METAIRIE, La. — Louisiana Corporate CEO David Savoie has had time to reflect on how the corporate reacted to the Hurricane Katrina disaster, and he's not holding back on trying to wake people up to the most important part of a business continuity plan–the people.
"The main thing we drew from it is you can have a real good disaster recovery plan, but unless your staff is there to run it, it won't work. You have to make the disaster recovery plan work the best for employees," said Savoie, who leads the $156 million corporate that serves mostly Louisiana credit unions.
It's not that LaCorp wasn't prepared for Katrina, it was. In fact it was evacuated a few days before the storm hit and prepared to operate remotely. "We declared disaster contingency before the storm came. I can remember seeing the headlines after it hit, 'New Orleans Dodges the Bullet'. Then the levies broke and we changed plans and went to Kansas City," said Savoie. That decision was solidified by the fact that its headquarters in Metairie took in water from the roof and needed significant repair work.
The corporate's back-up disaster recovery site was U.S. Central's headquarters in Lenexa, Kan. The small five-person staff had to move their families to Kansas to start operating in back-up mode.
"We took care of employees' expenses and their dependents' expenses. We put their kids in schools in Kansas City. It took a lot of help from a lot of people," said Savoie.
LaCorp wasn't ready for the costs of relocating employees and their families. "We were spending $10,000 a month. This time we needed help because we hadn't really planned on such a long relocation. It's just not something we really thought a lot about," said Savoie.
There was also an emotional aspect of the disaster that tested the corporate's resolve. Savoie said some of the corporate's employees wanted to return to the devastated area to help those in need. "We were up there in Kansas watching television reports, seeing people being pulled off rooftops. There's a tendency for people to want to go home and help. I tried to explain to them without being too corny that when you work for a credit union or work for a corporate you are part of the American banking system. You are helping people get access to their money. If you're doing that, you're helping. It's easy in this business to think what you're doing isn't very important, but it is," he said.
While the typical business continuity plan may account for short-term expenses for employees, Katrina displaced LaCorp for approximately two months. It has since increased its insurance coverage to provide more money for employee and family expenses if they are displaced.
Other than the expense related to a long-term disaster, there are also long-term operational issues that must be addressed.
"For us and most people when we tested for disaster recovery we tested for a day. You're well equipped to do everything you do in a day. What we weren't prepared for was the thing you do once every two weeks, once a month, once a quarter. Things like vendor bills and reports. We had to improvise on those things. The plan was more geared for the daily stuff," said Savoie.
And of course there are always surprises. The corporate also had to deal with a reverse effect on liquidity. Savoie and others thought that it would experience a drain on liquidity. To combat that it encouraged credit unions from around the country, which previously didn't do business with LaCorp, to make a deposit in an effort to help it avoid a cash shortage. It turns out, cash was plentiful.
"We were anticipating a big drain on liquidity. NCUA had some concerns. The immediate effect was the exact opposite. We had an influx of liquidity because of people in Louisiana getting insurance settlements and government assistance, but they couldn't replace their residents. There was no real estate to buy. That liquidity tended to sit in checking accounts for a long time. We had an excessive amount of liquidity for about a year. We are now back to a normal cycle," said Savoie.
The corporate did step up for CUs in need. It offered $10 million in 0% loans to help affected credit unions.
Things have normalized for LaCorp and its financials are solid. In December, it experienced .50 net income and is now looking at offering more term products to help credit unions looking for yield.
"Being a smaller operation, we have a small base of fixed expenses that don't increase for things like adding additional term products. My thinking has been if I can sell somebody a million dollar CD and have a 20 basis point spread, then on a two million dollar CD the 10 basis point spread is not costing me any more." –pgentile@cutimes.com
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