Brooklyn's Progress
June/July 2006

Events like the 9/11 terrorist attacks and Hurricane Katrina were a wake-up call for individuals, governments and businesses across America: The “unthinkable” can happen, and when it does, the consequences can be devastating.

Obviously, the greatest tragedy of these disasters is the loss of human life. But business failures can also have a profound affect on their owners, on the employees who depend on them for their livelihood, and on the customers who rely on them for vital goods and services. A disaster recovery plan can make the difference between life and death for a business.

Why You Need a Plan
Terrorist attacks and natural disasters make headlines, but even something as simple as a power outage or computer system failure can cause serious harm to a business. According to the Gartner Group, 40% of companies suffering a business interruption fail within five years.

Business interruption insurance can help you get through a crisis, but a prolonged interruption can cause long-term damage that’s difficult to repair. If you have difficulty meeting your payroll and paying vendors, for example, you may lose employees and damage your credit rating. Rent collections may be delayed and new business lost, creating cash-flow problems, not to mention the extraordinary expenses required just to stay afloat during a crisis.

The only effective way to avoid catastrophic losses is to reestablish critical business operations as quickly as possible. And the only effective way to minimize your downtime is to have a recovery plan in place before disaster strikes.

Constructing a Plan
There’s no cookie-cutter approach to disaster recovery planning. Every business is different, and each has different personnel and equipment requirements to maintain essential operations. Still, there are some basic steps you can follow to create a plan that’s right for you:

Review your insurance coverage.  Be sure that you have adequate insurance coverage in the event your physical facilities are damaged or destroyed or your business is interrupted for a significant period of time. Ask your insurance provider what documents and records he or she will need to calculate losses and process claims in the event of an emergency and keep them in a safe place.

Prepare your buildings and other facilities. Make sure your building and any buildings you own or manage have adequate safety precautions in place — such as fire extinguishers, smoke detectors, sprinkler systems, and first-aid kits — and an appropriate evacuation plan. Be prepared for disruptions in electricity, gas, telecommunications, and other utilities. Talk to your providers about alternatives in the event of an emergency and consider the use of back-up measures such as generators.

Should you have tenants, encourage them to develop their own disaster recovery plans. After all, if their businesses fail, the loss of rental income will make it that much harder for you to recover. If your buildings are wired for broadband access, consider partnering with an IT provider to offer tenants data backup services.

Document your needs. Your disaster recovery plan should document and prioritize all mission-critical business functions and personnel and outline the immediate steps you’ll need to take to reestablish critical operations.

Prepare an inventory of the facilities, equipment, furniture, and other physical requirements for maintaining essential business functions. Identify vendors that can fulfill these needs on an emergency basis. Remember, though, that in the event of a disaster that causes widespread damage, space and equipment may be in short supply, so have a contingency plan.

One option is to have key personnel work out of their homes using their laptops or home computers. Another is to maintain a “hot site” — a remote location that’s set up with the hardware, software, telecommunications equipment, and other essentials you need to operate your business in an emergency. A hot site can be provided through a disaster recovery center or by maintaining your own facility. To defray some of the cost, you might be able to lease the space to a tenant who is prepared to vacate the premises in an emergency. 

Protect your data. Your computer network, systems, and data are critical to the survival of your business. Evaluate your data backup and storage procedures and be sure that they are being followed diligently and that backup media are safely stored off-site. And test your backup systems regularly. The time to discover that your backup hardware or software isn’t working properly is before you need it.

If possible, train someone other than your IT director to restore your data in the event the IT director isn’t available in an emergency.

Don’t neglect hard copies. Restoring computer data may be the most important element of your disaster recovery plan, but don’t neglect legal files, blueprints, leases  and other critical documents that can’t be recreated electronically. To preserve these documents, keep photocopies in a safe place or use document imaging systems to transfer them onto microfiche, CD-ROMs or optical disks stored off-site.

It’s also a good idea to keep hard copies of important documents you may need before your computer systems are up and running again, such as emergency contact lists, client and vendor lists, blank checks, contracts, and insurance policies.

Have a communications plan. Your plan is of little value if key personnel can’t find each other after disaster strikes. Be sure that they have access to cell phone numbers and other emergency contact information. As a backup, consider setting up a remote voice-mail box or Web site where employees can let you know that they’re OK and how to reach them.

Have a PR plan and media kit. Don’t overlook the importance of public relations and communications immediately after a disaster. Even the most effective disaster recovery plan is worthless if your employees and clients don’t know that your business is up and running. Unless you get the word out, nervous employees may abandon ship and clients unsure about your continued survival may stop payments and seek alternate providers.

Seek professional help. Like an insurance policy, a disaster recovery plan is something you hope you’ll never need, but it’s critical to your company’s survival in the event the unthinkable happens. You can develop a disaster recovery plan internally, but an objective outside consultant may be better equipped to evaluate your risks, identify any vulnerabilities in your current procedures, and tailor a plan to meet your unique needs.

For more information regarding Disaster Recovery Planning and how to protect your business please contact Anchin, Block & Anchin LLP at 212-840-3456 or at http://www.anchin.com/.