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Disaster: Is Your Company Prepared?

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Disaster: Is Your Company Prepared?

As unlikely as it might be that a catastrophe would affect your offices or company, the risk exists. The attacks on the World Trade Center and the Pentagon warned us that things will never be the same again. Every business owner must prepare contingenc...


By Stan Ehrlich, Contributing Editor January 31, 2002
This article first appeared in the CB February 2002 issue of Custom Builder.

 

Sept. 11 raised the stakes of emergency preparedness. Not only did it cause our government to rethink its response to crisis in the homeland, it led many American companies, after seeing the horror of the World Trade Center collapse, to review internal procedures. For smaller companies, the attack should be a wake-up call to answer one question: How prepared are you if disaster strikes your company?

This is the first of a two-part series on how to prepare for a catastrophic event. Part I involves steps to be taken that would allow your company to continue functioning if it suffered a significant loss or your primary office space were inaccessible or destroyed. Part II is a primer for steps you should take to protect your personal affairs in case of disaster on your home front.

As unlikely as it might be that a catastrophe would affect your offices or company, the risk exists. The attacks on the World Trade Center and the Pentagon warned us that things will never be the same again. Every business owner must prepare contingency plans to address the most obvious risks and then go a step further. For purposes of this article, location is immaterial: Home offices, for example, are just as susceptible as offices outside the home.

Risks can be external as well as internal. A look at a few of the most obvious risks faced by owners of construction companies should serve as a starting point for your company disaster plan (a copy of which should be maintained off site).

Computer risk: Information stored on computers is susceptible to computer viruses, mechanical failure, theft and other hazards such as water and fire. Anyone who has been victimized by hard-drive failure or a computer virus can explain passionately how everything stored on the hard drive was lost. Others can relate how a virus e-mailed confidential company files to everyone in their address book.

Criminal risk: Owners of most construction companies can tell stories of material lost from job sites. Some can tell of equipment and machinery stolen from "secured" storage. Besides computers, office equipment at risk of loss includes copiers, file servers, printers and fax machines.

Employee risk: A disgruntled employee can steal or damage equipment at a job site, or wreak havoc with an accounting system. A computer-savvy employee can program a computer to "self-destruct" at some point in the future. Company finances can be at risk from the work of a dishonest bookkeeper or any other employee with a fiduciary responsibility.

Competitor risk: Have a construction technique or procedure that is proprietary? Your company records or the knowledge of a key employee would be of special interest to a competitor looking to copy your system or replicate your specialized equipment. The loss of this knowledge or information would eliminate your competitive advantage.

Environmental risk: Fire, flood (burst pipes as well as natural disaster) and structural failures are examples of calamities that can befall offices, equipment and storage facilities.

Any of the above, as well as imagined (and even unimagined) others, can strike a company unexpectedly. In the short term, they can cost a company money and time; over the long term, they can cause a business to fail.

What (and Who) Is Important
A company owner can’t secure all elements of the company against every eventuality all the time. Rather, the assets most critical to company operation must be determined and protected, and then steps must be taken to guard other assets deemed important but less critical.

Records and other documents: To determine criticality, answer what-if questions: What if you couldn’t access your office - would you still be able to operate? What if your office were destroyed - would you be able to function and rebuild? Critical documents are those related to jobs in progress, receivables and their supporting material, payables, payroll, taxes, personnel, active bids, insurance, licenses, permits, customer and vendor lists, telephone numbers, and any other correspondence/paperwork/files essential to company operation.

Equipment: Tools unique to a craft should be deemed critical. If you couldn’t access certain equipment, would you still be able to work? (Not to be included are items that are easy to rent or purchase.) If the answer is no, then any unique tools or machinery used for work are essential.

Personnel: You might employ key individuals whose absence would adversely affect company performance and profitability. In some instances, their absence might even threaten your company’s existence. When assessing risk to a business, an employer must look at individuals deemed irreplaceable. A determination of this nature ultimately will result in a cost to protect the company, so the owner must distinguish between employees who would be difficult to replace and those who, because of a unique skill set, could never be replaced.

An Action Plan
Data can be copied, property and equipment can be secured, and people and property can be insured. The hard part for a company owner is knowing how to balance the costs of disaster planning. Spending too little might prevent a company from surviving after a crisis; spending too much might impede cash flow and slow a company’s growth rate.

 

Computer Security: Your First Line of Defense

Among the easiest and least costly steps a company owner can take to safeguard company data and records involves computer security. Defense of your computer system should be three-pronged, with the following software packages examples of the types of programs available for purchase.

Backup: An employee or the owner should be responsible for regularly backing up computer-generated data. How often depends on the size of the company and the amount of documentation or data it generates. One option often available from computer manufacturers is the Iomega Zip drive. Whether built-in by the manufacturer or purchased as a portable unit, this magnetic storage system easily can be used for ongoing backup (www.iomega.com, $99.95 for 100 megabytes, $179.95 for 250 MB).

Firewall: The purpose of a firewall is to protect the information in an Internet-connected computer against external threats such as those posed by hackers. One program that’s easy to download and configure is ZoneAlarm Pro by Zone Labs Inc. (www.zonelabs.com, $39.95/year).

Anti-virus: While some firewall programs might stop viruses attached to e-mails, your final line of defense should be an anti-virus program. Two of the more popular programs are VirusScan (www.mcafee.com, $24.95/year) and Norton AntiVirus (www.symantec.com, $49.95/year). Both programs scan and clean incoming e-mail and its attachments, and have features that include automatic Internet updates..

Computer security: A list of all software used by your company should be maintained and updated as necessary. Include software manufacturers and version numbers. Even more important, the original disks should be kept off site, preferably in one location, along with your software listing.

Ideally, data and documents should be backed up (copied) daily. If that is not feasible, it should be done at least weekly. While a few reliable systems are in the marketplace, you should have multiple backup disks with all your company’s historical data. If you use only one backup disk, you are susceptible to having no backup if your system fails at the exact time you purged the disk to allow for another backup.

Anyone who accesses the Internet is susceptible to hackers and viruses. A firewall reduces hackers’ ability to break into your computer system. Similarly, virus protection reduces the chance that your hard drive will be infected by a virus when an infected document accidentally is opened.

Paper documents: Companies are expected to maintain certain documents, such as payroll, personnel and tax records, for long periods of time. There are multiple ways to back up paper documents, with photocopying and storing off site the most costly and time-consuming. A more modern and space-saving method is scanning, a form of copying that puts images of the paper documents onto a disk, from which they can be retrieved or printed. But if you want to opt out of the computer age, fireproof safes, vaults and cabinets can be used for the most sensitive information.

Equipment: A business insurance policy safeguards your company against serious loss if you have office or other equipment stolen or destroyed. At the time of your insurance review, which should be done annually with your agent, be certain to list all items to be insured and their replacement value. Only then will you be assured of having sufficient insurance coverage. And don’t forget to inquire about business interruption insurance. Ask your agent to quote a policy that will compensate you if your company cannot function for a period of time because of an unplanned occurrence.

Personnel Owners of even small and midsize construction companies should realize they can protect against the loss of key personnel. "Key-man" insurance lets a company owner write an insurance policy on an employee whose absence would be financially detrimental to the company. The potential loss of an employee through death or disability, however, must significantly outweigh the annual insurance premiums. An employee who is significant but potentially replaceable might not warrant thousands of dollars in premiums each year.

Property: Any company-owned property should be insured for replacement value and reassessed annually or protected with an inflation clause.

Knowing that steps could have been taken to protect a company against financial ruin but weren’t compounds even the worst calamity. Planning for disaster is something you owe not only your family, but your employees and customers as well.

Stanley F. Ehrlich, a past president of his 550-member local builders association, is a personal financial adviser in Clinton, N.J. He can be e-mailed at sfehrlich@rcn.com.

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