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Risk Management
Monday | 30 April, 2012 | 12:00 pm

Power of protection

By Jeffrey C. Terry & Tom Heebner

Essential planning mitigates the impact of business disruptions

April 2012 - In 2011, United States broke the record for the largest number of billion-dollar weather-related disasters, which amounted to more than $55 billion in losses and were responsible for the loss of more than 1,000 lives. Global economic losses from natural disasters for 2011 topped an estimated $350 billion. Costly natural disasters are only one potential problem metals companies face that can disrupt business.

Predicting when and where losses may occur is difficult. However, proper planning can have a profound impact on how a metals company recovers from the loss. With intense competition in the steel industry, even a brief service interruption can open a window for competitors.

Anticipating potential interruptions, planning a response and establishing strategies for business continuity will minimize the negative impact an event has on a company. A comprehensive business continuity program foresees the probability of damaging events and readies the organization to deal with them.

Potential disastrous events include natural disasters; security incidents, such as violent intruders, terrorism or civil disorder; public health concerns, such as infectious diseases and pandemics; and emergencies, such as fire, hazardous chemical spills or bomb threats.

Business disruptions translate to five outcome scenarios based on an infinite number of causes: loss of technology, loss of a facility, denial of access to a building, loss of staff and loss of a supplier.

Quick and effective responses can protect the health and safety of staff and tenants, reduce property damage and minimize disruption to business operations. Effective response planning also will help ensure an organization is compliant with local, state and federal laws.

Resuming business as usual after an event is critical to preserving a company’s reputation along with the income it generates. The potential economic impact of effective business continuity planning is difficult—if not impossible—to quantify. However, it is probable a substantial economic impact would occur in the event of a serious incident. Loss of a critical facility, life or customer stream can put the future of a metals company at risk.

Business continuity planning
Business continuity planning prioritizes key business processes, identifies significant threats to normal operation and plans mitigation strategies to ensure an effective and efficient organizational response to the challenges that surface during and after a crisis. An effective plan reduces risk through upfront mitigation and post-disaster response, recovery and restoration.

Every large-scale disaster is a reminder of the importance of planning. However, smaller disasters or emergency events impact companies on a daily basis. Having a simple disruption in the supply chain or having a critical piece of equipment inoperable can cripple individual steel companies.

According to the Bureau of Labor Statistics, 75 percent of companies without an effective plan fail within three years of a major disaster, and companies that aren’t able to resume operations within 10 days are not likely to survive. Fifty percent will be out of business within five years.

The following are a number of key steps to consider when creating a business continuity plan:

Establish a planning committee: Assemble a small, manageable planning team of key people who can identify risks and know your business and operations.

Conduct a business impact analysis: This process is used to identify, quantify and qualify impacts on an organization of a loss, interruption or disruption of operations and its dependencies. Explore all the risks your company is exposed to and the possible major disruptions that could occur.

Mitigate risk where feasible: Diminish risks that threaten the health and safety of people, operations, company assets or the environment, reducing the risk to an acceptable level. Because not all risks can be avoided, continuity/recovery strategies should be developed to maintain business-critical processes and their dependencies.

Establish business continuity strategies: Cost-effective strategies should be established to maintain resources, including alternate operating sites, external contingent production agreements, cross training, outsourcing and use of secondary suppliers.

Develop your plan: Record everything in the analysis process, and develop a plan and procedure to use as a basis if a disaster occurs.

Implement and train: Identify and train employees who have key roles and assignments to be performed in the business continuity, disaster recovery and incident response processes.

Test the plan: Perform the critical process of exercising strategies and plans, rehearsing with team members and testing systems to demonstrate business continuity competence and capability.

Audit and evaluate: Ensure the plan is reviewed on a regular basis. Make changes where deficiencies are noted or functions and strategies have changed. MM

Jeffrey C. Terry is vice president with HUB International Insurance Services in its Los Angeles office. HUB International is a top-10 U.S.-ranked insurance brokerage and risk management firm. Jeff has specialized in risk management consultation and insurance program design for the metals industry for more than 20 years. Tom Heebner, ASP, ARM, CLCS, practices in the HUB Risk Services Division at HUB’s Chicago headquarters and serves as a resource for the metals industry, providing risk control, safety, regulatory compliance and workers compensation reduction guidance. Jeff can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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