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VIEWPOINTS : Firms With No Plans Left Shaken by Quake

October 11, 1987|IAN I. MITROFF and BARBARA J. MURRIN | IAN I. MITROFF is the Harold Quinton distinguished professor of business policy and co-director of the Center for Crisis Management at USC's graduate school of business. BARBARA J. MURRIN is president of the Crisis Management Group consulting firm in Long Beach

If the recent earthquake had been the so-called Big One that is predicted for Southern California, most local businesses would have been devastated. The insurance industry says that 50% of all small local businesses would fail after a major temblor.

Some of the problems obviously are unavoidable. Telephone and computer services easily could be knocked out for days or weeks, crippling the many businesses that are dependent on that technology. The movement of products and supplies would be paralyzed by any damage to Southern California's already-clogged traffic arteries. Worst of all, of course, many people could be hurt or killed.

But the economic damage can be mitigated. Studies show that the overall economic loss could be cut by one-third if at least half of all businesses are persuaded to prepare themselves properly.

To begin with, businesses should inspect all of their buildings and bring those found to be deficient up to current building code requirements. They also need to teach all employees what to do in case an earthquake strikes while they are at work.

Beyond that, businesses need to:

- Establish and train search teams of employees to find people who may be buried under rubble.

- Set up additional teams of company employees or outside personnel to help in debris removal and in recovering valuable business assets.

- Provide special training in treating people for both emotional stress and physical injury.

- Organize groups to help employees find and contact loved ones and to arrange ways to reunite them.

It is important to note that none of this will help much, however, if these procedures are not instilled or constantly practiced--preferably through realistic simulations--long before a major disaster occurs. By the time an earthquake hits, it's too late improvise.

Unfortunately, the best estimate is that fewer than 20% of the nation's businesses have taken all of these steps. In addition, fewer than 10% have any business recovery plans taking into account, for example, the need to set up temporary operations, repair equipment and win back customers. These businesses will have to restore their operations in stages--do they know what they will want to bring back first? And have they bred the innovative spirit necessary to adjust and make a full recovery?

Most businesses have been lax in this area because they operate under two myths: 1) Since the destruction will be nearly total, there is little that can be done about it. 2) If it happens to us, it will happen to all our competitors as well, so we all will be in the same pickle.

The facts, however, refute these myths. First of all, a large number of buildings will suffer little or no damage if they have been properly renovated or if they were constructed in accord with current building code requirements. When power is restored and streets are repaired, the companies whose facilities are in good shape will be the first to recover. Thus, businesses prepared to cope with an earthquake likely will not only survive but also overtake the competition.

The irony is that most businesses have taken steps to protect themselves against fire losses by carrying insurance and installing sprinklers in their buildings; they are more likely to suffer major damage to their facilities as result of an earthquake for which few precautions have been taken.

As important as earthquake preparation is, we believe that it is only part of a larger issue--crisis management. All corporations are increasingly subject to such crises as terrorism, environmental disasters (Bhopal, Chernobyl) and product tampering. The bigger picture must be considered because, among other things, it's highly likely that a major earthquake will cause related crises such as the spillage of hazardous materials.

If anything good results from the recent earthquake, perhaps it will be the realization that we need to prepare for disaster. What if thinking about the big one just caused us to think big?

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