Do You Have An ERMP? Lessons From Sandy

Wednesday, November 28, 2012 - 10:03

“If only we had ...” is on the lips of all officers and directors of companies whose businesses experienced the impact of Hurricane Sandy. It was a painful wakeup call for those corporate counsel who had not thought seriously about advising their corporate clients to plan for a disaster here in the U.S. that would close their businesses in and around New York City for days.

We seem to have a mindset that made it easier to visualize the interruptions in supply chains that resulted from the Japanese Tsunami or the Thai floods than to conceive of the greater New York City area also being crippled by a natural disaster. In the wake of the Japanese and Thai events, many companies took steps to ensure that they had alternate sources for vital parts, such as the hard drives they relied on from Thailand.

After the fact of Sandy, many corporate counsel will reflect on how wonderful it would have been if their companies had implemented an effective Emergency Risk Management Plan (ERMP). If so, it is more likely that their company would have planned better for such an event by lining up the generators and heating system trucks that might have kept its business running or hastened the day when it could be restarted. An ERMP would also have required that the adequacy of its insurance policies be reviewed and perhaps enabled it seamlessly to shift vital business activities out of the stricken area. Some offices along the New Jersey waterfront stayed dry because the building managers had the foresight to use sandbags to protect vulnerable spots. Yet, some of these remained dark and cold for a time after the event because they lacked the electricity that could have been provided by mobile generating units.

Some businesses suffered because the services on which their IT Infrastructure depends were crippled due to the extensive power and communication outages. Many of the resulting problems could have been mitigated by the advance planning involved in developing an ERMP. Because this had not occurred, it was impossible for many stranded employees to work from home.  Even mobile equipment like smart phones or laptops on which businesses and their employees were heavily reliant was affected by the devastation of the storm. As a result, Internet communication between companies and their employees was impossible or greatly impaired. This occurred because servicers on which they depend to power their servers were knocked out, making it impossible for employees to send and receive many of their emails and, in some cases, causing emails sent to them to be permanently lost. Key employees lost the power needed to charge their smart phones and computers because they did not have generators at their homes or the adaptors required to charge their laptops and other electronic devices from their cars. Even Radio Shack quickly ran out of adaptors.

No matter where the company you serve is located, it too may at some time find itself confronted with a disaster with similar consequences. Has your company thought about what needs to be done to keep it running under such circumstances? Does it have an ERMP? If not, it may after the fact find its board asking, “Why not.” And, if by virtue of not having an ERMP or failing to properly implement it, the company suffered significant losses, it may find its officers and directors the target of derivative suits by angry shareholders.