Creating a short term emergency business plan, in light of the threat of terrorism attacks, is no longer an optional business exercise. The acts of terrorism are by design, unpredictable. The results of terrorism are chaos, confusion and disruption. While our political and governmental leaders disagree on many issues, most agree on two points regarding terrorism: We in the U.S. should expect another attack, and the purpose of any attack is the disruption of the U.S. economy. Michael J. Martinez states, "The renewed terrorist activity, including the [recent] bombing of trains in Madrid, has exacerbated the market’s uneasiness and raised the specter of a prolonged slump on Wall Street."
What Can Be Done?
As business owners and organization leaders we cannot stop acts of terrorism-that is up to our elected representatives. We can and should, however, develop a plan that will enable each individual business to survive a 9/11 type event. We in the Northeast corridor, from Washington, D.C. to Boston, are especially vulnerable this year. Between now and November our area will host two presidential election-year conventions--one in Boston and one in New York City. Based on recent events in Spain surrounding their national elections, we must be on guard and we must be prepared, according to John D. Solomon in a recent Washington Post article. "The bombing in Madrid last week should be a wake-up call to the American people to begin focusing on their own civil defense readiness. Recent surveys have shown that while an overwhelming majority of Americans expect terrorists to attack the United States in the near future, only about two in 10 have done anything to prepare for such an occurrence." If you are not one of the two in 10 who are prepared, this is your wake-up call.
Where Do We Start?
Begin with a hypothetical scenario, "What would your company do if your sales were reduced by 50 percent in one day?" Ray Owens of the Richmond, Virginia Federal Reserve Bank states that local tourism has never fully recovered after the Pentagon attack on September 11. "And the remedies that were used to cushion the damage from the terrorist attacks may not be available now (e.g.--The Federal Reserve Rate cut by 1.75 percentage points three months after 9/11, boosting car and home sales; two tax cuts passed by congress over the last two years)." By creating an emergency financial plan, in advance, we can increase the chances of our businesses surviving the crisis. We can use what we learned from the events and the aftermath of 9/11 to create a pragmatic crisis model and plan.
We can expect the transportation industry to be the primary target. Therefore, in the aftermath of a 9/11 type event, travel related activities will be reduced. How will your business be affected, and how will you stay in business during the crisis period? Prudent business owners and managers will develop and implement a strategic plan that will enable their businesses to survive a three-to-six-month period of negative sales growth. The key is to develop specific contingencies, now, in the absence of an emergency. Focus specifically on four areas: employees, customers, suppliers, and creditors.
Seek Input From Your Staff and Employees
Recognize that we all read the newspapers and listen to the news on the radio and television. This creates irrational fears which may or may not be verbalized by people within your organization. It is incumbent on leaders to create the forum that starts the conversation. Meet with our employees and ask them for the best initiatives that can be implemented to get your business through a downturn and stay whole. Generate ideas. What are the alternatives? Voluntary reduction of pay (across the board, including executives and officers)? Reduced work schedules? Volunary leaves of absences? You may be pleasantly surprised by the ideas that are generated and supported by your people, simply be asking for them.
Strengthen and Develop Your Customer/Client Relationships--Today
It is never a waste of time or resources, in our opinion, to strengthen customer relationships. In the retail environment, it is especially important to let your customers know, by concrete behavior, that you appreciate their business. In case of a crisis, customer loyalty is crucial. Start today and improve your delivery of customer service. In the event of a crisis, you will be ahead of your competitors. In the absence of a crisis, you have strengthened your business. In the non-retail services environment (CPA’s, financial advisors, marketing/advertising consultants), begin to proactively discuss how contractual commitments will be fulfilled if the clients’ revenue streams are reduced. Right now our economy is growing at a healthy rate, and we hope that continues. The current economic boom, coupled with future terrorist threats, means that now is the time to invest and leverage your marketing dollars. Generate a flurry of activity and sales revenue. It is imperative that your business build the momentum now to sustain your organization in the event of a crisis.
Enhance Your Business Relationships with Your Vendors and Suppliers
Find out from your vendors and suppliers what their plan is in the event of a crisis. How will they continue to supply you with the materials you need to supply your customers? If you wait for a crisis to ask your vendors what their plans are, you may be inadvertently left out of their solutions. Begin to develop backup suppliers to reduce your vulnerablility. In the event of a crisis, you will have increased your chance of survival. In the absence of a crisis, you may have discovered a new resource.
Talking with Your Creditors
Now is the time to create an emergency contingent payment schedule with your creditors. Go back to the hypothetical scenario--revenues have been suddenly reduced by 50 percent. You are still in business, but just barely. What emergency plan can you create with your creditors that can be implemented in your time of need? Can you prearrange a reduced payment plan, for a specified period of time (three-to-six-months), ahead of time? Now is the time to talk through these scenarios and reach agreement with your creditors. In the event of a crisis, you have a financial plan and your creditors have peace of mind. In the absence of a crisis, you have strengthened the relationships with your creditors.
Enhance Your Financial Position
We are not going to give specific financial advice--but we do think you should start the planning process in your organization. Create a new revenue model that addresses the hypothetical scenario. Establish an emergency cash reserve target that will allow your business to operate and sustain itself, in a bare bones scenario, for three-to-six months. Some other ideas to consider: secure a line of credit. Typically, financial institutions give credit when you do not need it, not when you do need it. While you are at it, secure a business credit card to be used in case of an emergency. Improve your liquidity by strengthening your accounts receivables. Improve collections on all overdue accounts by strengthening your accounts receivable aging reports. Shorten the collection time frames, from 90 days to 60 days, or from 60 days to 30 days. The result of this planning will better enable your organization to survive. You have also improved your financial skills.
Incorporate Your Plan into Your Business and Strategic Plans
In an emergency, we do what we practice. If we do not practice and prepare for an emergency, we either don’t do anything, or we do the wrong thing. Practice what to do in the event of a crisis--like a fire drill at school. Create an emergency contact list, including an emergency communication tree. Training will help prepare your organization for a potential disaster. "Readying...for terrorism won’t be easy. Changing that mindset requires well-organized, coherent and dramatic action," states John D. Solomon. If and when a crisis occurs, you will be ready to act. Your plan and advanced preparation will help you, your business, your employees, our economy, and our country. If no crisis occurs, thank goodness. You will have a stronger, healthier, more profitable business. Ultimately, there is no downside to being more prepared--that’s a benefit all to itself.
Let’s Get Going!
No one is sure how, when, or if the terrorists will stop their attacks against the Western world. We hope that our diplomatic and military strategies will continue to prevail in the battle against our enemies. The second line of defense is the strength and resilience of our economy. As owners and managers we can stiffen the resolve against terrorism by making each individual business stronger and more able to withstand any future attack and ensuing crisis.
We have demonstrated our ability to recover after the crisis of 9/11. But it took almost two years to recover because we were unprepared for the magnitude of the disruption to our economy. If and when a second attack occurs, our preparation and determination will enhance our ability to recover quickly. We can--we will--prevail. But only if we prepare for the worst and hope for the best.
Now, are you ready to invest in an ounce of prevention for a pound of cure?
This article is provided as general information, and is not intended to substitute for legal or other professional advice.
