This post first appeared on Risk Management Magazine. Read the original article.
For more from our May issue on natural disaster planning in 2021, check out:
Remote Workforce Considerations for Natural Disaster PreparationHeading into the 2021 hurricane and natural disaster seasons, organizations must reassess their risk profile with regard to remote or hybrid workforces to ensure the safety of both operations and employees.
Q&A: How Texas Roadhouse Takes a People-First Approach to Disaster Planning
Patrick Sterling and Matt McMahan from Texas Roadhouse sat down with Risk Management to share some of the lessons they have learned from managing disasters across 600 locations over the past year, preparations for natural disasters in 2021, and insight into building a people-first playbook for times of crisis.
While the rapidly evolving COVID-19 pandemic upended operations around the world last year, enterprises had to scramble to prepare for hurricanes, typhoons, wildfires and other natural disasters. As a result, many had to put together more ad hoc measures than usual to account for shuttered physical locations, strained supply chains, already interrupted or diminished business, and a workforce that was either adapting to new remote arrangements or was struggling with the danger of showing up every day.
Now, a year into the pandemic, Atlantic hurricane season is
approaching, reminding risk professionals worldwide that they must prepare and
refine their plans for another year of disasters against the backdrop of
COVID-19. This time, many enterprises know more about the lay of the land with
regard to the pandemic’s risks, and have resumed operations under modified
conditions that will at least hold for the time being. With that improved
stability, risk professionals are able to take a more deliberate approach to
enhancing their emergency preparation and response plans to reflect the unique
circumstances of doing business—and protecting that business—amid the pandemic.
With lessons learned from 2020’s hurricane season and
pandemic response, and the ability to do more advance planning for this season,
how are risk professionals preparing differently for natural disasters in 2021?
How can enterprises better care for employees facing disaster on top of
disaster this year?
After the critical tests of disaster preparation, crisis
planning and emergency response in 2020, many risk professionals have learned
key lessons about safeguarding employees and operations. Expectations have
adjusted accordingly, and as the crisis has begun to stabilize, enterprises
face a very different climate when addressing natural disasters in 2021.
“At this stage of the pandemic, customers and boards have
expectations that companies must operate differently in this COVID-19
environment,” said Jim MacDonnell, director in the crisis management and
business continuity practice at professional services firm BDO. “Additionally,
as businesses seek to mitigate their own risk, we are seeing increased
resilience expectations in the vendor selection and contracting processes. If
you cannot effectively communicate the lessons you have learned from COVID-19
to prevent or mitigate future disruptions, you are likely behind your peers.
Well-developed risk management and contingency plans have become expected in
many industries.”
2020 Lessons and 2021 Disaster Outlook
The 2020 Atlantic hurricane season set a new record for
activity with 30 named storms, including 12 that directly hit the United
States, surpassing the previous record of nine in 1916. Globally, Swiss Re
reports natural catastrophes in 2020 caused $190 billion in economic damages
and $81 billion in insured losses, the fifth-highest total since 1970.
“We saw in 2020 that Mother Nature doesn’t take a break
simply because there is a global pandemic,” said Scott Carpinteri, senior
structurer of innovative risk solutions at Swiss Re Corporate Solutions. “We
saw a record-breaking number of hurricanes and many underwent rapid
intensification, meaning that those in harm’s way had very little time to
prepare and evacuate.”
Meteorologists expect another hurricane season of
above-average activity in 2021. AccuWeather’s team predicts 16 to 20 named
storms, including seven to 10 hurricanes, of which three to five may be
stronger than a Category 3.
Enterprises should not assume that the measures they pieced
together to survive last year will perform the same way in 2021. “COVID-19 has
been so disruptive that many companies feel that they are battle-tested and
ready to handle anything,” MacDonnell said. “While they may be better equipped
to handle the next crisis, it’s still important to make informed decisions in
the moment and handle scenarios on a case-by-case basis.”
Last year’s tests shone a spotlight on risk management and
disaster response, and risk professionals should be preparing for that
attention and heightened scrutiny to continue through 2021. “I believe COVID-19
created a heightened awareness from corporate C-suites related to business
continuity planning, crisis management and enterprise risk management,” said
Lance Ewing, vice president of enterprise risk management and operations at San
Manuel Band of Mission Indians.
“I think companies and organizations should always be
reviewing, updating and advancing their risk inventory list,” he advised. “What
are the top 10 exposures that the C-suite is worried about, the top 10 of the
shareholders, the top 10 of the employees and also the top 10 of your
customers?”
Natural disasters fall somewhat uniquely at the nexus of
concerns for these different stakeholders, and taking into account the risks
and mitigations that speak to each group in the crisis response process will
help generate truly robust plans with better odds of holding up when
stress-tested by both C-suites and Mother Nature.
Preparing for Disaster
One of the most important distinctions in business continuity
planning and natural disaster preparation in 2021 is that the current threat
surface for enterprises could be fundamentally different than in previous
years.
“The pandemic has greatly increased awareness that employees
are critical to an organization’s supply chain,” Carpinteri said, pointing in
particular to industries with highly skilled workers, such as tech and
pharmaceuticals. “Going forward, business continuity plans will likely include
more reliance on some employees being able to work remotely. However,
continuity plans will also need to account for events impacting areas where
employees live and work, not simply locations where the organization has assets
and operations.”
Risk professionals should ensure they have a complete
inventory of the locations from which employees are working, a means of
monitoring this longer list of places at risk, and continuity measures for
every type of work setting (see page 26).
Disaster preparation and response are additionally
complicated by decreases in the number of on-site workers, whether due to
limited capacity, reduced workforces or a greater volume of personal
emergencies. “It has made managing emergency response more challenging over the
past year, as reduced personnel may expose companies’ premises to damage from
natural catastrophes, delay business restart, and impair emergency response,”
said Eric Olsen, vice president and executive property specialist at Chubb Risk
Engineering Services.
“Implementing emergency response plans takes people,” he
said. “Companies should ensure they have enough staff available to implement
the emergency response plan. This could range from those familiar with setting
up flood emergency response plans to having adequate staff for sufficient site
security before, during and after an event.”
Companies should also be sure they explicitly communicate
any changes in expectations for employees in the event of a crisis, advised
Thomas Varney, regional manager of North America at Allianz Global Corporate
and Specialty. For example, some staff may have previously come to aid in
recovery efforts as soon as it was physically safe to do so. Now, that may not
be safe or compliant with local regulations or company policies around capacity
limits, social distancing and availability of personal protective equipment
(PPE).
Given the tasks and physical proximity that may be involved
in disaster recovery, he noted that companies should also establish policies
now regarding what COVID testing or vaccination policies they will need to
implement specifically for disaster-related activity on-site. While a company
may not require its whole workforce to be vaccinated, for example, it might
consider limiting on-site recovery activities to employees who have gotten
COVID-19 vaccinations.
As many buyers and insurers made changes in 2020, it is
particularly critical to review any new modifications to insurance polices
before disaster season starts. Travel restrictions and pandemic-related loss of
business both contributed to challenges in adjusting and settling insurance
claims last year. Heading into the 2021 hurricane season, the pandemic has
already left many enterprises less able to withstand more financial losses or
endure prolonged or contested claims processes. “Budgets are stretched and many
emergency ‘war chests’ are wiped out,” Carpinteri said. “There will be a
temptation to reduce insurance spending in the name of tight budgets. However,
this is the time that many are the most vulnerable and unable to withstand
another hardship such as a major hurricane. An uninsured (or underinsured)
event can have a lasting impact during this critical rebuilding year.”
Risk professionals should ensure they know what is or is not
covered, and how that may have changed in the past year. “In this hard market,
we have seen premiums and deductibles increasing with coverage decreasing,”
said Drew Olson, partner in BDO’s forensic insurance and recovery practice.
“Coverages especially hit hard are non-physical damage such as contingent time
element, loss of attraction, civil authority and ingress/egress.”
Given the impact such lines can have in the wake of a
natural catastrophe, it is critical for risk professionals to ensure details
about any such changes are reported up within the organization. “Risk
management teams should communicate the coverage changes now in advance of
hurricane season rather than informing senior executives after an event
occurs,” Olson advised. “And if you informed them after renewal, do it again as
a reminder. Setting appropriate internal expectations is critical in our new
environment.”
Supply Chain Strain and Recovery Services
“As we like to say in the crisis management business, having
one crisis doesn’t prevent another one from arising,” MacDonnell said. “While
the issues that we saw early on during the pandemic have subsided a bit, there
continue to be several industries that are still struggling with supply chain
issues stemming from COVID-19.”
Business continuity planning and disaster response must be
reassessed with an eye toward the pandemic-related supply chain disruption that
remains, and the potential for disruption to both supplies and services in the
event of a natural catastrophe this year.
“The pandemic has complicated and decreased companies’ ease
and flexibility to respond quickly to natural disasters. That’s why thoroughly
considered business continuity and disaster recovery planning, in addition to
supply-chain planning, is more critical than ever,” Olsen said. For example, he
noted that the resurgence of the construction industry as the pandemic subsides
has contributed to difficulty sourcing wood and lumber products, which could
prove an issue when trying to board up windows ahead of an approaching
hurricane.
Olsen has also seen many companies challenged by both
capacity restrictions related to social distancing and talent shortages of
workers experienced in disaster response. “Reduced occupancy and reduced
availability of qualified personnel and contractors made planning for disaster
response more challenging over the past year,” he said. “As the pandemic took
hold, commercial properties operated with very lean building maintenance and
engineering staff as well as stretched resources and time to prepare their
properties for an incoming hurricane or windstorm event. Similarly, companies
were challenged to find qualified contractors post-event, such as for repairs,
cleanup, restoration services, etc.”
Ewing, who was executive vice president of global risk
management for disaster services firm Cotton Holdings until December 2020,
noted last year’s disaster season should serve as a critical lesson about the
need to have a restoration company already under contract before disaster
strikes. “Too many affected businesses had to wait until a quality restoration
company was available after hurricane damage,” he explained. “It is also
critical to read your insurance policies—the time to figure out what was
excluded is not when the wind has already blown the roof off your building.”
He also noted lessons from the shortages in emergency
response supplies and government aid. Cities, states and federal governments
around the world were clearly overburdened with disaster response throughout
2020, and that was often just from responding to the pandemic, let alone
additional natural catastrophes. Moving forward, businesses should anticipate
potential aid delays and develop the capacity to address their own needs for
emergency services or supplies in the immediate aftermath of catastrophe. “You
need to be self-reliant,” Ewing urged. “While the government says they are
going to help—and may be able to at some point—the first week or more is going
to be on your business continuity plan and crisis management team.”
Staying Plugged In
Many companies are turning to new or enhanced technology
tools to mitigate risk while employees are more dispersed and on-site staffing
is reduced.
According to Olsen, internet of things (IoT) products are
helping fill in monitoring gaps for physical premises. “Chubb encourages our
clients to educate themselves on and consider installing IoT sensors and
devices to enable better property protection,” he said. “For example, IoT water
detection and relative humidity and temperature sensors help companies increase
their knowledge about the property’s environmental conditions, especially with
current reductions of on-site manpower.”
These tools can also help enhance risk management
capabilities for risk professionals who are operating remotely. He explained,
“These IoT devices enable easy communication through smartphones, and
notification is half the battle when responding to an event, especially when
staff is located remotely or on-site personnel is reduced.”
Enterprises are also expanding their monitoring capabilities
to proactively identify potential threats in relevant areas and track risk in
real-time. This is particularly helpful as companies face a broader range of
physical locations that require monitoring to account for remote workers, to
enhance oversight of supply chain risks, or to scale risk management efforts
with business expansion.
For example, Texas Roadhouse uses a threat monitoring system
and geolocation to track risks across the chain’s approximately 600
restaurants, according to Matt McMahan, senior manager of business continuity
and records. This helps ensure the team in the support center is aware of
threats to each store and can provide relevant communication to support the
managing partners operating potentially impacted restaurants or the employees
who may be facing disaster in the region.
As communication is often threatened under disaster
conditions, many organizations are also looking into new ways to ensure
employees can stay in touch, whether as a matter of business continuity or to
execute disaster response plans.
“We have seen an increased focus on automation of crisis
management and business continuity capabilities,” MacDonnell said. “Having
plans, call trees and other documentation available or mobile applications has
proven to be of increasing importance.”
According to Patrick Sterling, senior director of legendary
people and risk management at Texas Roadhouse, cross-functional collaboration
proved especially critical over the past year in ensuring communication
throughout the company, facilitating creative and comprehensive
problem-solving, and resolving issues promptly. Deploying collaboration
technology and platforms such as Microsoft Teams helped the organization
facilitate these multi-department efforts. “Everyone has access to critical
documents, they can edit documents, view meeting notes, etc., so it’s a
one-stop shop and that was very helpful,” Sterling said. “Then, as far as
business continuity plan modifications, we were also able to capture our
lessons learned along the way and make updates in near real-time. This resulted
in a much more detailed plan that became an everyday resource that will help
guide and speed up our future responses.”
Sterling champions this all-hands approach throughout the
crisis response process. For example, he believes it is critical to have every
person involved in the emergency checklist on each crisis response team call,
such as standing group check-ins during a disaster. “Whether it’s IT,
purchasing, human resources, accounting, payroll—they’re all on that call to be
able to answer questions and to support our operators, so if there is a
question that somebody has or a special need, they have that resource right
there for them,” he explained.
Better Care for Workers
When facing natural disasters in 2021, it is critical for
companies to bear in mind that we have all already been laboring under disaster
conditions for the past year. The added impact of natural catastrophe threats
can easily be too much to handle, whether emotionally or functionally. Now more
than ever, companies must assess how to better care for their most important
assets: their people.
“Be genuinely concerned about their well-being both at work
and at home,” Ewing urged. “Employees want to know, ‘Am I being heard?’ Care,
concern, follow-up and listening are not just an HR function during a
crisis—they are required of all levels of management.”
Some organizations are considering more robust measures to
care for employees facing natural disasters. Such investments in personal
well-being can not only benefit individual workers, but also boost morale and
productivity, safeguard operations, and help ensure business continuity. Over
the past year, MacDonnell and Olson have seen some of BDO’s clients make a
broad range of investments to personally help workers at home, for example,
providing mobile hot spots or offering individual and family preparedness
classes.
In shoring up defenses against disaster, it can be helpful
for risk professionals to safeguard infrastructure, and approach protecting
employees as an extension of supply chain or continuity planning. “COVID was a
unique disaster in that infrastructure was largely unimpacted by the event: the
electrical grid remained intact, the data grid continued to operate, water and
sewage still flowed, and supplies were largely able to reach destinations,”
Carpinteri said. “Following a natural disaster, one or more of these services
may be out of commission for an extended period of time. As such, employee
assistance will be critical for many organizations. For instance, we’ve seen
petrochemical companies supply generators for their employees’ homes following
hurricanes and widespread power outages.”
Investing in such critical enhancements can pay huge
dividends to both the organization and employees. Various sources of funding
may be available to execute these ideas, including different departments’
budget allocations or even some insurance. “Organizations need to consider how
they will fund additional expenses such as employee assistance. Will this expense
fall to risk management, human resources, or both? Planning ahead can save
critical time in implementing necessary action following a disaster,”
Carpinteri said. “Innovative new insurance policies such as parametric natural
catastrophe insurance can also assist with this funding as the policies provide
rapid funds following a natural catastrophe in a particular geographic area.”
Looking Back and Moving Forward
While the prospect of weathering natural disasters in 2021
seems more complex and potentially daunting than ever, risk management,
emergency preparation and disaster response have made tremendous strides since
the beginning of 2020. Reassessing business continuity planning a year into the
COVID-19 pandemic also presents an opportunity to assess lessons learned and
strengths gained. Ultimately, these may prove some of the most long-term
advances for risk professionals in recent years.
“Watching businesses, government services, and nonprofits
pivot during COVID gave me great hope for the adaptability of organizations and
society,” Carpinteri said, pointing to the rapid innovation and technological
adoption among retailers, governments’ operational adaptation, and nonprofits’
massive scaling up to meet enormous needs amid economic devastation.
“Each of these adjustments were a bit of a ‘crash course’ in
risk management,” he said. “Too often we see organizations managing only the
risks they themselves have previously experienced and not to the greater
universe of what could happen. Going forward, organizations should use COVID as
a lesson in being prepared for new challenges and not to fall into the trap of
simply managing for ‘the next COVID,’ specifically.”
Carpinteri added, “If just some of these lessons work their
way into planning for the future, we will see a society and organizations more
prepared for not only smaller, more likely events, but larger, more remote ones
too.”