Risk managers should keep in mind that although insurance plays an important role in an organization's recovery, the majority of exposures might not be insurable, according to an industry expert.
An organization's solution "should be a balance of mitigation controls, financing strategies and insurance strategies," suggested Gary Lynch, national practice leader at Marsh for business continuity management, in a recent Internet seminar, "Preparing for the 2006 Hurricane Season."
Risk managers should view these elements "holistically, so they can figure the best way to allocate--both effectively and efficiently--capital, management time, resources and management attention to the exposure," he added.
In preparing for catastrophes, Mr. Lynch offered a checklist for risk managers. He said organizations need to:
o Plan for the needs of individual employees and their families, determining what support resources are necessary to help them do their jobs most effectively.
o Understand which products and services create the greatest value for their firms.
"An organization cannot plan for every event, can't recreate every resource and can't make assumptions that provide redundancy in all cases," he said. So risk managers should prioritize, focusing on the products and services that create the greatest value for their firms.
That value could be revenue, sales, cash flow or brand, he explained.
Mr. Lynch added that they should also examine supply chains and all the interdependencies needed to support those supply chains, both internally and externally.
o Quantify and qualify the impact of a catastrophe, such as a hurricane.
"Once they understand what's important and how it's supported, they can assess what the impacts will be at certain breakage points," he said, noting that this will help them make quick decisions.
In the end, he said, "making an informed decision is really the way to manage a crisis of this nature, because there are so many unknowns."
o Aggressively monitor events of a hurricane--leading up to and after it--to understand if there is a breakage somewhere else outside of the organization.
o Move information technology and telecommunications support outside the region affected by storms.
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