Archive for April, 2009

A Disaster We Inflicted On Ourselves

Tuesday, April 28th, 2009
September 27, 2001 Re-Opening

September 27, 2001 Re-Opening

I recently blogged about my interview with Associated Press Business Reporter Joyce Rosenberg. We agreed that the current Wall Street crisis is, in many ways, a greater threat to the vitality of Lower Manhattan small businesses than the consequences of 9-11. I took a photograph of an empty subway train at the Wall Street stop to accompany that blog entry and happened to notice that it is almost identical to the photograph I had taken in an empty subway train at the same stop. My attorney happened to remark to me that the financial district is like a ghost town these days. But I noticed another similarity.

Attached are two photographs I took on September 27, 2001 of Mangia, which is a chain of sandwich and lunch restaurants in New York City. This particular one is located on Wall Street and it is where one of my business school class mates, Alex Krutov, often meet for lunch. I mentioned Alex in the first edition of my book as he was on his way to meet me in my Wall Street office from his home in Brooklyn on the morning of 9-11-01. After I made it safely out of the World Trade Center, I attempted to reach Alex by mobile phone to tell him what had happened and urge him to turn around and leave the area. Anyway, we were evacuated on September 11, 2001 and allowed to re-open in our office building one week to the day later. This is because of the symbolic importance attached to reopening the New York Stock Exchange. Had we been located even one block north or south, our reopening would have been delayed by many more months.

A Sad Occasion

A Sad Occasion

This photograph shows the reopening of Mangia on Wall Street on September 27, 2001. In the window, you can see a cake on which the icing announced “Welcome back”. The restaurant recently closed. Its business consisted of serving lunch to workers on Wall Street and the financial district and catering meetings at Wall Street firm. With the demise of several of the largest Wall Street firm, major layoffs among the surviving banks and reduced discretionary spending among those workers who remain employed, Mangia could not remain open for business. This is a restaurant that successfully recovered after 9-11.

Not Again!

Monday, April 27th, 2009
An Unwelcome Visitor

An Unwelcome Visitor

In Prepare for the Worst, Plan for the Best: Disaster Preparedness and Recovery for Small Businesses (John Wiley & Sons Inc., second edition, 2008), I wrote (page 190) that “the residents {of Lower Manhattan} who heard the planes crash into the towers were especially sensitive to loud noises. I remember being woken up at 3:30 a.m. one morning by a pair of F-16 planes overhead. As it turns out, the planes were not supposed to fly that route at that hour. The pilots presumably did not appreciate that the residents of Lower Manhattan were probably sleep-deprived and hyper-alert to such sounds. Having spent some time with small businesses on the Gulf Coast, I can tell you that they are going through exactly the same process.” Today, the White House organized a photo opportunity that consisted of a military aircraft chasing a civilian aircraft over the airspace of Lower Manhattan, directly in the vicinity of Ground Zero. You can imagine the reaction that was provoked by that abuse. The White House claims that New York City authorities were given advance notice of this planned exercise, presumably implying that local authorities were responsible for the anxiety that ensued. My colleague photographed the planes with his cell phone, which is the first photograph on this blog entry. The second photograph shows a group of Dow Jones employees, nearly all of whom worked in the World Financial Center on 9-11, outside their office building when a mandatory evacuation had been ordered.



The context of the quote from my book concerns the emotional reactions to disasters, sometimes years after the original event, which is something you have to anticipate. One of my colleagues said it best in an e-mail he sent to our group, so I will quote him directly “The fact that the White House could not be bothered to let the New York authorities know that there would be A FIGHTER JET CHASING A PLANE! AROUND LOWER MANHATTAN really makes me wonder who is keeping Gotham safe when something actually happens. I am sufficiently enraged that I will be communicating in ALL CAPS for the rest of the day.” So I think you get the point about emotions. Actually, all Americans should be angry about this, not just those of us in Lower Manhattan who were subject to more abuse. The White House has some explaining to do as to why taxpayer monies were spent on this “photo op”. Don’t we have an unemployment rate approaching 10%? Haven’t our as yet unborn grandchildren been sold as indentured servants to our foreign creditors? It is not like we have money to burn.

Small Businesses Need to Contain the Spread of Swine Flu

Sunday, April 26th, 2009
We Work in Close Quarters

We Work in Close Quarters

The U.S. has declared a public health emergency to facilitate the shipment of approximately 12 million doses of flu  medications from a federal stockpile to states in case they may be eventually needed. Thankfully, that does not yet appear necessary. As Mexico has reported 86 people died as a result of the swine flu, possible swine flu cases have surfaced from as far away as New Zealand. Canada has confirmed six cases of swine flu and the U.S. confirmed 20 cases in 5 states, all with mild symptoms, who are recovering easily. In both the U.S. and Canada, the confirmed cases appear to have originated with students who had recently visited Mexico.

As the cases of swine flu reported outside of Mexico appear to be mild and have not resulted in any fatalities, public health officials do not consider the flu to be a pandemic threat. Nevertheless, the public should take precautions to contain the spread of the flu virus.  I had the opportunity to discuss this topic, in the context of the SARS threat, when working in Beijing not long ago. Many factories in mainland China experience significant workforce absenteeism owing to SARS-related illnesses. Working remotely is not an option for assembly line workers, but for other factory employees, such as office staff, it might be. Preparing for remote operations, or telecommuting from home, is a precaution that you should take in dealing with less severe threats. If employees don’t have to come to work, where they will be in close contact with other, possibly contagious people, in public transport or in the work place, allowing them to work from home may slow the spread of the illness. Some employees may have to work from home if they are caring for sick relatives.

I wish I had done that this past week. I spent the week in a newsroom where people work in very close proximity to one another. All week long, I had people coughing around me, but I felt great. Of course, this being the ideal weekend for outdoor activities with beautiful weather, I became ill on Friday within a few hours of coming home. I spent the weekend in bed, drinking lots of fluids and taking over-the-counter remedies. I think I have something more mundane than the flu, but it was unpleasant. I should take my own advice. For more information on how small businesses may prepare for public health risks, please see the attached article from New York Times Small Business feature. Reporter Patricia Olsen interviewed me in connection with a SARS-type threat, but the lessons remain applicable.

Home Distractions

Thursday, April 23rd, 2009
Plan Your Home Need in Advance

Plan Your Home Needs in Advance

In Prepare for the Worst, Plan for the Best: Disaster Preparedness and Recovery for Small Businesses (John Wiley & Sons Inc., second edition, 2008, first edition, 2002), I urged small businesses to prepare their homes and families for disasters and to encourage employees to prepare as well. This is critical to support the members of your small business family: give them the tools and information that they need to protect their families and households against the risk of disaster. It enables buy-in as employees can see the benefits of supporting the disaster plan for the small business: they can take this methodology home to benefit their families. It also proactively addresses recovery issues, as employees who are worried about the security of their homes and families in the immediate aftermath of a disaster are unlikely to be very productive in contributing to the essential recovery tasks of the business. Now add another benefit to family and home preparedness: long, long distractions brought about by post-disaster litigation.

QBE, an insurance company, is involved in litigation with Florida condominium residents concerning allegations over unpaid insurance claims arising from the 2005 hurricane season. Imagine what a stressful and unnecessary distraction this must be for the individuals concerned. This is yet another reason why you must prepare your home and family against the risk of disaster which includes carefully crafted insurance coverage and you must encourage your employees to do the same. And propose arbitration to resolve disputed issues with your insurance company. Both sides lose in lengthy litigation; only the lawyers win.

Protecting the Business Against the Disaster of Litigation

Wednesday, April 22nd, 2009
Use Your Head and Protect Yourself Against Litigation

Use Your Head and Protect Yourself Against Litigation

In this blog, I have written extensively about the need for data backups to protect your small business against physical disasters. Now I want to address a disaster of a different kind: litigation. A careful strategy of preserving electronic records may not only be helpful in mounting a successful defense (and, in many industries, is often a legal requirement), it may actually discourage a plaintiff from pursuing your business.

I recently spoke on the topic of disaster preparedness at a conference for smaller law firms. The focus of my remarks was, predictably, data backups, which are absolutely critical to businesses that are as document-intensive as law firms. To my surprise, the discussion among the participants took a different turn when one attorney described the experience of a client who had been served with an onerous discovery demand. He stated that often plaintiffs make such expansive demands in the hope that the defendant will not be able to produce what is required and that they can win a judgment on default. This particular client was exceptionally prepared, as the IT and legal departments had been working together on the matter of records preservation in connection with their disaster preparedness efforts. They complied with the demand in a timely manner, thereby creating a dilemma for the plaintiff: to sift through all of the records would have been extremely time-consuming and expensive with no guarantee of a commensurate benefit. Moreover, having charged out of the gate with an aggressive discovery demand, the plaintiff could expect little sympathy from the judge to a request for an adjournment. The plaintiff subsequently dropped the lawsuit. The attorney added that he believes that this thinking is the reason why the federal government settled its case with Arthur Anderson so quickly: the Department of Justice would be unable to justify spending taxpayer funds on an analysis of the reams of documents it had demanded from Anderson, which documents Anderson dutifully produced.

So consider your data backup in the context of a strategy for litigation deterrence. This lesson was so important that I wanted to share it with you. By the way, the graphic accompanying this blog, is a photograph I took in a subway station in Brussels, Belgium.

Protect Your Workers, But Manage Your Costs

Tuesday, April 21st, 2009
Protect Your Workers, But Manage Your Costs

Protect Your Workers, But Manage Your Costs

In this economy, small businesses are under pressure to cut expenses. One area to consider is workers’ compensation insurance, which is typically a mandatory coverage for businesses, depending on your state’s requirements. Should a disaster cause injury to an employee on the job, or while performing work duties when disaster strikes, these components of your insurance program will be very important to the recovery of your employee and your business.  Workers’ compensation insurance protects employees against the risk of sustaining a job-related injury. It covers medical expenses, disability income benefits, and death benefits to dependents of an employee whose death is job related. Premiums are assessed according to payroll and depend on the industry classification of your business. An advertising firm would pay lower workers’ compensation premiums than a construction company, reflecting the relative risks of injury to employees of those two businesses.  That is why it is important that you classify employees accurately for their job descriptions and wages. If you are adding new employees to your payroll, be certain to update your workers’ compensation coverage to avoid incurring an additional year-end charge.

Obviously, the risk of incurring workers’ compensation-related claims increases with the occurrence of a disaster: employees may incur injuries themselves while evacuating the business premises, stress-related injuries and depression and other types of disorders may occur as a result.  Be certain that your workers’ compensation coverage is up-to-date. Similarly, employees injured in disasters while on the job may require disability benefits.  Certain states mandate coverage for short-term disability for all employees.  Check the Web site of your state’s insurance commissioner or consult with your insurance broker to learn the requirements of your state.

I have three suggestions that may help to reduce your workers’ compensation premiums. First, ask your insurance company about merit-rating credits.  In most states, small businesses that have favorable claims experiences may be entitled to credits toward their premiums.  Second, consider adding a deductible to your workers’ compensation policy.  Workers’ compensation typically covers from the first dollar of losses, but most states allow deductibles that will reduce your costs. Finally, consider foregoing coverage for yourself or for other officers or directors of the company.  Many states let small business owners and certain officers and directors opt out of their workers’ compensation policy.  This would lower costs, but would leave you without workers’ compensation benefits should you be injured on the job.  This may make sense if you have medical insurance to pay for medical expenses incurred in an on-the-job injury or other means of financial support, such as a disability income policy, if you or any of your directors and officers were medically unable to work.

By the way, if you are wondering about the image I posted to this blog, it is a photograph of an office building in Brussels illuminated in the evening. It is the headquarters for a labor union organization, which I thought a fitting image for the topic of workers’ compensation insurance.

Spring Snow Storm Disrupts Small Businesses, Travelers and Residents

Monday, April 20th, 2009
Beautiful but destructive

Beautiful but destructive

Over the weekend, a powerful storm left more than three feet of snow across the Rocky Mountains and areas west of Denver, stranding hundreds of travelers, as airlines canceled flights. United Airlines, which has a hub at Denver International Airport, canceled 76 flights Friday, 14 on Saturday and delayed several others. Dangerous road conditions caused numerous traffic accidents across the area, one of which resulted in a fatality. The snow fall ranged from 3 to 10 inches in Denver to as much as 52 inches in Pinecliffe. The snow had prompted the closure of Interstate Highway 70 between Vail and Golden, forcing more than 500 people to spend the night at American Red Cross shelters in Idaho Springs and Georgetown. The National Guard delivered two truckloads of cots, blankets and food. About 15,000 homes and businesses in and around Denver were without power. Restoration of power was delayed by the lack of access to roadways caused by heavy snowfall. While severe snowstorms in the spring are unusual, power outages are not. This presents an opportunity for all small businesses to remember certain basic preparations for dealing with power outages.

Protection of computers and data.
Even when electrical power is available, there are quality issues, like peaks in voltage as well as micro-outages. Since IT equipment is sensitive, use an uninterruptible power supply unit (UPS), which is usually a surge protector, together with a small buffer battery that would supply energy for about ten minutes after the electricity supply is terminated, enough to finish important work and to shut down the system. Most units support an automatic shutdown before the battery is completely depleted. Some buildings supply self-generated backup power. Please note that this power is usually much “dirtier” than power from the outlet. Under these circumstances, you must use a UPS unit, preferably one that is designed to smooth out erratic electricity supply.

Certain high-rise apartment and office building have back-up generators that provide low levels of power for up to fourteen hours after termination of the central electrical supply. Many workers and residents of these buildings mistakenly believed that a volt of electricity is a volt of electricity irrespective of whether it comes from the central utility or a back-up generator. They often use their home and office computers with electricity delivered from a back-up generator, without the benefit of a UPS unit, and damage their computers in the process. Also, remember to turn off appliances and equipment during a power outage as power supply may be erratic when it is initially restored.

Basic measures of preparation.
Of course, all of the basic measures for preparation apply (keeping battery-operated radios, extra batteries, non-perishable foods, flashlights, bottled water, etc.) for both your home and your office. It also bears repeating that measures recommended for small business contingency will yield immediate benefits to your business in terms of improved operating efficiencies, even if disaster never strikes. Finally, remember that each suggestion put forward for small business contingency solutions can be applicable to home and to personal needs.

The Tragedy That Never Ends

Sunday, April 19th, 2009
Something of Substance

Something of Substance

For the small businesses that are based in Lower Manhattan in the vicinity of the World Trade Center site, and for the families that also live there, there is no end in sight. The ongoing reconstruction of the site, the round-the-clock noise and disruptions and concerns about environmental hazards (coupled with an extraordinary process for the demolition of 130 Liberty Street, the office building opposite the WTC) should have ended years ago. The endless and inexplicable delays prolong emotional trauma that should be healed and needlessly disrupt lives. It is an abuse of the residents and small businesses and an abuse of the American taxpayers who are underwriting this farce. Today there was another unwelcome but not, given the history, unexpected, development.

The Associated Press cites anonymous sources within the Port Authority of New York and New Jersey, the government agency which owns the World Trade Center site, that construction of two of the three towers planned for the site may be delayed for more decades, possibly until the year  2030. The delay is attributed, in part, to conditions in the real estate market. Of course, these market conditions would not be pertinent had the reconstruction proceeded in a more efficient manner: the site would should have been redeveloped years before the collapse of the credit markets at the end of 2008.

The other sad irony, that was not cited in the AP report, is that the various subsidies offered to real estate developers, such as Liberty Bonds on a tax-advantaged basis, probably undermined market forces in a way from which Lower Manhattan is unlikely to recover. The various corporate welfare programs incented developers to flip from commercial to residential properties. I am not a big believer in “if you build it, they will come”. Rather, I would see an entrepreneurial opportunity in response to market demand. If you think that there is a demand to live in the financial district, go there and try to buy a newspaper on the weekend or find a decent restaurant that is open late at night. In any event, the developers responded in a rational way by taking the incentives. Many small businesses, such as my own, that were successful were displaced to make way for these grand scheme projects, that now sit vacant.

Large downtown employers in the financial district (such as Lehman Brothers and Merrill Lynch) no longer exist and others (AIG) are in trouble. With fewer jobs available in the financial district, and no other reason to live there unless you are an investment banker who works 100 hours a week in that neighborhood, there is little demand to buy apartments. There is such too much uncertainty about employment in that community and mortgage financing is harder to access. I made the decision to move out of our Wall Street office with very little enthusiasm. I miss that community. But now I am glad I did. The photograph, by the way, is one I took of a more enduring symbol of New York. I snapped a picture of the Brooklyn Bridge illuminated at night from my seat in a taxi cab as we were driving down the FDR. I find it to be a more optimistic picture than that of Wall Street now, with its chain retailers, it has lost its character.

Sign of the Times

Saturday, April 18th, 2009
Lots of Space Here

Lots of Space Here

Yesterday, I participated in a telephone interview with Joyce Rosenberg, the small business writer of the Associated Press for an article she was researching on small business disaster preparedness. To see the article, which was published today, click here.

In addition to covering the small business beat, Joyce also writes about banking and finance issues for the Associated Press. As we are both based in the New York City area, our conversation took a turn around the topic of the banking crisis and its implications for our local economy. I took this photograph of an empty subway car (the #5 from the Wall Street station!), a sure sign of the times. It wasn’t that long ago when we worried about the risk of injury to passengers on overcrowded subway platforms. For the local small businesses that serve banking clients, such as restaurants, accounting firms, law firms, messenger services and copy and printing businesses, the ripple effects have been devastating. Unfortunately, business interruption insurance only obtains when there is a triggering physical event, not an economic downturn.  In my former neighborhood (where residents choose to live largely because of its proximity to Wall Street), there is an entire apartment building in foreclosure. Tenants who have lost their jobs are seeking to terminate their leases without penalties.

Speaking from experience, one of the most challenging issues in disaster recovery is for the small business to make a hard-headed assessment about whether cash reserves can sustain the business until revenues return to pre-disaster levels. This is not an easy assessment to make as small business people are optimistic by nature. In discussions with my peers in the Lower Manhattan small business community today, we arrived at a consensus view that the economy will recover, but Lower Manhattan and Wall Street will likely never again return to the wealth-generating capacity of the past. It is difficult to be a global financial capital within a debtor nation. For the local small businesses that depend on banking clients, it is time to make some tough decisions.

It’s That Time of Year

Friday, April 17th, 2009
Spring Blooms Mean Spring Cleaning

Spring Blooms Mean Spring Cleaning

I took this picture of one of my two favorite florists in Zurich. This one is inside Bahnhof Wollishofen, the Wollishofen train station, and shows spring flowers blooming.

I use the change of seasons in the spring and in the fall to update my records, including my office and home inventory for insurance purposes, and purge outdated or obsolete paper and electronic files. I try to keep up with this task during the year, so it doesn’t become overwhelming. But the change of seasons is a reminder to formally address this need. In addition to providing the serenity that comes with a sense of order, it reduces the risk of human error to ensure that no one is working with obsolete files. (Remember to check both the files and the backups.)

I also use the occasion to replenish essential supplies, such as long-feed fish tablets for the aquarium (should we have to leave the office for more than a half-day), bottled water and other items.

And it is also a reminder to check or change the batteries in the office and home smoke alarms! If you replace the batteries on a seasonal basis, you should never hear the chirping to indicate that power loss is imminent.