Hurricane, flood, fire — you don’t even want to think about the impact that such worst-case scenarios could have on your business. Putting a contingency plan in place is a necessary strategy for any size firm.

{manning, align = left}Do you know exactly what your business interruption insurance policy covers? Where your server computer backup data reside? Where your firm will relocate in the case of a major catastrophic event that affects your community and prevents you from returning to your office? These are just some of the questions one is forced to consider in the event of an evacuation, which is what happened to my firm.

According to professional services firm PricewaterhouseCoopers, a company that experiences a computer outage lasting more than 10 days will never fully recover financially. Of those firms, 50 percent will be out of business within five years. The United States’ 27 million small businesses are dependent on their computing systems, so any contingency planning for business interruption will pay huge dividends. In his book Surviving Armageddon, Solutions for a Threatened Planet, author Bill McGuire suggests that for every $1 spent on preparedness, $7 is spent on recovery or relief.

In every sense, design firms are usually as ill-prepared as any other business for a catastrophic event. This is important not only for those of us who reside in the Gulf Coast of the United States. The National Oceanic and Atmospheric Administration’s National Climatic Data Center reports that there have been 70 weather-related disasters over the past 27 years, with 61 of those occurring from 1988 through 2006. The damages for those events alone exceeded $430 billion.

Whether the catastrophe in question is a World Trade Center or Pentagon attack, an earthquake, tsunami, tornado, fire, or flood, business contingency plans should be on your strategic agenda regardless of your firm’s size and location. Most of us would rather not dwell on the worst-case scenario, but research shows that those who think deeply about the unimaginable usually fair better when faced with difficult situations.

Trouble Brewing

When Hurricane Katrina struck New Orleans in 2005, it nearly swept our firm, Manning Architects, away with it. In fact, were it not for the determination of key employees and the quick actions of an impressive IT organization, the firm might have become another casualty of a storm that claimed more than 18,700 businesses in the state of Louisiana.

This is a cautionary tale for all small businesses. It suggests that the difference between profit and loss, survival and extinction can hinge on being prepared for the worst.

By Aug. 29, 2005, our firm had already evacuated our downtown New Orleans office to temporary quarters in Baton Rouge, La. — about 90 miles northwest — and to various cities around the region and country.

Following the power outages, our Web site, e-mail, and server went offline. Only three tape drives containing the most recent backup of our server data made the trip to Baton Rouge. Retrieving the data from these tapes was critical. There were clients outside of New Orleans that were depending on our services. If we could not get the server up and running again, we risked losing those clients — and possibly the business. Returning to New Orleans wasn’t an option: The city was shut down and we did not know when residents would be allowed to return.

Within 72 hours of the storm, our server was restored and e-mail and the Web site were operational. Remember that impressive IT firm? They now provide all our information technology needs. We knew that achieving this simple set of objectives in a timely manner was essential. As many other businesses struggled to get up and running in the wake of the storm, our firm was able to begin assisting in the city’s recovery. We undertook damage assessments at the Louis Armstrong New Orleans International Airport, which involved the inventory of damages caused by the storm and returning the airport’s terminal from a makeshift hospital in the hurricane’s aftermath to an active airport.

Contingency Analysis

In the post-storm evaluation of our preparedness and as a part of re-establishing our office in New Orleans, we engaged the IT firm to assist us in evaluating our systems that existed prior to evacuation. In doing so, we uncovered aspects of our business to which we had paid little attention.

The first issue was that our server operating systems, which had evolved over several years, deployed in a way that was not easily reconfigured off-site. The fact that we did not have a reliable data backup off-site was a second cause for concern. We knew that we needed to establish data redundancy both on- and off-site, and we needed to update our server software. Using systematic (off-site) storage along with reconfiguring our primary server was the first order of business. We also used that as an opportunity to examine additional aspects of how we were putting our IT dollars to use. We realized that one of the most significant issues we could undertake was to make sure the IT specialists we employed were certified by the software manufacturer.

We also wanted to establish additional consistencies that would help us not only in case of an emergency but to improve our overall productivity as well. One of those long-term solutions we deployed was a new SQL server Web-based software solution for accounting and project management as we updated our exchange server to the latest version. These two items, along with the implementation of the latest updates to all software (from AutoCAD to Microsoft Office), were essential to reformatting the firm’s IT infrastructure.

With that in mind, we enlisted an organizational and business development specialist to undertake a year-long review of our firm’s business culture. In that planning effort, we made the decision to focus on three key objectives: firm identity, continuous improvement strategies, and the creation and maintenance of an advanced technology infrastructure. We would implement a dedicated on-site/off-site backup system with secure remote geographic locations and a laptop program that would allow staff to operate virtually anywhere. Additionally, our presence on the Web was moved away from our server.

Approximately 14 days after Hurricane Katrina shuttered our office, we were back up and running in our temporary Baton Rouge office. We were being hosted by a professional colleague who offered us space in his office and allowed us to piggyback onto his server so that our staff could continue to perform work that we had in locations outside the New Orleans area. Additionally, another firm allowed our hospitality group to locate a team in its Nevada office to complete a project there.

What we learned from this experience, which included 40 days away from our office, is that our firm has to incorporate basic operational changes that will allow us to perform our work in a virtual world, that our offices must be mobile, and that professional relationships are vital to the success of a firm.

Insurance Woes

Insurance is a vital necessity to design firms. However, few design professionals actually read their respective policies, instead relying heavily on their agents to interpret the documents in concise terms and to explain deductible amounts, premium amounts, policy limits, degree of financial exposure, and other details.

During our 20 years in business, we met with our agent annually to review the renewal documents. We were assured that our coverage included the best the industry had to offer with regard to the business interruption endorsement.

Having what we believed was adequate business interruption insurance coverage (for which we dutifully paid premiums for more than 20 years), we were disappointed to find that, in the end, business losses surrounding the 2005 office closure and disruption would have to be litigated. The only way to recover those claim funds was to bring action against our insurance carrier. Although policy coverage had been reviewed annually, we never anticipated this level of disruption. In the end, we recovered our losses, but only after two years following the storm. Most businesses did not survive that process.

The events following the storm cast the language of the provisions under microscopic legal interpretation. The insurance industry had never before been exposed to the magnitude of claims that would follow. The insurance companies became guarded in their efforts to resolve claims in a timely fashion when cash flow was most needed. This resulted in numerous lawsuits filed in both federal and local jurisdictions. Many claims now include bad faith damages as the result of the insurance companies not following the time-sensitive provisions of claimants’ policies.

Putting the Plan in Action

In August 2008, just days after the third anniversary of Katrina, we were faced with a second mandatory evacuation of the city due to the impending Hurricane Gustav. This time, we were prepared as a result of post-Katrina analysis and planning. The results were evident in the relative ease with which we closed the office and subsequently returned.

Those steps included the basics:

• Hard copies and electronic backup of all business records, tax, accounting, payroll, and production records. A contact list with emergency phone numbers for all staff as well as a dedicated Web site that employees could access for vital information about projects, client contacts, and times for office-wide conference calls that would be held 72 hours after landfall of the hurricane. This site was used to update the location of all staff and whether or not current, non-local projects and proposals were moving forward.

• Telephone lines were routed to non-local area codes. We learned that our area code (504) was offline, which meant that the most reliable form of communication was text messaging. We now maintain several mobile accounts in at least two different area codes.

• Our FTP (file transfer protocol) site and server are backed up to two locations. Both are at least 100 miles away and outside the Gulf South region. Access to project data is through a Web portal that all employees can access via laptops with an Internet connection.

• Maintaining a national bank account permitted us to meet payroll during the Katrina event and during the most recent hurricane season of 2008 despite the chaos. This allowed our staff to have the continuity of their salary, which aided the firm in retaining 90 percent of its staff.

• The collaboration and alliance with firms outside our city allowed us to use their offices and share resources.

• Establishing project offices in other cities has not only let the firm grow but also gives us alternate location options for potential future evacuation. We have focused our marketing efforts in cities to which we can easily commute by air travel, and now we look even beyond the United States for project opportunities, as larger firms have done for decades.

My suggestion in the aftermath of these events is fairly straightforward. Make a plan, whether you do it in-house or use one of the many companies that specialize in business continuity planning. A good first step is to make sure your insurance coverage is understood and that it’s right for your firm. Communicate within your firm the need for organization of records and files. Inventory your assets on an annual basis. Having those records will allow you to file a prompt insurance claim and take advantage of any recovery programs in the aftermath of a storm, disaster, or catastrophic event.

Even though you have read and seen the endless media coverage of hurricanes Katrina, Rita, Gustav, and Ike, and even though you may live far from hurricane zones, the activities and steps described here are part of best business practices for any architecture, engineering, and planning firm. Hopefully, you will never have to experience such a dramatic event; however, a simple loss of electricity for an extended period of time could have the same effect on your business.

Wm. Raymond Manning is president and chief executive officer of Manning Architects, a 25-member architecture, interior design, and planning firm in New Orleans. Established in 1985, the firm focuses on education, hospitality, corporate, and transportation design and planning in the Gulf South region, the northern Texas region, and Nevada. Manning Architects is currently part of a multi-disciplinary team consolidating all of the planning efforts in post-Katrina New Orleans into a city master plan and rewriting the city’s zoning ordinance.