says Kazan. "But we've recovered a good portion of the work we had in progress."

Resourcefulness is often key to recovering lost data after a disaster. Gerry Nolan, president of disaster recovery consulting firm Eagle Rock Alliancein West Orange, New Jersey, recommends that companies ask clients, vendors, strategic partners and even employees to scan the disk drives of their undamaged computers to see if useful files may have been stored on them. Gruzen Samton did just that, retrieving a number of computerized design files in the form of e-mail attachments that had been sent to consulting engineers. Some disaster survivors, Nolan adds, have been able to salvage damaged hardware as well as data by having useful information removed from damaged machines, then having the systems refurbished, reinstalled and reloaded with the data.

Another key ingredient helping Kazan and his company recover is adequate insurance protection, including business interruption coverage that helps pay salaries and otherwise cover the break in the normal routine. "The insurance companies stepped up right away and have been extremely cooperative," he says. "I believe we'll be covered for all our out-of-pocket costs."

Many firms' most serious immediate issue is how to return to efficient production. Kazan's people are used to working together but are now in seven scattered locations. "The inefficiencies [of] traveling and the lack of secure communications are a tremendous drain on [our] energies," Kazan says. While the company has located space farther uptown, it will take months to prepare it for occupancy, and Kazan is uncertain whether his employees will be able to return to anything like their usual efficiency in that time.

Planning for a backup physical location is one of the most frequently overlooked requirements of a disaster recovery plan, says Nolan. But, along with backing up data and arranging with telephone and Internet access providers to restore service as soon as possible after a disaster, it's one of the most important, he stresses.

Again, resourcefulness is vital to recovering in the event that your plans prove inadequate. You should make extra efforts to gain access to destroyed or damaged offices to see if there is a vital Web server or other piece of equipment or data you can bring out intact, Nolan says. Beyond that, he says, "you have to get creative." Consider any possible angle that could give you new space or more time to find it. For instance, you could ask customers to hold off on transactions you wouldn't be able to fulfill until you get into your new space. In addition, as many World Trade Center-area companies found, after a disaster is a good time to ask erstwhile competitors for a hand.

Market Disruption

Many industries are being harmed by the uncertainty following the terror attacks. Airlines, car rental companies, cruise lines, hotels, meeting planners, trade show companies, training firms and travel agencies are just a few of those reporting or expecting a falloff in trade. Ann Bell and her daughter Marianne Newwenhouse lost $30,000 in sales in just one mid-September morning, a hit that threatened to sink their three-person Manahawkin, New Jersey, travel agency. "It's a hell of a nut to crack," says Bell, who co-founded the company with Newenhouse 18 years ago. "It's almost like starting over."

Bell and Newenhouse soon reacted to the cutback by laying off their sole employee. Bell feared that wouldn't be enough, but soon cruise lines, hotels and airlines started offering sharply discounted fares and rates. The markdowns were enough to spur customers to begin calling again. Six weeks after the terror, she could report customers were coming in "like gangbusters."

Bell's experience highlights the importance of short-term cost-cutting and revenue-boosting, coupled with long-term patience. Mike Ross of the New York State Small Business Development Center (SBDC) in Albany says small firms should investigate the government-guaranteed loans--of up to $1.5 million on terms of up to 30 years and interest rates as low as 4 percent-that have been made available to small businesses in the impacted area.

But financial assistance may not be enough. SBDC advisors suggest many firms, especially those whose markets were seriously hit, look for new markets and even business models. "You could break out of the box you were working in before," Ross says, "and take a look at some new opportunities."

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This article was originally published in the January 2002 print edition of Entrepreneur with the headline: Disastrous Effects.

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