I



ROLE OF BUSINESS AND INDUSTRY IN EMERGENCY MANAGEMENT

• The Need for Business and Industry Emergency Management

• B&I Involvement with Governmental Emergency Management

• Disaster Preparedness within Business and Industry

• FEMA Initiatives

Sources to Consult:

Alesch, Daniel J., James N. Holly, Eliott Mittler, and Robert Nagy. Organizations at Risk: What Happens When Small Businesses and Not-For-Profits Encounter Natural Disasters. Fairfax, VA: The Public Entity Risk Institute, October 2001.

Bain. William A. 1999. “Application of Theory of Action to Safety Management: Recasting the NAT/HRT Debate.” Journal of Contingencies and Crisis Management, Vol. 7, No. 3, September, pp. 129-140.

Baruch, Stephen B., and Merle E. Baruch. “The Mitigation-Quality-Performance Connection: An Integrated Approach.” Stephen B. Baruch & Associates, August 12, 2000.

Campbell, Ross. 1999. “Controlling Crisis Chaos.” The Australian Journal of Emergency Management. Vol. 14, No. 3, Spring, pp. 51-54.

FEMA. “Before the Aftermath – Business Actions to Reduce Disaster Losses.” Bothell, WA: FEMA Region X, December 1999, 4 pages.

FEMA. Disaster Resistant Jobs Training (Facilitator Guide). Emmitsburg, MD: Emergency Management Institute, no date (circa 2001).

FEMA. 1998. Protecting Business Operations: Second Report on Costs and Benefits

Of Natural Hazard Mitigation (FEMA 331). Washington, DC: FEMA August, 1998.

FEMA. The Value of Pre-Incident Planning for Effective Emergency Management (Special Technical Report # 051). Emmitsburg, MD: FEMA, United States Fire Administration, National Fire Data Center, no date.

Harrald, John R. 1999. Linking Corporate Crisis Management to Natural Disaster Reduction. Washington, DC: Institute for Crisis, Disaster and Risk Management, George Washington University.

Hopkins, Andrew. 1999. “Counteracting the Cultural Causes of Disaster.” Journal of Contingencies and Crisis Management, Vol. 7, No. 3, September, pp. 141-149.

Institute for Business & Home Safety. 1999. Open for Business: A Disaster Planning Toolkit for the Small Business Owner. Collaboration with the Small Business Administration.

ISO (International Organization for Standardization). Environmental Management Systems – Specification With Guidance For Use (ISO 14001, 1st edition, 1996-09-01). 1996.

Pearson, Christine M. and Ian I. Mitroff. 1993. “From Crisis Prone to Crisis Prepared: A Framework for Crisis Management.” Academy of Management Executive, Vol. 7, No.1, pp. 48-59.

Perrow, Charles. 1999. “Organizing to Reduce Vulnerabilities of Complexity.” Journal of Contingencies and Crisis Management, Vol. 7, No. 3, September, pp. 150-155.

Webb, Gary R., Kathleen J. Tierney, and James M. Dahlhamer. “Business and Disasters: Empirical Patterns and Unanswered Questions.” Natural Hazards Review, Vol. 1, No. 2, May 2000, pp. 83-90.

Objective:

Acquire an appreciation of the role that business and industry plays in the U.S. emergency management system and FEMA’s outreach to the business and industry community.

The Need for Business and Industry Emergency Management

In large scale disasters, the government cannot be everywhere at once helping everyone who needs assistance. Just as disaster planning cannot be a one-person job at the local level, neither can it be just the job of government, at any level, whether local state, regional or national. The only way we can minimize the devastation of disasters is to work together to plan and prepare for them. That means that government, at all levels, must work cooperatively with a wide segment of the private sector. One of the larger segments of the private sector is certainly business and industry.

With competitive markets, tight overhead, and slim profit margins, losses due to natural hazards can make the critical difference in a business’ ability to maintain profitability, or even survive, after a natural disaster. Fortunately, natural hazard mitigation is a cost-effective method to reduce or even prevent losses, especially when it is integrated into the way the business operates (FEMA 1998b, 1).

According to one study cited by the U.S. Small Business Administration, more than 43 percent of businesses hit by disaster will never reopen and almost 29 percent close within two years (FEMA 1999, 4).

There are two major aspects of business and industry disaster preparedness. One is to actively work with representatives of the business and industry community on behalf of jurisdictional disaster preparedness. The second is to provide advice and guidance to business and industry on measures they can take to become better.

B & I Involvement with Governmental Emergency Management

In terms of the first aspect, that of the need for business and industry to work with local communities to enhance disaster preparedness, it can be said that the business community has a clear stake in the health and personal and economic security of their community. The people who live there comprise the employee and customer base for most businesses. When disaster strikes, individual businesses may survive and recover operations quickly. But the recovery is not complete if employees cannot get to work because they can’t travel on the roads, or the electricity and water are not available, or if customers can’t buy products and services because debris has not been removed, or order and safety have not been restored.

Thus, the first reason why business and industry should work with local government in emergency management is that it helps companies fulfill their moral responsibility to protect employees, the community, and the environment. Other reasons beyond this are:

• It facilitates compliance with regulatory requirements of Federal, State and local agencies.

• Enhances a companies ability to recover financial losses, damage to equipment, products.

• Reduces business interruption.

The proliferation of shareholders and consequent stock market activity has led to the increased awareness that investments must be protected through the ability of the organization to continue profitable, whatever the severity of business interruption. Increasingly shareholders and auditors alike are asking to audit contingency arrangements and to make audit sign offs and further investment conditional on implementation of a fully documented Business Continuity Plan. It is therefore rapidly becoming a key item on board agendas (Power 1999).

• Enhances a company’s image and credibility with employees, customers, suppliers and the community.

• Reduces exposure to civil or criminal liability in a disaster event.

• May reduce insurance premiums.[1]

However, a challenge to overcome is that sometimes business and industry, on the one hand, and government, on the other, do not work well together:

...business and emergency management don’t understand each other, don’t trust each other and the business community is hard to reach out to because we don’t speak with one unified voice. (John Copenhaver of IBM, EPN, 17 Feb 97, 31)

Disaster Preparedness Within Business and Industry

As regards the second aspect, that of encouraging business and industry disaster preparedness, FEMA has undertaken several initiatives. The reasons, again, are obvious. Clearly, the business community and the community at large are interdependent. It is just common sense and mutually beneficial for any emergency management activities to be cooperatively coordinated and implemented. The bottom line is that a public/private partnership in emergency management will increase the likelihood that communities and businesses will survive and recover from disasters.

As an example of the need for more business and industry participation in emergency management is the Northridge Earthquake. About 80 percent of businesses there reported earthquake-related interruption of operations. And, the estimated aggregate business loss was nearly $6 billion, or, according to one analysis, about 23 percent of the total Northridge losses. More than 50,000 businesses applied for Small Business Administration loans to help get their business going again.

On the other hand, it is reported that Warner Brothers Studios, which had invested in disaster preparedness and mitigation measures prior to the Northridge earthquake, saved over $1 million in losses. (Shaw 1999 forthcoming, Session 11) For example, Warner Brothers

• Established an Office of Emergency Services

• Implemented a range of non-structural hazard mitigation measures

• Implemented training programs

• Developed a flood hazard map for the facility

• Checked for plugged drains on a weekly basis

• Stockpiled 2,500 sandbags

• Arranged for stand-by purchase orders to ensure the flow of supplies

• Participated in community disaster planning and preparedness activities

Another manifestation of the cost of disasters to business and industry is that disaster claim payouts by the property/casualty insurance industry routinely exceed Federal payments to cover disaster recovery and restoration. The insurance industry has thus far been able to cover disaster recovery and restoration expenses by spreading the risks from catastrophic disasters and thereby lessening the financial impact of disaster on insured victims, including insured local governments. However, the scope and nature of disasters this past decade is causing a reevaluation within the insurance industry of the way they conduct their disaster business.

FEMA Initiatives

With the forgoing in mind, FEMA has developed a document entitled Emergency Management Guide for Business and Industry. In this document we discuss the importance of planning for disaster. Planning for disaster can literally make or break a company hit by disaster. But, we need to do more than provide guidance documents for business and industry.

In recent years, FEMA has been involved in several public/private partnership activities. In the Pacific Northwest, FEMA Region X staff have worked closely with business, lifeline, engineering, and government organizations, and area universities to form the Cascadia Region Earthquake Workgroup (CREW). CREW was formed to develop and promote cost-effective, all-hazard mitigation in response to the threat of a great Cascadia Subduction Zone earthquake.

FEMA has sponsored a series of roundtable discussions with public and private groups to discuss their potential involvement in emergency management. Additionally, FEMA has formed several task forces with members of the insurance community to explore partnership opportunities.

Through such initiatives, FEMA’s goal is to develop a structure for a public/private emergency management partnership that facilitates communication and coordination between government and the business community, not only during a disaster, but also in shaping and implementing preparedness and mitigation.

Mentioned elsewhere in this course is the importance of including business and industry representatives in developing and coordinating a local disaster operations plan. This needs to be done at all levels of government. But the relationship between government and the private sector must be initiated and nurtured all the time, not postponed until an event occurs.

One must bear in mind, in following the recommendation above, that those who engage in business and industry-related “crisis management,” “continuity planning” or “contingency planning” face many of the same problems that emergency managers face in the public sector:

Business continuity programs are expensive and will definitely affect a department’s profit and loss (P&L) statement. Depending on how business unit executives are evaluated, they may be tempted to put off business continuity planning or testing because they don’t want a major hit on their current year’s P&L. (Marinstein 1998, 14)

Other

Crisis prevention is considerably more effective than disaster recovery and many organizations are encouraged by some consultants, to spend a disproportionate amount of time and money on recovery options, without first looking at what organizations are doing to minimize risks—at all levels (Power 1999).

See, also, Internet Use Section for information on the Leadership Coalition for Global Business Protection.

REFERENCES

Marinstein, Jeff. 1998. Cross-Departmental Cooperation and the Politics of Planning and Management. Contingency Planning and Management 3 (February).

Power, Peter G. 1999. Business Continuity—Planning or Management?—Part 2. CCEP News E-Zine April 9 (an Internet newsletter available at ).

Shaw, Greg. Forthcoming. See FEMA. EMI. Forthcoming.

FEMA. EMI. Forthcoming. Business and Industry Crisis Management. Written by Greg Shaw for the Higher Education Project. Emmitsburg MD: Emergency Management Institute.

FEMA. 1993. Emergency Management Guide for Business and Industry. (FEMA-141.) Washington, DC: FEMA.

FEMA. 1999. The Business of Project Impact—Showing the Private Sector the Way to Being Disaster Resistant. Impact. A Newsletter for the Employees of FEMA. Vol. 1, no. 10 (March/April).

FEMA. 1998. Second Report on Costs and Benefits of Natural Hazard Mitigation. FEMA 331. Washington, DC: FEMA.

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[1] These six points come from a presentation on “How to Create a Disaster Resistant Business,” developed by FEMA staff officer Suzanne Frew, February 1999.

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