Disaster Definition
July 31st, 2008 by Roberts Keeling
Most people define a disaster as something that affects just them:
- A broken fingernail,
- A fender bender,
- A missed promotion or,
- A pimple may qualify,.
Public disaster definitions may include:
- 911 the Twin Towers Disaster,
- The Sinking of the Titanic,
- The Hindenburg dirigible explosion,
- JFK’s assassination.
I suggest the truth for most of us is somewhere in between:
Ø The loss of a relative,
Ø The loss of a business,
Ø A marriage breakup,
Ø Serious injury or illness for ourselves or a loved one.
Of these, the loss of a business is probably the only one we can prevent.
I lost a business once and in hindsight it was totally unnecessary. It was a viable, very successful business, growing, profitable and I lost it. Why? Well almost without exception, financial advisors, bankers, and accountants will use terms like; “lack of financial controls”, “inadequate capitalization”, “unrealistic sales forecasts”, etc. However that type of advisor rarely has started or held the ultimate responsibility for managing a business and that lack of first hand experience makes their opinion lack value. Or that I value anyway. The “why” was my fault as I failed to follow a principle that my business was based on (preventive maintenance of computers) well duhh! I failed to meet my primary responsibility of protecting my business by failing to anticipate and plan on avoiding any and all disasters!
I’ll come back to “why” in a minute; first let me tell you “how”. My business was a computer service. The computer service industry is one where “the only constant is change”. So one year end when we were completing our financials, our accountant recommended we significantly write down the value of our parts inventory as recent changes in our service offerings had reduced the value of the parts. A simple accounting change that did not have much impact on our bottom line.
Wrong!
Our loan manager at our bank freaked! Her position was that as the parts inventory was a significant asset in support of our loan, we had “torpedoed her!” We met with her and her boss and managed to successfully resolve the problem with an accelerated payment plan.
Wrong!
A week later the bank called our loan. O.K. lets deal with that. As we were sorting out our new plan and budget to pay the called bank loan, we addressed the fact that we were slightly behind on our submissions of employee withholding to Canada Revenue Agency (nothing new, we had been operating this way for years and CRA had always been co-operative). So we met with CRA explained the bank situation and presented CRA with our plan to pay them up to date and they accepted it – no problem.
Wrong!
The next day CRA faxed out a demand to all of our customers to remit all payments due to our company directly to CRA!
Payday was 2 days later & we were dead! We were totally unaware that CRA had just lost a court battle with our bank to establish who had first dibs on the assets of a company that had failed. So CRA covered their butt, by instigating a proactive strike by scooping up our cash before the bank.
This was my disaster defined. If I had been thorough in preventing, planning for and avoiding the issues that triggered this disaster it could have easily been avoided. So I learned a very painful lesson that to avoid a business disaster you must:
Ø Research thoroughly (What happens if),
o There is a fire, flood, earthquake, hurricane, tornado, major power outage?
o How about a postal strike, a serious flu epidemic, a death or incapacitation of a key employee, a labour dispute?
o What is the impact of the loss of a key contract or customer, or the technology shifts and some of your processes are suddenly obsolete?
o Or your IT hardware fails and you lose your data and/or you attempt to reinstall from your backup tape or disc system and the data is not all there.
o What if the bank calls your loan ?
Ø Determine what needs to be addressed,
Ø Identify the mitigation of risks through redundant systems (two banks instead of one), (backup and insurance of key staff), etc.
Ø Ensure you have the best data backup for your computer (and test it)
Ø Develop and implement full disaster avoidance and recovery plans.
There is an old saying, “Defining the problem takes you 50% of the way to solving it!”
This is especially true in “Disaster definition” and the design, implementation and maintenance of your Disaster Avoidance Plan.
