Monday, 3 October 2011
Companies must have response strategies for business interruption
The ability of companies to respond quickly when their facilities are hit by a disaster is crucial if they are to avoid severe business interruption, participants at the Ferma Forum were told yesterday.
In a session that focussed on the recent experiences of Canadian aircraft and rail equipment maker Bombardier, experts highlighted the importance of having a strategy in place to respond immediately to any crisis.
In the summer of 2010 Bombardier’s plant in Brautzen, Germany, was severely affected by floods, causing the interruption of its activities.
It took the waters, which caused damage to thousands of its machines, three hours to reach a height of up to 1.6m inside the plant’s buildings.
“We were aware of the risk of flooding,” said Malwinne Braunwarth, the Group Risk Engineer at Bombardier Transportation. “Nevertheless we were surprised by the speed and volume of the water.”
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But loss adjusters and recovery specialists were quickly brought to the site, and in three days the Canadian headquarters of the firm was able to approve a plan to return things back to normal.
According to Miss Braunwarth, in one month 99% of the plant was cleaned and production was gradually resumed.
More importantly, the firm said that it did not lose any clients as a result of the floods.
Bombardier assembled a crisis management team as soon as the alarms were raised, and on the same day, Sunday 8 of August 2010, loss adjusters and cleaning experts were called in to help deal with the problem.
Even employees were rushed to the site to try and remove as much mud as possible, a task for which even snow shovels were employed. “And you should just try and find hundreds of snow shovels on a sunny August day,” Miss Braunwarth said.
Hans-Pieter Wollner, the Managing Director of Belfor-Relectronic, the restoration and recovery group called on by Bombardier, said that a speedy initial response to a crisis is key.
This is how Bombardier managed to minimise the problems caused by the floods, he added.
His firm immediately got on with the job of cleaning up the Brautzen site, for which an accumulated 30,000 hours of work were finally required.
The final damage caused to thousands of machines was evaluated, and it was possible to recover around 50% of the affected units.
“The cost of recovering a machine represents between 10% and 20% of its replacement,” Mr Wollner noted.
The experts said that it is important to learn lessons from such episodes.
Miss Braunwarth pointed out that the company has decided to invest €3m in a high technology flat wall around the site that aims to prevent new floods.
In light of the flooding Bombardier has also reassessed the risk of flooding in the group’s other production sites around the world.
The participants at the Disaster Recover: What to do before, during and after session also debated the wider implications of disasters like flooding, such as the effect that the recovery of machines can have on the warranties offered by their providers.
Mr Wollner said that many producers consider that the warranties are voided in such circumstances. “Normally it is basically a strategy to sell more equipment,” he claimed.
In some cases, insurance companies can agree to take over the warranties as they benefit from the lower costs of repairing, rather than replacing, the equipment.
However, Otto Kocsis, the principal engineer for Business Reliance at Zurich Engineering, said there is no standard procedure for such circumstances.
Insurers evaluate whether this can take place on a case-to-case basis, he added.
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