Hi! Managers: A tale of two flooded cities

In December 2010 and January 2011, Queensland in Australia experienced its worst flooding in what was said to be the last 50 years. Fifty-one areas with a population of 2.1 million people, including capital city Brisbane, were labelled as disaster zones; 500,000 sq km was affected and more than 20,000 homes and businesses flooded. The total financial cost was put at Bt950 billion.
About 20 per cent of businesses had to shut down at some point due to the effects of the flooding. In the end, 85 per cent of all businesses reported that their “business viability” had been impacted with 22 per cent suffering “critical impact”.
In February, the Chamber of Commerce and Industry Queensland performed a survey entitled “Impact of the Queensland floods on business”. While the Bangkok flooding is larger, the survey results there apply substantially to businesses just starting to recover here.
By analysing surveys related to flooding, combined with direct input from our customers, we can isolate 10 major areas of critical concern for businesses wishing to stabilise. Each has then been further broken down to a series of key questions and answers, helping businesses prioritise their stabilisation response.

--Financial
-Insurance: Payments do help, and have a direct effect on cash-flow and business recovery. In recent conferences about the flooding, 75 per cent of questions related to insurance. Claims relate to effects from direct flooding, indirect impact and also costs incurred due to flood avoidance. Insurance has 15 key questions.
-Cash flow: According to the US Federal Emergency Management Agency (FEMA), 40 per cent of businesses do not reopen after a disaster and another 25 per cent fail within one year. A substantial number of companies face this prospect in Thailand today. It is critical to have a detailed cash-flow analysis with a full understanding of the impact on loans, debtors, stock, supply chain, sales pipeline and creditors. Cash-flow has 21 key questions.
-Statutory financial obligations: Effects on tax are important. For example, some businesses, particularly factories, may have a discrepancy between raw materials, work-in-process and finished goods if any of these have been damaged in water. Accounting for these will be important. Also understand short-term remedial measures from government and the Board of Investment (BOI). There are 13 questions here.

--Operational stabilisation
-Employees: There are important considerations under the Labour Protection Act for how employees are treated. Also, how can your business adapt its workforce and related policies for these new conditions? Employees have 11 questions.
-Customers: An important point in the Queensland study was that there was not much difference in recovery time between those businesses that were directly affected versus those indirectly impacted. It revealed a strong mutual dependency on the entire ecosystem for recovery, with the second-most-requested help category being to restore customer confidence as quickly as possible. It is vital to understand the impact on your customers and the longer-term knock-on effects of the ecosystem recovery. There are 10 questions in this category.
-Premises: How can as much of the business be restored as possible, and as fast as possible? What help is required to lease premises or machinery, replace key components which may themselves be in short supply or temporarily hire key staff? There are 10 questions here.
-Supply chain: The supply chain will continue to change for a long time as routes, distribution centres and businesses open and close. This can affect every type of business, for example a service-related business ordered 50 PCs for new staff but now they will not get them for some months, possibly even at a higher price. Here there are 10 questions.
-Document and data safety: This may seem too late to consider, however it is vital that key documents are protected, found, recalled or copied, especially for tax and insurance matters. What are these vital documents, how can copies be acquired and what is their effect on the business recovery? There are 11 questions here.
-Business continuity: Every business needs to have a six-month plan of what, exactly, day by day, it will do first to stabilise and then move towards normalisation. This will also be vital for employee, customer and supplier confidence. This section has 10 questions.
-Assessment of impact: It is critical that businesses are able to identify and assess key business functions and processes that are vital to their ongoing operations. An analysis of business impact should help the company understand the nature and effect of each critical function, and correlate that to specific system components, processes and services. This will be fundamental to the development of an effective mitigation plan. We have 10 questions in this section.
Grant Thornton is running free half-day Business Stabilisation seminars to help people look at these 10 areas in more depth. It has also just released its free “Thailand Flood Disaster-Recovery Guide”.

Andrew McBean is a partner at Grant Thornton Management Consulting, Grant Thornton Thailand. Follow his article every third Monday of the month. He may be contacted at [email protected]