Katrina hit not just the complex of river ports, offshore oil complexes, and Mississippi's Gulf Coast. America's economy is going to feel the impacts for months to come. As this is written, business media articles are speculating that Katrina's impacts could push America's economy past the tipping point to enter another recession. With that statement and the summary above, it might seem our concentration should be exclusively on the impacted major government organizations (Ports, Emergency Management, and regulatory agencies) and major impacted corporations (shipping companies, oil companies, et al).

It shouldn't be.

First, those organizations have extensive recovery resources. The major international shipping corporations and the oil industry are by definition trans-nationals, with multiple locations worldwide, the ability to divert hardware and personnel, immediate cash access, and solid ties to the financial industry. Important to any discussion of recovery are the financial industry's functions of insurance and short-term loans.

Second, organizations of that size have plans. Not just response plans, but plans and internal management teams formed to manage recoveries. Readers have probably noted that most large corporations now have titles like Business Continuity Director to their organizations, with appropriate salaries and authority.

The same trend exists in governmental organizations. An increasing number of local Emergency Managers are attending the Mitigation and Recovery part of FEMA's Integrated Emergency Management course –and bringing their department heads and key private sector representatives with them. Recovery planning is becoming more common for local governments.

Finally, U.S. Government policy encourages planning for recovery of not only governmental organizations, but also infrastructure components –if they're large enough. While Tom Ridge was Secretary of Homeland Security, several speeches and interviews noted that 85% of the resources for recovery are held by the private sector. He also stated his strong desire that the private sector adopt a national standard on Business Continuity. Significantly, his Special Assistant to the Secretary -- Alfonso Martinez-Fonts Jr.-- was retained after Michael Chertoff became Secretary.

Our national efforts to assist and encourage business continuity to date have concentrated almost completely on trade groups representing our largest corporations providing very large infrastructure segments while paying scant attention to the smaller companies –which is deficient policy.

We are doing it wrong.

To follow the line of reasoning above: First, the smaller companies do not have extensive resources. Where trans-national corporations have multiple locations, giving them the ability to divert hardware and personnel, many of the companies vital to the local economies of American communities and regions have one or only a few sites. Their access to immediate cash is limited, and their ties to the financial industry's insurance and short-term loans are likely to be inadequate to carry them through the recovery phase.

Large organizations are beginning to speak in terms of crisis and post-crisis periods. For the smaller companies, the crisis period is ongoing. As their ability to deliver goods and services is reduced, and customers look elsewhere, their market share diminishes at the same time. If their market is a mature one, the barriers to re-entry or to recovering market share can become overwhelming.

Second, few moderate-sized corporations have recovery plans. While they may have (indeed, many are required to have) response plans, they seldom have plans and management teams trained to manage their recovery. Unlike large corporations, there is no Business Continuity Director. Response planning is likely to be a collateral duty of whoever is assigned the security function. He or she is unlikely to have time or background for recovery planning.

Third, Homeland Security's present de facto policy encourages business continuity planning only for very large components of our infrastructure. Perhaps the thinking is to minimize impacts on a national scale. Perhaps the thinking is to get the most effect with limited DHS internal resources. Either way, there are other benefits to encouraging –even requiring business continuity planning that should not be overlooked. More about those will soon follow.

Most policy-makers realize that when a major disruptive event occurs, a community’s revenues, self-image, and quality of life depend on public and private coordination, cooperation, and performance together to restore interrupted services and get the community’s economic drivers back on line.

Why should we pay more attention to those smaller companies?

One risk is that the smaller companies can become a drag on the economy. Many will even go under. In the words of Lord Peter Levene, Chairman of Lloyd's:“More than half of U.S. corporations don’t have crisis-management plans, even though 40 percentof companies hit by a disaster will fail within five years.”

The risks go beyond reversing government’s cash flow from businesses, beyond interrupting a corporation’s profits, even beyond losing the confidence of citizens, customers, and taxpayers.

People move in and stay where their quality of life meets their expectations. Major disruptive events degrade quality of life, and people want to leave. The message spreads far beyond a jurisdiction’s borders. Issues that get raised are: competence of both government professionals and corporate management, motivations of elected officials, ability to meet legal obligations, economic stability, and environmental stewardship. If the negative perceptions are not reversed, disruptive events become disasters, and disasters become catastrophes. Aviation’s term of art is “the graveyard spiral”.

The smaller corporations provide the goods and services that contribute to quality of life. Not just the "nice to have" non-essentials. During the immediate period after disruptive events, these are the local sources for: flashlight batteries, tarps and plastic sheeting to protect roofs and windows, bottled water, milk for the kids, and ice to keep the milk from spoiling. For readers tempted to regard those as minor matters, consider that a principal concern of every head of household's is for the children. Until their urgent needs are met –no work force. That applies to local government's workers needed for the community's recovery, also.

Equally important is the relationship between the smaller corporations and the larger ones that are the mainstays of the national and regional infrastructures. The smaller ones are the supply chain for the largest. Without their logistics support, event the largest trans-nationals recoveries can be crippled.

By now, the case for requiring, or at least facilitating smaller companies' business continuity planning by government should be clear. Next –how to accomplish that.

Before

Mitigation most frequently delivers the best cost / effectiveness ratio for time, talent, and money expended. Sending flood waters elsewhere beats trying to restore a drowned business district. In addition to the economics, it has become increasingly clear taxpayers do not support the folly of rebuilding “as it was” at government expense. Citizens living on the East Coast believe inhabitants of Earthquake Country are at least slightly demented. Those on the West Coast wonder about the judgment and / or sanity of coastal dwellers in Hurricane Alleys. Both believe folks who remain where tornados and biannual flooding are the norm  --well, nevermind. One thing they all have in common --they are not shy about giving their opinions to their elected representatives who control the purse strings. Mitigation instead of mindless reconstruction in harm's way makes better sense to all.

The preparedness period provides excellent opportunities for public and private sector cooperation and coordination. At present, the wariness between those sectors takes on the form of principle –approaching the former barriers between church and state, especially when law enforcement intelligence or homeland security / terrorism issues surface. The “sensitive information” catchall is too often used to block interactions between public and private sectors.  Corporate executives find it ironic that their lifetime habits of information security around very high stakes plans, proprietary research, and operational information are blown off by government people using the “sensitive information” phrase,

During

During the response phase, private sector representatives are too often excluded from government emergency operations centers.  A notable exception is Los Angeles, where a seat is reserved for just such a representative. In another Southern California city (Carson), the representative is connected to a call center accessing that city’s businesses, which give real-time two-way communications between public and private sectors –plus instant rumor control and reports on conditions in the field. Another advantage to government is access to and direction of companies’ emergency response teams when first responders are overwhelmed.

After

Immediately after an  event, during the restoration phase, businesses need access to their premises. First, to clearly understand their operating situation: Are the premises useable? Are the vital records intact? Which products or services can be produced, and how quickly? Second, to establish a central point for decision-making and communicating with key stakeholders. Examples: employees, customers, suppliers, investors, and regulatory agencies. Too often government’s response is “unsafe to enter.” In fact, at that point damage assessment is often just beginning. Businesses contract with engineers and architects, too, and can assume some of government’s workload –IF their contractors are pre-qualified by their local governments.

Later in the process, expediting rebuilding and operating permits become important. What many government managers don’t realize is how many “local” businesses are controlled by trans-national corporations. If they cannot be restored to profitability soon, their functions can be moved. A whole industry exists to entice, then help, businesses to relocate. Goodbye tax base, goodbye jobs, hello social costs.

Policy

Clearly, our society’s public sector (government) and the private sector (business) must work together to stop disruptive events from entering that graveyard spiral.

Underlying Principle

Most of us accept that a business is required and structured to produce revenue –enough revenue to cover all its costs and still return a profit, and that it should be managed to try to keep its profits greater than those of its competitors. That concept escapes too many people who work in government.

It’s not that they can’t intellectually grasp it or recognize that government and business must coexist in the same communities, but very few truly understand the necessity for businesses to thrive so that government can function well and so that the community’s quality of life can bloom alongside both. Very few local government decision-makers think about that when they are making the day-to-day decisions of their jobs, and that includes planning to manage major disruptive events and recover from disasters. Those omissions lead to major problems.

Example

Whether the disruptive events begin with a terrorist attack, human error, or a natural threat turned into reality doesn’t matter. Where advance public-private cooperation and coordination is lacking, problems follow. Sometimes problems occur during the event.