Sponsored by American Public University
Retailers’ crisis management programs have matured over the last decade. Nonetheless, wishful thinking continues to plague their disaster planning, according to Anthony Mangeri, American Public University’s director of fire and emergency management strategic relationships. Too often, the orientation of retail organizations leans towards “it probably won’t happen” or “if it does, it probably won’t be so bad,” he said.
This attitude of denial remains a principal cause of business closures and huge hits to bottom lines, Mangeri added. To survive, “you have to have a plan and have strategies in place—whether you are a small convenience store or a large retail entity—that identify how you’re going to manage operations in times of crisis and emergencies.”
He cited Waffle House as an example of a company that derives value from its contingency planning, including its ability to mobilize resources during disasters impacting electricity or water or both to maintain operations—and revenue. At the other end of the spectrum are the businesses that do little or no planning, which can have crippling consequences. “A huge number of businesses fail following a disaster. They simply never reopen,” he said.
But a plan, by itself, won’t make retailers crisis-ready.
To offer true resiliency, plans need to be built on a foundation of relationships, starting with coordination between those who know how to protect and those who know what needs protecting. “Crisis management and risk management don’t always talk together, or they don’t necessarily speak the same language, but these are individuals who have to work together to determine what can happen that will harm the business,” said Mangeri. “It’s critical for [these groups] to have a common understanding of risk, and to then assign resources to address the most important risks.”
Underpinning a retailer’s crisis preparedness, therefore, are risk and threat analyses, a vulnerability assessment, and a business impact analysis. “It’s critical to build disaster response around an understanding of threats from a frequency, probability, and potential impact perspective,” said Mangeri. “Then you have to decide on your acceptable level of risk, and develop that common operating picture of risk and of what is acceptable and what is not.”
“In initiating continuity planning, you have to look at what can impact you, what is essential to you, and what will allow you to continue to operate,” explained Mangeri. “If computers go down and the POS system doesn’t work, do you have a way to complete manual transactions?”
In addition to coordination among internal stakeholders, the relationship between retailers and their suppliers is also critical for building true resiliency. “Even if you’re in good shape and you managed to get staff into the store and are ready to operate, if you have nothing coming in, then you will have nothing to sell,” said Mangeri.
Retailers should avoid a ‘tick box’ approach to examining the contingency plans or service levels of key suppliers. That is, don’t just ask if they have a plan and then tick the box if they do. You need to examine if suppliers’ continuity plans protect you as well as them.
“Vendor assurance is very important. Before you sign a contract, you need to build in it contingencies for emergencies,” said Mangeri. “Make sure a vendor can actually sustain delivery, or you’ll be left high and dry.” He added that maintaining supply is growing more important as retailers warehouse less and rely more on a “just-in-time” supply chain.
A third critical relationship is the one between corporate retail players and staff working in stores. Naturally, these groups have different disaster planning priorities for their respective environments, but plans must reflect the important roles that both entities play in building resiliency. “If I am a large company and have locations all over, the contingency team must work with store managers to make sure they have the resources, training, and support they need to respond to crisis events,” said Mangeri. He warned, however, against trying to drive crisis response centrally. “Every plan has to have a local component and reflect the fact that no one has a better understanding of local conditions.”
Mangeri cited evacuations as a key area where local personnel have to be empowered. Retailers don’t want to create a situation where a local store is contradicting local community instructions by waiting on corporate personnel to approve an evacuation, for example.
Communication between line employees and management is key to disaster response, explained Mangeri. Retailers need to tweak crisis communications to align with how employees receive—and report—information. “You need multiple avenues of communication to put information out. Twitter and Facebook have become essential,” he said. Fast, frequent communication is vital for safety and business continuity—and for public relations as well. Mangeri noted that “everyone is a reporter” with social media, and unless retailers put out accurate information, conjecture will fill the void.
Finally, communication with emergency responders and business partners is vital. “As a retail entity, we need to communicate with the communities we service, employees, and stakeholders. It’s critical to never overlook any of these three relationships,” advised Mangeri.
Retailers should review their emergency plans after any incident that triggers it, as well as annually or more frequently, according to Mangeri. While it can be hard to carve out time to plan for “what-ifs” when there is always a plateful of existing problems, there is a good business case for planning activities, Mangeri said. “It’s very important to keep in mind that we now know that emergency planning and preparedness decreases losses. That has been proven.”