From tornados to typhoons, severe weather can wipe out a business in a matter of seconds. And even though suspending business for a period of just a few days can lead to permanent closure within three years, only 25 percent of small businesses have a disaster plan in place.
If shuttering the doors forever isn’t reason enough, you can also open yourself up to lawsuits and bad press when a business is unable to manage and mitigate the physical risk to employees and customers alike. For many financial institutions, this poses a unique challenge.
Never interrupting service is crucial to the customer service promise. Your customers can’t make a deposit, close on a house, meet payroll or any of the other transactions that allow their lives to continue when a bank closes early due to a severe storm. Whether employees go home early or seek shelter in place, a comprehensive disaster response plan would illustrate how to handle situations like this.
Luckily, there are several regulations banks must follow to ensure they’re prepared in the event of a weather crisis:
- EFA Act, 1989: Federally chartered financial institutions need to have business continuity plans. This ensures funds are promptly available.
- FFIEC: The board of directors is responsible for making sure a comprehensive business continuity plan is implemented. Additionally, the FFIEC has specific suggestions in terms of business continuity planning for fire, water/flood damage, severe weather, air contaminants and hazardous spills.
- Basel II, Basel Committee on Banking Supervision, 2003: Banks must put in place both business continuity and disaster recovery plans to ensure uninterrupted operations and to limit losses.
A disaster response or business continuity plan can also clarify how to uphold the supply chain. With one already in place, you know how to prepare facilities and ATMs prior to a storm, and you know who is responsible for transporting cash to and from machines.
Build Up Your Bank’s Disaster Protocol
There are no longer questions remaining about stocking ATMs along evacuation routes, protecting sensitive documents or simply keeping the lights on during a power outage. While a devastating weather event may never befall a particular location, other emergencies can happen. Preemptive planning can help, and it often includes the following:
1. Put a protocol in place. Protect employees traveling to and from work by instituting a business continuity plan. Determine what weather conditions may require the closing of some — or all — offices or branches in the same county.
During the winter of 2014, a large financial institution had few options when snow began to melt and then surprisingly freeze across Birmingham, Alabama. With frozen sheets everywhere, travel became treacherous, if not impossible, across the city. Many people were stranded on highways and forced to take shelter in their vehicles while they waited for rescue.
“We usually ask our weather company for projected precipitation amounts,” explained one bank official. “We ask about the temperature and get an idea of how long the precipitation will be around. We ask for any travel or road conditions.”
Regularly scheduled conference calls with the meteorologists kept the bank executives informed with up-to-the-minute information.
But this wasn’t enough. Because the Birmingham forecast called for snow, not ice, all sanding and deicing equipment had been rerouted to the southern parts of the state where the forecast was calling for freezing rain and ice. So northern areas of the state had to fend for themselves. The institutions that didn’t plan ahead were forced to wait out the storm.
2. Spot potential weaknesses. Coordinating a business continuity plan isn’t always enough. Establish where that plan might break down during an actual emergency by organizing periodic vulnerability assessments.
Practice your outage preparation plan. Consider all possible variables with inclement weather. What if the phones go out or email is down? What if internet access fails? Do you have backup communication?
Disaster response consultants have worked with many banks and other businesses to determine whether their plans are sustainable in the event of a hurricane, tornado outbreak, ice storm or whatever type of weather might be a potential interruption of their business. They can help to make sure strategies hold up before a crisis occurs by helping institute and test those plans.
3. Keep communication constant. Communication is a critical component to a business continuity plan. Failure, as they say, isn’t an option, yet failures do occur. Settle on how employees will communicate before, during and after an emergency. Maintain records of cell phone numbers and email addresses for all staff, and update regularly.
Don’t, however, assume group texts or emails will reach everyone. Consider setting up a centralized communication portal or a password-protected page on your site for messages related to business continuity procedures.
In case of power outages, invest in two-way radios like walkie-talkies. Have battery-operated phone chargers at the ready. Distribute a few of each to all of the offices in your branch.
Besides staff, decide how and when to contact outside stakeholders, such as clients, vendors, service providers and media. “We get calls days ahead of an event letting us know about changes,” reported one vendor. By that same token, clarify which is the best way to reach you during inclement weather.
While there will always be more important and pressing issues at hand, developing a disaster response plan is a worthwhile investment for financial institutions. With new technology helping meteorologists forecast more efficiently, effectively and accurately, you have no excuse not to be prepared. Don’t let your bank be the one shuttered due to a lack of planning.
Don Shelly is the Director of Sales—North America for StormGeo. He has over 25 years of experience in delivering custom-designed solutions for clients in a variety of business sectors. The breadth of his experience in understanding the challenges faced by companies and the importance of having effective risk mitigation solutions backed by timely decision guidance resources has resulted in clients being well-equipped to mitigate weather-induced business disruptions and maintain profitability.