Have Plans Ready To Cope With Unexpected Disasters
by; Morey Stettner
You plan for risk. But do you plan for extreme risk?
Analyzing business risk typically involves identifying vulnerabilities, plugging security holes and ensuring the enterprise can continue to run amid a disruption. Yet some disruptions blossom into full-blown disasters.
In the last decade, entrepreneurs have faced everything from a terrorist attack on U.S. soil to Hurricane Katrina to a global economic crisis. Leaders of companies that survived these shocks may not have predicted such events, but they planned for high-level emergencies.
Yet just as many adults avoid shopping for life insurance rather than confront their death and its consequences on their family's finances, entrepreneurs may prefer not to spend time dreaming up big disasters and planning how their company would respond. That's a mistake, warns Howard Kunreuther, a professor of decision sciences and public policy at University of Pennsylvania's Wharton School.
Planning for severe emergencies can actually save a business. It's precisely these types of low-probability but high-consequence events that do the most damage.
"It's not that anyone thinks these catastrophic events can't or won't happen," said Kunreuther, co-author of "Learning From Catastrophes." "They just think, 'These things won't happen on my watch.'"
Entrepreneurs tend to concentrate on short-term challenges. They may spend most of their time putting out fires or planning for three or six months in the future. And given their optimistic nature, business builders tend to underpredict the next potential crisis.
It's tempting to adopt the attitude, "If there's a low-enough probability of some massive natural or man-made disaster occurring, then I don't need to plan for it." This explains why some executives may be willing to prepare for more routine problems such as fires or spring floods while neglecting to plan for less-common but higher-magnitude disasters.
You can avoid this trap by analyzing worst-case scenarios with your employees, Kunreuther says. Hold a brainstorming meeting where you ask your team to identify what can happen at a local and national level that would seriously affect the firm's ability to function.
"Gather everyone to help you figure out mechanisms you can apply to think outside the box and prepare for catastrophe," Kunreuther said. Rather than just hire a consultant to draft a disaster recovery plan and then forget about it, stage drills with employees to practice emergency response.
At www.ready.gov, you can obtain free business-preparedness resources and participate in the "Ready Business" mentoring initiative that includes guides on how to take practical, low-cost steps to protect your business. You can also review worksheets on how to protect inventory, improve data security and shop for proper insurance coverage.
You plan for risk. But do you plan for extreme risk?
Analyzing business risk typically involves identifying vulnerabilities, plugging security holes and ensuring the enterprise can continue to run amid a disruption. Yet some disruptions blossom into full-blown disasters.
In the last decade, entrepreneurs have faced everything from a terrorist attack on U.S. soil to Hurricane Katrina to a global economic crisis. Leaders of companies that survived these shocks may not have predicted such events, but they planned for high-level emergencies.
Yet just as many adults avoid shopping for life insurance rather than confront their death and its consequences on their family's finances, entrepreneurs may prefer not to spend time dreaming up big disasters and planning how their company would respond. That's a mistake, warns Howard Kunreuther, a professor of decision sciences and public policy at University of Pennsylvania's Wharton School.
Planning for severe emergencies can actually save a business. It's precisely these types of low-probability but high-consequence events that do the most damage.
"It's not that anyone thinks these catastrophic events can't or won't happen," said Kunreuther, co-author of "Learning From Catastrophes." "They just think, 'These things won't happen on my watch.'"
Entrepreneurs tend to concentrate on short-term challenges. They may spend most of their time putting out fires or planning for three or six months in the future. And given their optimistic nature, business builders tend to underpredict the next potential crisis.
It's tempting to adopt the attitude, "If there's a low-enough probability of some massive natural or man-made disaster occurring, then I don't need to plan for it." This explains why some executives may be willing to prepare for more routine problems such as fires or spring floods while neglecting to plan for less-common but higher-magnitude disasters.
You can avoid this trap by analyzing worst-case scenarios with your employees, Kunreuther says. Hold a brainstorming meeting where you ask your team to identify what can happen at a local and national level that would seriously affect the firm's ability to function.
"Gather everyone to help you figure out mechanisms you can apply to think outside the box and prepare for catastrophe," Kunreuther said. Rather than just hire a consultant to draft a disaster recovery plan and then forget about it, stage drills with employees to practice emergency response.
At www.ready.gov, you can obtain free business-preparedness resources and participate in the "Ready Business" mentoring initiative that includes guides on how to take practical, low-cost steps to protect your business. You can also review worksheets on how to protect inventory, improve data security and shop for proper insurance coverage.
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