Avoiding the Disaster Within a Disaster: Three Ways to Prevent a Bad Situation from Getting Worse

Year after year, disaster after disaster, CUNA Mutual Group’s claims specialists help credit unions recover from catastrophic losses. During September, designated by FEMA as National Preparedness Month, consider three lessons the company has gleaned from credit unions that tend to handle disasters better than others.

1. Review and update your insurance coverage—including extra expense coverage

Understand what your insurance does and doesn’t cover. If your policy doesn’t provide 100% replacement value for property, be sure the credit union is prepared for the co-pay. Also, take into account any property improvements made since the last time you updated your policy limits.

Look closely at your coverage limits for extra expenses involved in providing member service during disaster recovery. It’s difficult to over-estimate what it will cost to run a credit union when a branch or main office has been damaged or destroyed.

Adequate “Extra Expense” and other coverage limits for buildings, business personal property, and data processing can be the major factor in how quickly and completely you can recover from severe damage and the indirect losses.

2. Practice your disaster response plan

The NCUA requires credit unions to have a written plan for disaster recovery. If credit union employees have never seen and practiced implementing the plan, however, chances are it won’t work when disaster strikes. (See below for three effective training exercises.)

Having all employees read through and practice the plan helps you find bugs and work them out. And it’s important for all employees to be aware of the plan because, in an emergency, any one of them may end up having to make quick, important decisions.

3. Set up an emergency communication procedure

When disaster strikes and your insurance provider has been informed, your top priority should be communicating with employees to see who’s available, who needs help, and to share the plan for restoring service.

This means that before disaster strikes, employees must have an idea how to get in touch with the credit union in these situations. Every employee should have a “cheat sheet” with them or at home that details the first steps to take. For example, the cheat sheet should provide alternate locations designated for temporary branch service.

The cheat sheet should also include phone numbers and emails to use if phones or Internet service are available.

To prepare for unreliable phone/internet service, consider “phone trees.” On each employee’s cheat sheet, include the names and contact information of several other employees. Instruct employees to call each person on their list—they may get through to one co-worker who in turn has found someone else, and so on. Word about who is available, who might need assistance, and what to do next can spread surprisingly fast this way.

Also consider setting up an agreement with your state league to provide a toll-free number for employees to call in a disaster situation.

Three Essential Disaster Recovery Training Exercises

Your disaster recovery plan isn’t ready to do its job until you’ve tested it and worked out the bugs. These three training exercises can do that, and also make the plan real for the employees who may be implementing it under difficult circumstances.

1. Preliminary structured walk?through

Involve all the employees who play critical roles in conducting your credit union’s business interruption procedures. Read through the plan together, step by step. Note any issues that arise during the walk?through, and clarify them before moving on to the following simulations.

2. Disaster simulation

The most practical type of simulation may be the “table?top” format, where the exercise is conducted in a conference room or series of rooms, where employees can gather in functional groups. It generally takes two to four hours. You need a credible disaster scenario fully written, including a series of events that happen in timed segments. A facilitator explains the hypothetical events as they happen, and employees must carry out key elements of your business interruption plan.

3. Technical “hot site”

Your plan should include procedures for running operations from alternate sites. The term “hot site” refers to a pre?determined facility where the credit union will have access to its data, and the ability to conduct transactions. This is a demanding test to set up, but it provides critical hands?on experience. A hot site test should require employees to mobilize in the remote facility, establish communications with the necessary employees and vendors, and perform actual processing.

 

Many of the lessons CUNA Mutual Group and their bond holders have learned about how to prepare for and handle disasters are channeled into the company’s Protection Resource Center at www.cunamutual.com.

 

Strategic Link is the NWCUA’s wholly-owned service corporation, providing the Association’s member credit unions with exclusive high-quality, competitively-priced products and discounted services. Questions? Contact Sales & Marketing Associate Craig Reed: 206.340.4789, creed@nwcua.org.

Posted in Around the NW, NCUA.