We often talk about living in a “globalized” and “connected” world. It’s true that even small “local” businesses today benefit from a network of resources and information undreamed of only a generation ago. If you’ve ever played the game of Six Degrees of Separation, you know that our lives are connected in often surprising ways.
There are many benefits to this inter-dependency, but it also brings new risks. Nowadays, even if you live and work outside the impact area of a natural or man-made catastrophic event, you can be still be affected by it. And these challenges often come from the direction you least expected.
With the first anniversaries of Hurricane Harvey and Hurricane Maria just passed and the damage from Hurricane Florence still to be calculated, we wanted to take a closer look at several “fallout factors” your organization needs to consider and prepare for.
Your Supply Chain
This may seem like a strange piece of advice. People are used to thinking about supply chain for businesses that make or sell “things.” Service-based businesses such as insurance and financial services tend not to think about supply chain in the same way.
But think of it this way … how many different entities are involved in the delivery of your service – start to finish? Do you even know where their offices are located? Here at ILSA, for example, we have clients nationwide, many of them located in regions at risk for natural disasters every year. We also interact daily with insurance departments, Secretary of State Offices, Departments of Revenue, Surplus Lines Stamping Offices and surplus lines associations for 54 different jurisdictions.
Like most people of my generation, I remember very clearly where I was on the morning of September 11, 2001. I watched the first news reports of a plane’s crash into 1 World Trade Center, and thought, “How terrible for those poor people and their families.” After a moment of silent prayer, I headed out for my commute to my Atlanta office. I heard the news of the second impact over my car radio and realized that our nation was dealing with something so much worse.
Over the next few days, while we all dealt with our personal reactions, our team also had to track down in-transit shipments of life-sustaining medications for our company’s patients. With all air traffic grounded indefinitely, we scrambled to provide alternate care for our patients and to try to locate temperature-sensitive medication shipments before they were ruined.
For a typical insurance agency, you have clients, their risk exposures, state regulators, insurance carriers, claims processing and adjuster services, and more. Catastrophic events at any of these locations can delay or disrupt your normal business operations.
In addition to these key players, you also depend on banking services and various utility grids. If you outsource essential support services such as payroll, employee benefits, courier and transportation services and/or security, you face vulnerabilities there as well.
And beyond the disruption caused by physical events such as natural or man-made disasters, you also need to consider cyber-threats and resulting data and communications disruptions.
Most businesses have some sort of plan for what to do if employees can’t make it into the office due to bad weather or similar circumstances. But have you considered what the impact on your team may be from catastrophic events further from home?
If you have employees who serve in the state or National Guard, they may be mobilized to respond to disasters in distant areas. Such deployments rarely have clear end dates. Additionally, you may have employees who want to participate in humanitarian relief efforts through faith-based organizations or charitable groups such as the Red Cross. Your employees and community may also need to respond to the needs of family and other survivors displaced by a disaster.
When Hurricane Harvey made landfall, ILSA was fortunate to far enough away from the coast to receive only intense rain. Over the following days and weeks, however, as the full scope of the disaster became evident, our company dealt with the aftermath.
Our small town welcomed some of 3 million plus people forced to evacuate the Texas Gulf Coast, much as we had welcome refugees from Hurricane Rita twelve years previously. ILSA opened our office space to insurance agents displaced by floodwaters and to adjusters waiting to move into the area as soon as authorities permitted. Many of our team members opened their homes to evacuees.
Several employees also had family members who were first responders and utility workers. When their loved ones mobilized to help save lives in Houston, Rockport and other coastal towns, it was a sacrifice, but one we were glad to make.
Employees also made several trips to deliver water, clothing and other essential supplies to devastated areas after the flood. We’re still in contact with the people we helped as they rebuild their lives and businesses.
Major events may also result in the reallocation of manpower at insurance carriers and other organizations your business depends on. Insurance adjusters and utility workers leap to mind. These shifts of personnel may delay your access to these professionals, even if you are far removed from the site of the event.
Remember, too, that prolonged or repeated stressor events can take their toll on your team as well. One of the most common reasons given for entering the insurance profession is the desire to help people at the most difficult times of their lives. The inability to “make everything better” can be enormously stressful. This stress often manifests as illness, a greater tendency to make mistakes, the temptation to circumvent normal business practices, and – perhaps worst of all – “compassion burnout.” Just letting your team know that such feelings are normal and providing opportunities to step back, take a breath and regain perspective can make all the difference.
Your Company Goals and Business Projections
Whether you’re a start-up or a national corporation, your organization likely has financial goals that you need to reach, either to satisfy stockholder or just keep the doors open and the lights on. A disruptive event can force you to reconsider these goals, even if you’re not located at the site of the event. If you are a start-up, or if you’re in the midst of an expansion, resources and opportunities you counted on may be unexpectedly unavailable.
Ted and I moved to beautiful Humacao, Puerto Rico, in October 2016, to open ILSA’s sister company, Spot On Insurance. We held the Grand Opening for our new offices on July 17, 2017, and launched the Spot On Insurance podcast series in August. It takes time and a lot of work to attract an audience, and consistency is essential. Our newly hired team was enthusiastic, however. Year One would be our growth year!
On September 19th, we arrived back in Puerto Rico from a trip to the Dominican Republic for our son’s wedding. I remember being relieved that we’d made it back home before a hurricane named Maria made landfall. We had no idea! Our offices were devastated, and as were many of our team’s homes. We faced weeks, then months with basic utilities such as electricity and running water. Internet and cellphone communications were almost nonexistent. I vividly remember our team driving around for hours hunting for spots where we could get any kind of signal. One of our key employees was recalled to the National Guard to assist in areas even more hard hit than our own.
Thankfully, SOI survived — even thrived — but it certainly wasn’t the year we planned for!
Since we are in the insurance industry, however, the opposite can also be true. Bad news can sometimes mean good business opportunities. Companies underwriting entertainment risks, for example, may suddenly have an influx of clients needing to insure risks for relocated events. Finding the time and resources to respond to such opportunities can be a challenge in its own right.
We all know how a major disruption can impact the financial markets, but if you rely on outside funding sources – especially if you are a start-up – the availability of funding can be at risk. Venture capital often plays a “wait-and-see” game when the financial and consumer markets are in flux. More traditional lenders may face uncertainties or delays for existing loans and may be unable or unwilling to extend new loans.
After the DotCom bubble burst in 2000, I was fortunate to find a job with a promising software start-up. When 9/11 happened, however, all their “Angel” money dried up, due to the financial uncertainty.
In one month, I went from “You will always have a place at this company” to “We’re sorry, but we can’t afford to keep you on.” Lots of technology start-ups faced the same issue, so what followed was a series of part-time gigs until I finally decided to relocate.
Remember, too, that even if you have money sitting in the bank, communications issues ranging from internet outages to power cuts can limit your access to your funds, even including credit cards and ATM.
It’s Called the Unexpected for a Reason
Every catastrophic situation presents its own unique challenges. No matter how carefully you and your business prepare, you may still face contingencies you haven’t planned for. But the discussions your team has in preparing for the scenarios above – and the resources you discover along the way – create a preparedness mindset that will serve you well.
For more information about how to develop a response and recovery plan: