The wide-ranging effects of the coronavirus on business are not fully known. But organisations can’t simply sit still, waiting and hoping for the best. In this podcast, Jennifer H. Elder, CPA/CFF, CGMA, shares advice for companies on disaster planning and more. Elder is a co-author of the book Faster Disaster Recovery: The Business Owner’s Guide to Developing a Business Continuity Plan. (Also read "35 questions for coronavirus planning," featuring Elder's tips and a list of questions for organisations to consider in planning for the effects of the virus.)
What you’ll learn from this episode:
- An applicable scenario Elder faced more than 15 years ago.
- The importance of having a disaster recovery plan.
- Thoughts on when to put such a plan into motion.
- The human elements that business leaders should consider as part of coronavirus planning.
Play the episode below or read the edited transcript:
To comment on this podcast or to suggest an idea for another podcast, contact Neil Amato, an FM magazine senior editor, at Neil.Amato@aicpa-cima.com.
Neil Amato: I’d like to welcome Jennifer Elder to the podcast. Jennifer, thank you for being on today.
Jennifer Elder: Thank you for having me.
Amato: Before we talk about coronavirus, which obviously is on a lot of people’s minds right now, I’d like to ask you about a different kind of challenging scenario you encountered while managing a construction business through multiple hurricanes in Florida. What challenges did you encounter there? Can you set the scene for me on that?
Elder: Yes. The year was 2004, and I started working as the CFO for a $200 million construction company in June of that year. I was just getting settled in my role and made the mistake of not considering whether or not this company had a risk management system or a disaster plan.
In August we were hit with Hurricane Charley. That was a real shock for me because I discovered we had no plan and nobody knew what to do. And there was so much panic around employees being worried about their own homes, we were worried about what we were building, our customers were calling because they were worried about their homes, and it just was a three-ring circus.
After the first one, I said, “We need to put something together very quickly, at the very least just having checklists.” Because when you’re in the thick of a disaster, trust me, you’re not thinking clearly. It’s like trying to find your keys when you’re running late. They’re right in front of you, but you can’t see them because you’re so scattered.
So the challenges we had were trying to keep everybody on the same page and try and remember all the different things we had to do. So we found that we got our management team together, we got all of the departments together maybe two weeks after the first hurricane and sat everybody down and said, “What did we learn?” So everybody was responsible for coming up with a checklist on what we would do next time.
What we didn’t realise was next time was going to happen within the next week, and so we went through it again and then again and then again, because 2004 was the year we had Hurricane Charley, Frances, Ivan, and Jeanne all in 13 weeks.
But by the time we got through the fourth one, we really did have a very good idea of what to think about. The real insight I would share with our listeners would be it’s not just about you and your business. You really have to be mindful of what’s happening with your employees, your customers, and your vendors. You start to realise that your company has an ecosystem, and if one part is not healthy, it affects everything else. So that was my real insight from that year.
Amato: What principles of disaster planning apply in a situation like we’re in right now with coronavirus?
Elder: A couple of things that are important to think about: Number one is not to panic, to try and stay calm. The best leaders all have a common quality, and that’s grace under pressure. So trying to stay calm while you’re trying to figure this out. Now that being said, some of your employees, some of your customers may be panicking, and the worst thing you can do is in effect give them a verbal pat on the head and say, “There, there, don’t panic”. That just makes it worse. Acknowledge that people are upset, acknowledge that people are frightened, and that [alleviates] the pressure.
What companies really should do is consider, “How do you take care of your employees? They’re our front line, and without them we can’t do anything. So how do we make sure that they’re OK?” Some of your employees may have travel scheduled. Maybe you want to ask them if they still want to go. Allow them a little bit of control over the decision, rather than just saying, “No”, or “You’re going whether you want to or not”.
You also need to consider how your customers might be affected, what they might be thinking about.
For CPAs and public accounting firms, a lot of your employees can work from home as long as they have access to your IT system. It would be a good idea to check with your IT department to make sure that you could handle the traffic if half of your staff decided to work from home.
So it’s thinking about the basic disaster recovery or business continuity plans or thinking about how this could affect your business. That’s the first thing. So brainstorm all the things that could happen. What happens if customers get sick? What happens if employees get sick? What happens if the building that you have your office in is quarantined? What if somebody in another office gets sick?
How about suppliers? One of the things that they’re just starting to talk about now is the fact that there are an awful lot of products that [the US sources] from China, and there is generally a six- to 12-week delay in delivery. So supply chains are about to be disrupted.
Many people don’t realise that 90% of prescription medications come from China. And while China was trying to contain the virus, they quarantined entire cities, and factories have been shut down.
So it’s really at a bigger level you have to say, “What are all the possible things that could happen?” Then you brainstorm, “What can I do to mitigate the issue?” And it’s a lot of brainstorming. So with your employees, you might want to have a quick training session on how they could protect themselves from the coronavirus. Contacting your customers just to let them know that you’re thinking about this.
Maybe again, if you’re in public accounting, maybe you’d rather do tax prep interviews virtually, do it over a Zoom call or a Skype call, so they don’t have to come into the office.
Think about your supply chain. What happens if you can’t get some of your materials? Are there critical materials that you need that you might actually be able to stock up on now, but you won’t have to throw away later? So again, we don’t want to create a rush on materials, but you do want to make sure you don’t have to shut down because you don’t have access to what you need.
Amato: Right, yeah, those are all very good points. So let’s say you have a disaster recovery plan. Let’s say you’re not the construction company in Florida, and you have this plan. You’ve thought about it a lot. You’ve brainstormed. How do you know when to actually put it to work?
Elder: That’s a fabulous question. I think the best practice for me with disaster response plans are I really like it to be simple, a checklist that people can glance at very quickly, but also identify at the top of the checklist, “When do you ring the bell?” When do you say, “It’s time to implement this”?
Now again in this situation because it’s so new and everybody is a little frightened, the minute somebody starts coughing in the office, you may want to implement and say, “It’s time for you to go home”. Then think about how you’re going to clean their office, disinfect it just in case. So I think an abundance of caution is probably in order this time, because we really just don’t understand how to respond entirely in this situation.
Amato: So obviously in these situations no one can prepare for every scenario, but how do you balance the need, I guess, to kind of have a plan, but also have some flexibility to know when to deviate from it?
Elder: I think we can only plan for what we can imagine, and since we haven’t been through this, we really can’t imagine all the possibilities. So it is very important to be able to look at your plan, your checklist, and say, “We didn’t think of that. Now let’s sit down five minutes to figure out what the next step is”. Try and be patient about it, not reactionary and go, “Oh, my God, we didn’t think about this, now what do we do?” It’s OK not to think of everything.
With the hurricanes, one of the things that after the first one we did not think about was we had roof shingles on top of a roof. In the first hurricane, we didn’t have an issue with it. The second one was much stronger and impacted our developments much more strongly than the first one. We discovered that roof shingles in the middle of a bad hurricane become projectiles and they end up two, three miles away. You have people showing up at your office going, “See this roof shingle? This went through the window of my car”. Well, I certainly had not thought about that. So the person is there and I said, “OK, let me take your information, and we will look into this.”
It’s very important not to just over-the-top react and go, “Oh, my gosh, we’ll fix this”. What I found out, what I didn’t know at the time is that there are force majeure clauses in insurance policies that say, “An act of God no one’s responsible for”. So just taking a measured approach allows you time to regroup, talk to people who might be more of an expert than you. So in my case, I called our insurance broker, and he explained it to me.
It’s OK not to think of everything is basically what I’m trying to say.
Amato: Right. You talked about it earlier, the notion of making sure you focus on the people involved and not to forget that. Not just to be, “How can I keep my business going” or “How can I get my business going again?” I guess there’s kind of a potential reputational gain in that, as much as you hate to say it. So how do you make sure people are all OK, and, I guess, how can it help you moving forward?
Elder: Well, I really believe that there is opportunity in every disaster. There is always a silver lining. I think using emotional intelligence comes into play here and understanding that with your employees there will be people who are saying, “Eh, I’m not worried about it. I don’t care”. There will be other employees who might have elderly parents, they might have a young child, they may have a spouse who has health issues, and they are panicked because they’re worried if someone in their household gets sick. So you can’t take the exact same response to each employee.
So understand that you have to deal with each employee differently, and if you do that, you really are demonstrating emotional intelligence, and your employees will really see the value that you bring to the table because you are treating them as a human being and saying, “I understand you’re upset. Tell me more about what your concerns are. What can I do to help?”
Another way of helping your employees is truly not just trying to immediately fix it, but let them talk. Listen. Just let them share, let them get it out of their system. I don’t think in this scenario that you can communicate too much, because, again, people are concerned. A lot of employees aren’t going to want to look like they’re panicking, but they are concerned in the background. So when they know that you are staying on top of it, then it gives them a level of comfort and also lets them know that you really do care.
Amato: Jennifer, this has been excellent today. What would you like to say in closing? What have I not asked you about that you think is still something worth exploring on this issue?
Elder: I think I’ll share my favourite quote: “Failing to plan is planning to fail”. It’s much better to take an hour out of your day in busy season — and even for those in corporate, they’re in corporate deadline mode right now — so everybody is very busy. Much better to take an hour or so and get your management team together and say, ask the question, “What do we need to think about?” “How do we ensure that we get through the rest of busy season without imploding?” Trying to figure it out when that first person calls in sick will cause you to implode.
Amato: Very well said, Jennifer, thank you very much.