No one is immune from tornadoes, fires, torrential rains and other disasters. Business continuity and disaster recovery are two sides of the same coin that can cost a lot of coins if companies don’t spend the right amounts on each of them. Among things broadcasters should do routinely are: examine liability insurance policies to ensure coverage levels adequately address their business recovery costs; strike any loss-of-market exemptions; and don’t assume insurance companies have the right replacement numbers.
With a lot of organizations looking at ways to make lean budgets even leaner, it can be tempting to cut back on “rainy day” items, especially those we haven’t needed for a while. However, it’s most unwise to skimp on items like business continuity and disaster recovery. No one is immune from tornadoes, fires, torrential rains and other disasters.
As attendees at MFM’s 2009 annual conference learned, business continuity and disaster recovery are two sides of the same coin. And it can cost a lot of coins if companies don’t spend the right amounts on each of them.
We typically discuss business continuity planning as part of risk assessment activities. This year’s conference included advice from Michael Drayer, director of the national media industry sector at Aon Risk Services, on steps that media companies should take to ensure their insurance is up to par.
Drayer recommends routinely examining liability insurance policies to ensure coverage levels adequately address their business recovery costs. “With polices written on replacement costs, it’s important to compare the values stated in the policy, which are often based upon purchase or market values, to the actual costs of replacing structures or equipment,” he advised.
Businesses shouldn’t expect that their insurance companies have the right replacement numbers, Drayer warned attendees. Insurance companies rely upon buyers or brokers to monitor replacement costs since they can be influenced by changes in zoning laws and other local factors as well as the fluctuations in labor and materials costs that are tracked more widely by the industry. Broadcasters should also make sure their microwave and satellite uplink trucks are covered for equipment and not just standard auto insurance.
Drayer also recommends examining current polices and striking any loss-of-market exemptions they may contain. “This exemption basically says if the market goes away, your loss wasn’t damage to your business,” he explained.
Drayer reminded the conference audience that with disasters like Hurricane Katrina, local TV stations can lose their cable delivery, their advertisers and their viewers. “It’s extremely important that you evaluate your exposure and make sure you have addressed it.”
Scott Nicholl, a business continuity and disaster recovery specialist with the Loss Control Division of the Chubb Group Insurance Companies, described the resources that may be used, such as data from FEMA and the U.S. Geological Survey for assessing the risk of particular disasters occurring in particular parts of the country. However, there are limitations. “While tools like flood zone maps are helpful in making a general assessment, they don’t take into account what can happen when a storm becomes stationary and drops eight inches of rain over central New Jersey in a matter of a few hours,” he warned.
Nicholl also stressed the importance of routinely inspecting systems designed to mitigate damage like lightening arrays and fire sprinklers.
Complementing business continuity’s focus on the liabilities and replacement costs is disaster recovery’s focus on the nuts and bolts for resuming operation.
“Disaster planning needs to consider your people, your property and your facilities,” said Joe Mannetta, director of loss prevention and continuity planning at Disney/ABC, during a conference panel. “This includes addressing how you will resume your operations in the time you need it, which for most of us is two minutes ago.”
Alex Soulis, assistant vice president and senior consultant for FM Global, told conference attendees that he encourages his clients to consider the worst-case scenarios as the starting point for determining how soon they can restore service to their customers. “It may not be all the bells and whistles, but reach the level of quality required for meeting your customers’ expectations,” he said.
Soulis also suggested that companies look for way to consolidate their strategies, which will be more efficient and economical than implementing a separate plan for each location.
This advice tracks with recommendations from Mitch Weinraub, executive director of products and services at the Comcast Media Center, which has been chosen by a number of video programming companies to serve as their disaster recovery services provider.
Recommendations from a paper on emergency preparedness that Weinraub delivered at the 2009 NAB Show will be combined with our MFM conference experts’ advice for an article on disaster recovery that will appear in the September/October issue of MFM’s The Financial Manager magazine. The paper contains several mathematical formulas, which can be used to calculate how much to spend on plans for the rainy days that we hope never come.
Weinraub also provides several checklists that will be helpful in determining where to locate a disaster recovery operation and what the facility should offer. He also offers an operational checklist for all of the steps that companies need to take before, during a disaster.
Disney/ABC’s Mannetta also recommends taking advantage of disaster planning resources such as NFPA 1600, the Standard on Disaster/Emergency Management and Business Continuity Programs, from the National Fire Protection Association, and documents available from the FCC’s Media Safety and Reliability Council.
The conference sessions on business continuity and disaster recovery were organized by our 2009 Television Committee Co-Chair Dan A. Adams, who was promoted earlier this year to president and general manager of KFSN Fresno. Dan was previously vice president, business manager, at ABC-owned KTRK Houston, where he came to appreciate the importance of disaster recovery planning first-hand thanks to last year’s Hurricane Ike.
Committee co-chairs like Dan help us to ensure that MFM’s resources — from our “Ask The Experts” forums to our distance learning seminars and conferences to publications like Guidelines and our bi-monthly magazine — provide timely and relevant information to help MFM members succeed.
Ike was one of 75 disasters declared by FEMA in 2008. There have been 40 declarations so far this year. These declarations, and our own experiences, remind us that disasters and business interruptions are bound to come at some point. Thanks to the work of the MFM Television Committee and our other committees, we have a better idea on how to prepare for that rainy day.
Mary Collins is the president and CEO of the Media Financial Management Association, a professional society addressing the diverse needs of the industry’s financial and business professionals. Her column appears here every other Friday.