Taking Some Of The Risk Out Of Disaster

You can't prevent natural and man-made disasters, but you can mitigate their impact on your business by preparing for emergencies and making sure you have insurance to cover the loss of property and revenue caused by service disruptions.

Whether you blame global warming, cyclical climate fluctuations or even sunspots, there’s no denying that natural disasters seem to be increasing in frequency. Couple that with heightened terror alerts, and you may decide it’s time to re-evaluate your preparedness. 

Natural or man-made, these interruptions represent a double-edged sword. On the one side, they can disrupt all or critical parts of the operation, taking a station off the air. On the other, they can cut into advertising revenue as a result of pre-empted programming and/or because the catastrophe has shut down local businesses.

One of the most dramatic examples of this double whammy was Hurricane Katrina, which not only took local stations off the air, it also wiped out a big part of the market for commercial spots as a result of damage to local businesses and the exodus of so many residents. “Nearly 120 radio and television stations went dark in Alabama, Louisiana and Mississippi,” recalled Timothy Ehrhart.

Ehrhart, entertainment and broadcasting segment manager for Chubb Commercial Insurance, co-authored an article with Sam Lee, a VP and manager for risk management services for Chubb Services Corp., which appears in the current issue of MFM’s The Financial Manager magazine. As Ehrhart and Lee observe, “When it comes to both serving the public interest and preserving their own economic viability, media companies confront a multi-headed hydra of disaster-related risks.” 

One of the topics we read about surrounding observance of the 10th anniversary of the 9/11 terrorist attacks is the renewed call for allocating “D-block” frequencies to support coordinated communication between emergency responders from varying agencies. 

While the future of D-block frequencies may rest with the Congressional Super Committee appointed to work toward a balanced budget, Ehrhart and Lee remind us that there were additional recommendations arising from 9/11 that may still be waiting for our response.


These recommendations were developed by the Media Security and Reliability Council (MRSC), which was formed by the FCC. “The council’s work has heightened the need among media companies to improve their disaster preparedness and recovery practices,” explain Ehrhart and Lee. In 2004, the Council issued its Readiness Guide for Local Media on How to Prepare for Emergencies. The MRSC also developed Model Disaster Recovery Plans and Vulnerability Assessment Checklists tailored to local radio and TV stations, local cable systems and satellite operators. Copies of these documents are available via the Council’s web site,

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As our Chubb experts observed, “Media companies’ information infrastructure is especially vulnerable. They rely on electrical power, and telephone and cable transmission, to receive and transmit information.”

They also go on to point out that media enterprises do not exist in a vacuum. “Companies contract with other broadcasters to transmit information locally, nationally and internationally. In this vast chain of communications, one link lost can lead to an unraveling of the whole chain.” 

Additionally, there is heightened risk. “Media organizations also may be at greater risk to a terrorist attack than other types of organizations, due to the industry’s crucial communications function,” Ehrhart and Lee observe.

Revenue Losses

“When a disaster shuts down a company’s transmission or distribution capabilities, the resulting loss of advertising income causes immediate financial pain,” the Chubb experts remind us. ”Future anticipated advertising revenue evaporates, and there is a greater chance of losing regular viewers to competitors. Moreover, the longer the company is in the dark, the larger the reputational damage.”

In response to these economic realities, the authors have found most media businesses have adopted industry best practices for managing anticipated risks, allowing them to continue service in the midst of disaster. However, they note, “Success hinges on effective disaster planning and impact recovery. A company that does not heed the lessons of the past is doomed to repeat them, exposing organizations to potential losses of physical assets, revenue, reputation and people.”

First Strategy Steps

“Planning for a disaster improves an organization’s ability to protect employees, preserve assets and diminish the financial consequences,” the Chubb experts advise. “This process begins with an in-depth assessment by the organization of its vulnerability to wide-ranging disasters.”

In keeping with the recommendations contained in an Open Mike column appearing in TVNewsCheck earlier this month, Ehrhart and Lee say the starting point for disaster preparedness is “to consider the range of events that might compromise the business in order to identify ways to minimize exposure and reduce potential financial losses.” 

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Our authors go on to suggest these risks be ranked, “prioritized insofar as their possible financial severity and human impact. By analyzing the business and its particular vulnerabilities, a company can also determine the critical functions that require restoration first, followed by the recovery of all other business processes.”

It’s also important to assess what will be needed in order to recover from the disaster. “A superior disaster preparedness plan should ensure that the necessary equipment and materials needed for business restoration are quickly accessible. Construction engineers, fuel providers and external telecommunications suppliers should be identified and, where financially feasible, contracted in advance,” the Chubb experts recommend.

Disaster preparedness also requires routine tests and outside audits of security measures. These periodic reviews may be used to update the station’s vulnerability assessment and disaster recovery plan.

The Open Mike column in TVNewsCheck and the Chubb article appearing in The Financial Manager contain detailed descriptions for the considerations that broadcasters should include in their business continuity planning.  If you haven’t read them already, I strongly encourage you to add them to the list of things you’ll do this month as you both think back on how our industry came together in the aftermath of 9/11 and work on your plans for 2012. 

Risk Management Coverage

Evaluating your company’s insurance coverage should also factor into your business continuity planning. In addition to addressing the material costs that may be required for rebuilding the business, companies can insure against revenues losses that may be anticipated by their disaster planning. Based upon its experiences in working with broadcasters, Chubb recommends addressing the following areas:

    Property, including towers, antennas, and analog and digital assets such as mobile broadcasting equipment, media libraries, and electronic data processing equipment—on a replacement cost basis.

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   Business income with extra expense, including an unlimited period of restoration which enables businesses to meet continuing expense obligations and maintain an income stream beginning at the time of loss and ending when business operations are restored.

    General liability insurance, which includes broad “Who Is An Insured” provisions.

    Special events liability insurance, for promotional and charitable events.

Chubb, which has more than 20 years of experience insuring the broadcast and cable industry, is endorsed by MFM as the preferred commercial insurer for its members.In addition to risk management, the firm offers a wide spectrum of specialized, state-of-the art insurance solutions tailored to the unique risks faced by broadcasters, including Media Professional Liability insurance, for addressing such areas as copyright or trademark infringement, defamation, and invasion of privacy. Its suite of products also encompasses polices required for protecting most businesses, such as director and officer liability insurance, and policies for insuring against employee theft and cyber crimes, such as electronic fraud. 

Since I’m not a risk or insurance expert by any stretch of the imagination, it helps me to think abut this topic by drawing parallels to my own life. My health insurance helps me cover physical repairs. Disability insurance protects me and my family if I’m unable to work. And, just as business insurance specialists work with companies to develop strategies to prepare and protect against whatever man or nature send their way, I rely upon the help of a certified financial planner to prepare for and hedge against changes in my own life.

Business continuity and disaster recovery planning certainly don’t represent the “sexy” part of our business. Still, they are crucial to ensuring we can continue to fill our role of providing information and entertainment for our audiences. 


Mary M. Collins is president & CEO of the Media Financial Management Association and its BCCA subsidiary. Her column appears in TVNewsCheck every other week. You can read her earlier columns here.

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