Planning for Disaster: Is Your Business Prepared? (part one)
by Edward Poll
(County Bar Update, November 2001, Vol. 21, No. 10)

 

Planning for Disaster: Is Your Business Prepared? (part one)

By Edward Poll, J.D., M.B.A., CMC. Poll is a certified management consultant who advises attorneys and law firms on how to deliver their services more effectively while increasing their profits at the same time. The opinions expressed are his own. To make suggestions or comments about this article, contact Poll at (800) 837-5880 or via e-mail at edpoll@lawbiz.com (c) 2001

As recent events in New York, Washington, D.C. and Pennsylvania demonstrate, we can never truly predict when a disaster will occur or what its nature will be. Terrorists have raised the stakes on the consequences.

However, many parts of our country have experienced -- and continue to experience -- other types of disasters resulting from fires, floods, earthquakes, hurricanes, tornadoes, human error, employee sabotage, personal health problems or injury -- with the resulting conclusion that there is little point in debating "if" or even "when" these disasters or catastrophes might occur.

The real question is -- What are you doing right now to plan for and recover from a minor or major interruption that could seriously disrupt your law firm's operations or even put you out of business?

According to the U.S. Bureau of Labor, most businesses that experience a major disaster are no longer in business within five years. Why? Estimates are that only one-quarter of companies in the United States consciously prepare for disaster recovery. Most do nothing. Even lawyers -- who are trained to handle other people's crises -- are usually unprepared to handle their own extreme situations.

Regardless of what type of catastrophe or interruption you might be facing someday, risk-recovery experts all agree on one thing: The more that you plan and prepare for it, the easier and faster your recovery will be. Here are some basic disaster planning suggestions that will help your firm (even if you're a sole practitioner) be prepared for the worst.

1. Conduct a firm risk assessment. Analyze the possible consequences that a disaster could have on your firm. Carefully review your current state of readiness and look for weaknesses. This preparedness inventory should include reviewing your insurance policy, emergency evacuation procedures, alternate work sites, information and document storage, and other areas that are discussed below.

2. Prepare a specific disaster/recovery plan manual. This plan should spell out exactly who does what after a disaster strikes. Part of this plan involves creating a disaster recovery team or a committee of key personnel to carry out the plan, including one committee member for each sensitive area of the firm. Examples include emergency supplies, computer services, important documents and records, personnel safety and staff welfare, insurance claims and client contact. Make sure to have back-up members for the team, and change team members as the firm's staff changes. Identify these committee members to all staff and to the building managers. Periodically and regularly (quarterly is best, annually is minimum) bring the committee together to review the manual, revise the procedures and do a run-through. These updates serve to remind everyone about the plan's existence.

3. Review -- or establish -- your insurance coverage. Insurance is a central aspect of disaster planning -- and recovery. Make sure you understand the fine points of your insurance policy by having your agent explain the coverage, deductibles, settlement policies, etc.

Your policy should be tailored to your specific practice and should cover damage to or loss of real and personal property, loss of revenue (this is termed "business interruption" coverage and will continue to pay profits and ongoing firm expenses as if nothing had happened), general liability, reconstruction of destroyed documents, and extra expenses related to a disaster or catastrophe.

To help with any insurance claim, make a complete inventory and photo-document your entire office with all its contents -- before and after -- to prove your losses. Memories may fail, but photos and videos never do. It's not unusual for insurance claims to be significantly higher when insureds use this sort of documentation.

4. Plan for temporary space. In the event that your office or building is damaged or destroyed, how will you continue to work? Contingency space planning ranges from having a temporary control center set up to house the disaster recovery team to finding temporary office space for transferring the entire firm. Building managers and real estate agents should be contacted in advance with contingency plans for locating such space. Access to compatible computer equipment is another important part of deciding what sort of temporary space is needed. One idea is to have a reciprocal arrangement with another law firm that uses similar computer, accounting and litigation support equipment.

5. Back up all computer data and store these and other important records and documents in a safe, off-site place. Everything you save on the computer should be backed up on a regular basis. (The frequency of computer back-ups depends on how much work you produce between back-ups and how much you can afford to lose.) This also applies to crucial paper records such as master files, time and billing records, court dates and appointments, wills, powers of attorney and corporate records as well. Store all important data and paper back-ups off-site. It doesn't do much good to have the original and the back-up at the same location when a fire or flood wipes out everything on the premises.

6. Establish an Employee Assistance Program. If valuable staff members are important to any firm during normal times, then they are indispensable in times of a disaster. But by virtue of their relative lack of capital compared with professionals, owners or partners, employees tend to live more closely to their means and are typically in a more precarious financial position after a disaster. Consequently, consider creating a fund that would be available to staff in times of need. Such an assistance program or relief fund could be set up with the firm matching grants to employee contributions.

7. Have a written succession plan in place. In the case of a death of a primary rainmaker or managing partner in the firm, a clear plan for succession will allow for a smooth change in the running of the practice. "Key-man" life insurance may provide money to the firm after a death, but it's only the beginning. The most important thing is the continuation of the firm, and that requires someone to step in and take the place of the now-deceased attorney. And that does not happen smoothly without prior planning.

In summary, don't gamble on whether a major disruption to your firm's operations will happen. Count on it, and take the time and effort to plan ahead for trouble. Your recovery will depend on it.

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