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By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance®

As we approach the fifth anniversary of Hurricane Katrina, oceans of ink and billions of TV and computer pixels can be spent, and have been spent, discussing all that individuals and employers went through when the storm made landfall on Aug. 29, 2005. The stories of suffering, endurance and redemption deserve attention. But so does the silver lining, things that Katrina taught us. From an enterprise standpoint, perhaps none is more important than the lessons of business continuity planning.

Lessons like identifying how to retain your workforce; how to maintain communication lines to employees, customers and suppliers; how to focus on longer-term recovery and not just the emergency after the first days of an event, said Karen Avery, leader of the business continuity practice at Marsh Risk Consulting.

Or how to understand your enterprises needs before you "buy" a plan, and how to prepare for a wide variety of impacts besides just the "worst case," said Kathleen Lucey, practice manager at IT consultant EMC.

Yet did anyone learn these lessons?

"Basically, going back to not just Katrina, but 9/11, everyone thought that this would provoke a huge surge of interest in business continuity, and it's just not the case," Lucey said.

Lucey, who also serves as board member of the Business Continuity Institute, has the impression that organizations plan to merely meet the letter of regulation, and that even firms directly impacted by Katrina or catastrophes might not even have learned their lesson.

"People are not rational about this, not as rational as you'd hope they would be," she said.

Avery is not as downcast.

"I think what I'm seeing is, there is a great focus on business continuity planning and crisis management ... we're seeing companies putting plans in place," she said.

Look particularly where Katrina made her mark. According to Avery, educational institutions in the Gulf have gotten very creative with business-continuity solutions, working together to plan for displaced students and investing in technology for distance learning. Manufacturers have taken to making sure they can shift production outside a given area within a given time period, while others are paying greater attention to suppliers' planning.

Yet Avery also said that much of what is being done elsewhere is the old approach, a "threat-based" approach to planning. Companies are failing to plan for a regional threat like a Katrina, and they aren't looking at outcomes--in other words, the impact of an event on key people, physical assets, technology, and resources like suppliers and customers.

And she added: "Yes, unfortunately, there are companies that haven't done much of anything."

Particularly, she pointed to smaller, growing companies, or companies that haven't felt the pain of a business interruption.

A recent report from FM Global, titled "Flirting With Natural Disasters," echoes this estimate, albeit specifically for natural disaster preparedness. In the report, the global property insurer cites its own research that 96 percent of surveyed financial executives said that their companies have facilities exposed to natural disasters. Only 20 percent responded that their enterprises were "very concerned" about a disaster hitting their bottom line.

How is this possible in today's hyperaware and uber-connected world, where it seems every week images of new disasters are broadcasting 24/7 on the Web and TV? The FM Global report offers several explanations, such as the "won't happen to me" risk management mentality, procrastination and short-term financial focus.

Lucey finds it hard to believe that many companies have the internal resources for business continuity planning when staffs are so lean and budgets so thin. And as for smaller to midsize businesses, continuity offerings are too heavy on analysis, too light on action and return on investment.

Whatever the reason for inaction, the failure to plan around business interruption won't just hurt business when that worst-case scenario happens. It can affect operational management, warned Lucey, down to everyday hiccups that reveal how well a company is run.

August 24, 2010

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