By MATTHEW BRODSKY, senior editor/Web editor
HOUSTON--As days passed after Hurricane Ike made landfall on Saturday, Sept. 13, some businesses sat in the dark, literally and figuratively. They waited for power to turn back on. In doing so, they were perhaps dooming their companies never to be the same. Some corporate risk managers, though, weren't waiting on anything.
For Continental Airlines Inc., Hurricane Rita's near-miss in 2005 prompted the company president to call for an emergency management plan to be available for the 2006 storm season. Pete Fahrenthold, managing director of risk management for Continental, shared the details of this plan, and how well it fared during Ike.
A main part of the plan was a hot spot called the Westlin Center. Located in Conroe, Texas, about an hour drive north of Houston, it consisted of hardened office buildings and a former bomb shelter and was designed to house a duplicate of the airline's Systems Operations Control Center, without which flights are impossible, and other "Tier One" business continuity functions, meaning those essential enough that Continental cannot afford to have them go down for more than 24 hours. "We were concerned that damage to the city center would limit access to our building, so we set up Westlin," said Fahrenthold.
Five days out of Ike, Fahrenthold started watching the hurricane as it lashed Cuba but threatened the Gulf Coast. Three days out, on Wednesday, when the storm reached Cat-3 status within 100 miles of Houston, Continental pulled the trigger: Friday, they would relocate to Westlin.
"The decision to begin using the center on Friday ensured that we did not have any problems getting our people to the site," explained Fahrenthold. Not to say that Westlin was immune. The site, owned by the Houston-based Westlin Corp., experienced 85 mph winds during the storm, and its generator kicked on when the community's power source went down.
And it's not to say that setting up the hot spot was a matter of just flipping on the power in Conroe. The continuity plan involved activating pre-existing relationships with a local hotel and caterer for nearly 250 rooms and daily meals for 300 personnel. A transportation contractor was notified to provide four buses between the hotel and the hot spot. And Continental airplanes were employed to help workers stationed at Westlin get their families out of Houston.
Speaking of airplanes, the last flights out of Bush Intercontinental took off Friday before winds heavier than 35 mph hit. All planes were evacuated to El Paso and Abilene, and the airport shut down for most of the weekend. Meanwhile, operations outside of Houston kept moving.
Fahrenthold admitted that such an extensive business continuity plan was an investment that Continental might not have gotten a return on. "We were happy we made that investment," he said. "Overall, we came out well with the storm."
Headquarters was operational by Monday, and Continental had succeeded in scoring an 89 percent on-time rate for all remaining flights in its system over the weekend.
Another high-profile business affected by Ike was a 250-room, 14-story, name-branded hotel along the Houston shoreline. Ike's winds twisted around the building, suctioning off most of the front fašade. They blasted out the lobby atrium, leaving the interior exposed. Raindrops became missiles capable of piercing window sealant, soaking 80 percent of the rooms, some with foot-deep indoor pools, with other interiors drenched beyond salvation. Storm surge gobbled the wooden pier and gutted the hotel's bottom floor and its offices, fitness center, banquet hall and retail stores.
By Friday, Sept. 19, nearly a week after the storm, the lobby was a construction site of bare drywall and concrete. Whole floors were bare of carpet and smelled of kitty litter, lined with dehumidifiers and drying fans. But the hotel was operational. In fact, guests weathered the storm on-site, and by that Friday, nearly every room capable of housing guests was, including the U.S. Coast Guard and other government employees.
"You have to be very creative in these types of events," said Frank G. Oliver, senior adviser with Aon Rapid Response. With 28 years in claims, Oliver is helping to coordinate the effort to keep the hotel moving forward. "The death knell on a loss is just to let it sit there."
The REIT owner of this hotel did not do that. Prior to the storm, it took Aon Rapid Response's advice to get a massive, 18-wheeler-sized generator on-site. Fuel was brought in to run the beast.
By Sunday, dozens of remediation workers arrived. About 20 security guards were retained to ensure safety and protection at the facility. Massive dryers and an industrial crane were set up. Two engineers from Arup examined the building for structural damage, which luckily the sea wall helped to prevent.
Most importantly, the envelope of the building was sealed to prevent further damage from the salty, wet air, allowing remediation efforts inside to begin in earnest. So by Friday, the hotel looked vastly improved.
Aon Rapid Response coordinated meetings between the REIT's risk manager, its insurers, adjuster and remediation team. Ultimately, the insured has the final call on what actions to take.
"The insured has to do what they need to do to protect their business," said Oliver, standing in front of a bustling lobby on Friday. But it's teamwork among all interested parties, including the insurers providing the extra expense cash flow, that ensures success in those efforts. "Our goals are one: mitigating the loss."
The largest independent broker in Texas, John L. Wortham & Son, learned from Sept. 11, 2001, that a catastrophe could take away a company's very headquarters. Since then, Chairman Bob Hixon encouraged the efforts of the 15-member business continuity team, spearheaded by Vice Chairman Charles Flournoy.
"We hoped we would never pull the trigger," said Flournoy. But on Saturday, Sept. 13, after the team members dared the debris-laden roads of downtown Houston to reach the Wortham Tower, they found the top five floors of Wortham Tower ransacked by tremendous winds and hard rain. Interior walls were caved in on desks. Ceilings had collapsed. Water had infiltrated computer and electrical systems, filing cabinets, carpets.
Sunday, the team launched the major component of its business continuity plan, a high-tech trailer hot spot that would double as the firm's headquarters. The trailer from Rentsys had been positioned in College Station during the storm, and by Sunday evening, it was parked in the corner of the business campus' parking lot.
The RV houses 43 workstations, connects directly into the corporate phone system, and is fully powered with diesel and juiced with a satellite uplink and an entirely duplicated Wortham IT system, a backup of all the firm's electronic records and servers that had been safely ensconsed in Austin.
Periodic plan rehearsals and a phone tree with every contact they could collect for employees paid off. The end result was that on 10:30 a.m. on Monday, Sept. 15, Wortham had its headquarters back.
"We're basically running our full operation," said Flournoy, standing outside the trailer, where additional chairs, tables and a canopy were set up for partners to do work. "This is the first conference room I've been in where you need sunscreen."
Wortham had to call some audibles in implementing their continuity plan. They encountered "bottlenecks" when lining up a remediation company, said Vice Chairman Richard Blades, but succeeded in finding a quality partner in SouthPro, which already had boots on the ground cleaning up a neighbor's office. And in trying to get employees back into the tower, at least on the bottom floor, said Blades, they've also taken on air quality issues.
But no doubt, the Wortham plan as a whole was a success, as were the other two, down to the little details--managing to save priceless artifacts, like an original desk from the old Lloyd's building. And down to the big details, like taking claims and sending out certificates of insurance for clients affected by the storm and performing non-Ike business--like taking a marine claim from India or making sure a seven-figure London premium got paid. Are these three companies members of the minority in the Houston area, in corporate America in general? It would appear not, if you go buy the experts on the ground, the firsthand witnesses to recoveries.
"Most companies have a protocol, and there's a lot of thought that goes into the protocol to preserve life and property," said Thomas Dollar, executive general adjuster and vice president, Houston branch manager, at McLarens Young International.
"Carriers and customers have learned to allocate more time and resources to planning ahead so that they are prepared for major events," agreed Mike Hargrave, national catastrophe manager for Zurich.
October 15, 2008
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