It's been nearly four years since Hurricane Katrina ravaged Mississippi and Louisiana, and there are still many physical and emotional reminders of how our lives-both personally and professionally-were turned upside down. Likewise, I'm sure our neighbors to the west in the Houston and Galveston areas are still feeling the effects from last year's Hurricane Ike.
Events such as these demonstrate the importance for credit unions to have a disaster recovery plan in place to enable them to successfully respond to and recover from a major disaster. Although disaster planning is a topic the NCUA and individual state regulators continue to emphasize, it still gets too little attention until a major event occurs.
When a storm like Katrina or Ike strikes, the nation watches the devastation and upheaval it causes. As with other major events, regulators and credit unions' first focus is to assist affected credit unions and members. The tremendous impact of hurricanes and other disasters causes many credit unions out of harm's way to immediately examine what type of disaster plan they have in place should a major disaster strike them, their sponsor or their field of membership.
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However, as often happens with the passage of time, attention to disaster planning is replaced by the daily issues of running a credit union. Instead of worrying about preparing for the next disaster, many CEOs and boards are likely focused on the troubled economy and the many financial challenges facing credit unions. I fear that for many credit unions, disaster planning has been put on a task list for later discussion.
Disasters take many forms, are relative and do not wait. Paying attention to disaster planning only when the issue is in the media or when regulators bring it to your attention is too late. Disasters strike when you least expect. For ill-prepared credit unions, it may mean the end of their operations, regardless of their size.
Hurricanes Katrina and Ike, the Iowa floods, and the California wild fires all demonstrate the need for all credit unions to give their full attention to a well thought out and rehearsed disaster plan. To ensure your credit union will survive a major loss, both management and the board of directors need to plan year round and not just pay lip service to planning, or have only a shell of a plan in place because the NCUA or state regulator mandates it.
The focus of every credit union is to serve the needs of its members. However, as recent disasters have shown, if a credit union is not fully prepared to react and recover from a major loss, it will never be able to serve the needs of its members, thereby threatening its very existence. Credit unions cannot be passive onlookers but instead must give serious thought on how they would have survived one of these major events.
CUNA Mutual Group paid out more than $12 million in claims payments covering damages caused by disasters in 2008. More than $10 million of that was related to Hurricane Ike. However, as Mike Retelle, CUNA Mutual's veteran claims manager, reminded me recently, insurance money helps those struck by disaster, but if there's no building to return to, money alone does not help serve member needs.
Retelle said that without a proper disaster recovery plan in place, you cannot guarantee members access to their money or much needed services. "In this case, ask yourself if you will keep that member once things return to normal," Retelle pondered.
Even if you have a plan and have rehearsed its execution, you still may not be ready. Some of your assumptions will be wrong and chances are the worst-case scenario you have built into your plan is not really worst-case after all. The magnitude of a disaster often doesn't hit until you're faced with a badly damaged building, no electricity, no computer services, limited staff and a line of members in need of cash.
Retelle explained that when a disaster occurs, credit unions expect to call a meeting and discuss the plan. However, it just doesn't work that way, especially if three-fourths of your board members have lost their own homes.
Boards of directors are sometimes reluctant to grant authority to staff to make any and all decisions on their behalf when a disaster occurs, but the resulting delays cost time and money. Sometimes, staffers are fearful of being second-guessed, but this is not business as usual. Management must have the authority to make decisions and be decisive.
No disaster plan will be perfect, but the Mississippi credit unions that were most successful after Katrina were those with boards and management on the same page and nimble enough to make critical decisions quickly. People understood their roles and were cognizant and accepting of help when it was offered. They also identified their main support providers that would help them get back up and running-from data processing, to insurance to security.
Disaster planning is critical and should be given attention year round, not just following a major event. More importantly, don't let that plan sit in a drawer gathering dust-make it a living document that is reviewed and practiced often. Planning for the unexpected and focusing on minimizing service interruptions will give members confidence in your ability to serve them in times of an emergency, and it will help you and your staff better deal with a potentially physically and psychologically taxing period.
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