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Forming a contingency plan.

Feb 1, 1996 12:00 AM

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Can all or part of your work site cease to exist for one day or permanently while the firm continues? If the answer is no, then a contingency plan is vital for survival.

Contingency plans protect and prepare firms in the event of disasters, such as earthquakes, floods, fires, vandalism and civil unrest. The plans assume that all or part of the business has ceased to exist at its location for a period of time. The goals of contingency planning include addressing the damage, continuing critical business functions and recreating the organization.

What are the possible results of not forming a contingency plan? Consider the costs to a company if it ceased to function for 30 days. If a disaster plan could bring the firm back on line in 15 days, what would be the cost savings? What is the value of retaining customers during the disaster and recovery period, if they can be serviced at a known time, rather than offering a guess about when the business will reopen?

Contingency plans are important for additional reasons. For instance, the public, families and victims deserve the best planning possible. Also, there may be fiduciary obligations of plan trustees, and prompt claims processing is critical. Contingency plans help minimize business disruption, which mitigates loss.

Basic do's and don'ts of contingency plans

* Develop a written plan.

* Involve all employees--make it their plan.

* Test the plan periodically.

* Don't try to develop a contingency plan in the middle of a disaster.

* Don't forget to ask key service providers if they have a plan.

Contingency plans must be tailored to each company, yet developing a plan has certain common steps.

Step 1 Organize a dedicated group

Establish a committee composed of members from each significant part of the business and appoint a chairperson with authority to complete the plan. Form strong executive support, set time frames and clarify accountabilities.

Step 2 Plan for the worst possible scenario

Each member should assume the worst: the physical facility housing his or her area of responsibility and all of its contents have been destroyed. From that scenario, list each item that would be important to the firm if it had been salvaged, as well as items that must be recreated from scratch in order for business to continue.

Typically, records and the ability to communicate are crucial to the continuing business. Furniture, materials and manuals can be replaced and generally are insured for their value.

Step 3 Identify internal alternatives

Of those items on the list that should be salvaged or must be recreated, determine if any precautions could have been taken before the disaster to avoid a total loss. Precautions may include the following:

* Maintain duplicate records at a different site.

* Use equipment from another firm or one of your other work sites.

* Store disks or tapes of critical information such as accounts receivable, client information, vendor and personnel records or outstanding billings in a safe, secure place such as a bank vault.

Step 4 Verify external alternatives, contingencies and insurance

* Determine the adequacy of fire and disaster insurance.

* Do emergency evacuation planning, including periodic drills, special considerations for employees with disabilities and coordination with local emergency and fire authorities.

* Establish a plan for an alternative work site during the emergency for records, staff and support services such as telephones and other equipment. Also, consider a reciprocal relationship with a vendor or competitor.

* Specify under what circumstances a facility will be closed (bad weather), who makes the decision, how the decision is communicated and how employees are compensated. You may want to use the Employee Assistance Program (EAP) hotline or another emergency number.

* Collect emergency call-in numbers for employees and establish a relationship with local radio or television stations. Provide this information to all employees in written form, such as a wallet card.

* Train employees, particularly if your facility is located in an area prone to natural disasters such as hurricanes, earthquakes or flooding.

* If your company operates 24 hours a day or provides critical services, formulate a plan for alternative electricity, water storage and other routine public services.

* Carefully plan public relations responsibilities and a spokesperson's duties. Also, allow for more than one backup spokesperson.

* Stress to your designated spokesperson the importance of being truthful with the press. Lying to the press can be disastrous if reporters find out the truth later.

* Individuals with key responsibilities should keep copies of the emergency plan at their homes.

* Use all available community resources, such as police and fire departments, local and state emergency planning agencies and weather services. Plus, private consultants can assist in preparing emergency plans.

Step 5 Keep plans current

* Formally review and update the plan at least quarterly.

* Review contingencies within the plan, such as storage of a specific set of records, and update the contingencies on a regular schedule. The frequency of updating will vary with the degree the material changes over time and the degree of risk the firm accepts if the data is outdated.

* Train key members of the emergency team, including spokespeople, in stress management, team building and media relations. Provide periodic refresher training and initial training for replacements to the team.

* Train employees periodically on fire prevention. There should be a minimum of two fire drills a year and frequent on-site self-inspection and review. If done routinely, fire drills become expected in the workplace and do not raise concerns that something is wrong.

* Duplicate prepared information and place in a three-ring binder to facilitate adding and deleting materials over time.

* Clearly assign accountability for ongoing actions to a specific individual or incumbent of a position/title to keep the emergency plan up-to-date and follow up periodically. Include this task as a part of employees' performance appraisals.

* Periodically test your plan to the extent possible without complete disruption of the workplace. After the test, modify your plan based on gaps or unforeseen contingencies discovered as a result of the test.

In addition, it is important to find out if any local, industry-specific groups offer consulting, training and reciprocal support in disaster planning.

Developing and maintaining an adequate emergency contingency plan is hard work, so companies must place significant importance on this task for it to be done adequately. Therefore, it's understandable that management may be tempted to play the odds and forego the effort completely. Given that a company's very survival may be at issue, this investment is worth the cost.

By Brian W. Gill Senior vice president of education and human relations, Printing Industries of America, Alexandria, VA