The Blackout of 2003 created widespread disruption across eight U.S. states and parts of Canada, impacting hundreds of thousands of businesses and 50 million people. Given the current state of the nation's power grid, additional blackouts of this magnitude remain a real possibility and pose a significant threat to businesses. A blackout means more than just the loss of electricity. In fact, so much of the economy is dependent upon electricity that even a temporary loss of power can have a significant and lasting impact on a wide spectrum of business operations. In addition, in the increasingly interdependent, global economy, even if your company is not directly affected by a blackout, your suppliers, customers, vendors, and employees very well may be.
"Regardless of whether the problem was related to the transmission operations, we need more transmission capability. If we don't have an upgraded transmission system, we're going to have more problems like this, because there will be inadequate capability to deliver power in the future."
Energy Secretary Spencer Abraham, Fox News, 8/17/03
Blackouts cause a "domino effect," disrupting a variety of other services and utilities. Several essential services, such as water/sewer, transportation, IT services, communications (both cellular and land lines), banking/ financial services, etc., were impacted by the energy blackout. A blackout can also severely impede an organization's ability to respond to emergencies such as a fire or employee injury. Finally, after a business's operations are back online, it will need to face the task of filing insurance claims for losses that may have resulted from the blackout. If nothing else, last week's blackout should make corporate executives and local, county and state government officials begin to question how well they are currently able to manage their portfolio of risks, not just individual ones. They should be thinking beyond individual business operations and asking questions that are fundamental to their overall businesses, such as:
Business Risk Consulting
- Do I have a continuous business risk management process to understand the company's potential exposures and their interdependencies so that I can deal with risk proactively?
Business Continuity Planning
- Have I identified potential threats and assessed their impact on my company's people, assets, operations and the environment?
- How do I know if I lost data? If I have, how do I recover it?
- How quickly can I restore critical business functions?
- Do I have manual procedures in place to continue critical operations in the absence of Information Technology?
Emergency Response Planning
- How well integrated are my emergency response plans with public authorities?
- Is my staff properly trained to implement our contingency plans?
- Do all employees know their roles and responsibilities during an emergency?
Strategic Risk Communications
- Do I know how to effectively communicate with employees, suppliers, customers, the media, public officials and the general public? Supply chain
- Have I addressed the int erdependencies with my suppliers, vendors, customers and even competitors to help my company survive and quickly recover from an unexpected disruption in service?
- Do my utility outage plans address loss of electricity, potable water, sewer and other critical resources?
"More than 50 assembly and other plants operated by General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group were affected by the cascading blackout that occurred Thursday afternoon in New York, parts of Canada and the upper Midwest."
The Detroit Free Press, 8/15/03
Claims
- What are the terms and conditions of my property policies with regard to this loss?
- Do I have a property or liability claim that needs to be filed (or that will be assessed against me)? If so, do I know how to properly manage these operations?
- How do I determine, measure and document my economic losses to maximize my insurance recovery?
- How can I adequately recover damages incurred outside of the insurance contract?
To help address these and related issues, there are a number of solutions that executives can utilize to help them better plan for, survive and quickly recover from the unexpected disruption of normal business operations. These include:
- Business Risk Consulting: Identify, prioritize and assess critical business risks across the enterprise to ensure an effective, corporate-wide plan to proactively manage the potential consequences of power failures.
- Business Continuity Planning: A process that systematically identifies critical business and IT processes and strategies that can help a company stay in business in the event of a severe disruption to operations.
- Emergency Response Planning: Helps companies make effective decisions and execute protective strategies for potential threats, including fires and explosions, terrorism, natural hazards, hazardous material spills and utility outages. Also assists with rescue planning.
- Corporate Risk Communications: Provide timely and appropriate information to reassure different audiences -- including employees, shareholders, clients, analysts, the media, vendors, public officials and the general public -- that you are effectively managing related challenges.
- Supply Chain Risk Consulting: Helps companies identify and prioritize critical dependencies within the organization's operation as well as external to the organization that pose potential disruptions within the supply network.
- Claims Consulting: Provides a review of a company's property insurance policies and assists with measuring, documenting and recovering major direct or indirect losses through investigation and forensic accounting and claims services. Develops plans for handling self-insured disability and third-party claims. Provides dispute resolution services and insurance claims accounting and preparation services.
- Property Claims: Helps companies navigate through a property loss, from reporting the claim, collecting loss data, quantifying damages, policy/coverage interpretation, through settlement.
"This outage clearly demonstrates how close the nation is to its energy production and distribution limit."
U.S. Senator Pete V. Domenici, The New York Times, 8/18/03
If you have any questions or would like additional information, please contact us.
