| Sound contingency
plans can prevent or minimize
damage in a crisis. Although natural
disasters are the most obvious and
dramatic, firms also should be prepared to
resume business after a fire or theft, or
the loss of a key firm member. |
continuation insurance can pay for
time lost from client work to
manage the disaster response.
planning, consider the
possibility of the sudden death of a
partner or other key firm member. At
such a time, smaller firms can benefit
from having built cooperative networks
with other professionals.
Don’t put off
crisis management and recovery
planning just because it
seems daunting. List possible crises to
start your firm thinking about how you
would carry on. Assign staff to a crisis
management team and commit a plan to
writing. Then file the plan off site
where it can be easily retrieved should
the worst come to pass.
is a JofA contributing
editor and freelance business writer.
ou’re open for
business and dressed for success. You’ve planned
your CPA firm’s operations with budgets,
flowcharts and contact lists. But are you really
prepared? What if something sweeps away documents,
your equipment or, God forbid, key personnel?
Fortunately, there’s little under the sun or storm
clouds that can’t be foreseen—and the best
possible time to think through how to handle a
cataclysmic event is before it strikes. This
article’s crisis case studies offer valuable
information about how to keep operating when
really big setbacks happen.
Between 1980 and 2005, the
United States sustained 67
weather-related disasters in which
overall damages and costs reached or
exceeded $1 billion. Total normalized
losses for 58 of those exceeded $350
National Climatic Data Center.
CPA, was one of 11 people working late on March
28, 2000, when a tornado tore through downtown
Fort Worth, Texas, wreaking havoc on the 35-story
building that housed Sproles Woodard LLC, the firm
at which he was managing partner.
under the library conference room table. When it
quieted, we came out—to the biggest mess,” he
says. He stepped into the hallway to find rain and
wind raging through broken windows and much of the
furniture in the newly remodeled office in pieces
or simply gone. Miraculously, the computer server
was still running.
AFTER THE STORM, BRAINSTORM
No one was injured, and there was another
lucky twist: The firm had just moved back into its
7,000-square-foot offices, so many still-packed
boxes of documents were intact.
But on the
long walk down 23 floors to the street, Evans and
other firm members could see the building had
sustained extensive damage. The partners called a
staff meeting the following day to brainstorm
about regrouping and to reassure everyone about
the firm’s future. In its strategic planning, the
firm assumed the IRS would not give it deferrals
on the filing requirements for April 15, so it had
to act quickly. Another key concern was whether
the landlord of the structurally sound but
temporarily uninhabitable office building would
release the firm from its lease—or whether the
firm would end up paying rent on two locations at
The firm created a temporary staging
area in a nearby church. Because of safety
restrictions, only seven people were allowed into
the office building to retrieve business
materials, and only for one hour. So they devised
a plan to carry out as much key equipment and data
as possible, taking dollies and boxes with them.
A year earlier the firm had reviewed its
insurance and improved its coverage to include the
cost of a document recovery company, which located
client records in the debris and restored them.
Evans credits the firm’s business continuation
insurance with saving a great deal of expense.
Among other things, it paid for the time lost from
client work to manage the disaster response.
“Trying to get us positioned again absorbed my
life for the better part of a year,” he says. The
firm added work it did on the recovery to its time
and billing codes to keep a record for the
insurance company. “Ask your agent what he or she
recommends having insured in the event of a
calamity,” Evans suggests.
busy-season planning also helped, enabling the
firm to know the status of all tax returns and to
turn its attention immediately to those still
Three days after the tornado, the
firm signed a six-month lease for a
5,000-square-foot office in downtown Fort Worth,
with the option of continuing on a monthly basis.
(It has since moved into permanent quarters in a
new building.) “It was not pretty,” Evans says of
the location, “but we signed in a hurry because
space was a commodity after the storm,” which
affected 1 million square feet of office space.
Long-standing relationships with other area
businesses also proved valuable, as Evans was able
to arrange for immediate cabling, computers and
furniture for the new office.
ZIPPY RETURN TO OPERATION
Of course, it doesn’t take the drama of a
tornado to knock out a small business. When
thieves broke into the office of one of CPA Bob
Fay’s clients, they took the computer and printer
that represented the client’s entire technology
system. After alerting the police, the client
called Fay, a sole practitioner in Canton, Ohio,
who had only recently suggested the client back up
its software and store its data off-site.
Fortunately, the client’s part-time bookkeeper
had taken home a Zip drive containing all company
data, as Fay had advised. With the data safe, the
client was back in business by 3 o’clock.
“The theft could have been a crisis for a small
business owner,” Fay acknowledges, “but this was a
real, practical case of a disaster avoided.”
While it’s common knowledge that backing up
information is important, Fay underscores the
importance of defining the term and details with
clients. “The CPA may believe it means the data
are being backed up and then taken off-site—but
the client may simply be putting the Zip file in a
filing cabinet,” leaving it vulnerable to theft or
Taking unprotected information
off-site can lead to problems of its own, of
course. CPA and consultant Roman Kepczyk of
InfoTech Partners North America Inc. notes that
laptops and even physical files can be lost or
stolen in transit. Even worse, as more files are
stored digitally, computer data can be stolen. He
recommends a simple tool that can prevent
disaster: a USB (universal serial bus) memory fob.
Also known as a flash drive or memory stick, it is
plugged into a computer’s USB port, becoming an
extra drive that copies files or a directory and
can then be carried on a keychain. It is roughly
the size of a remote car key fob and holds up to
several gigabytes of data.
HARDEST LOSS TO BEAR
Sometimes firms are forced to face the
unimaginable. Schleisman Onken & Associates PC
of Omaha, Neb., confronted a devastating personal
and professional disaster. Once a sole
practitioner, Tom Schleisman had teamed with his
son, Greg, to buy another small practice, and
added Jane Onken as a new partner. The firm then
began a formal transition toward Schleisman’s
All that changed on
April 30, 2003, when Greg, his wife and daughter
were killed in an auto accident.
did I lose my son and business partner, but my
family situation changed,” Schleisman says, as he
and his wife became guardians of Greg’s surviving
three children. “I almost immediately went from
working 60 hours a week to working 40,” juggling
the challenges of holding family and firm
The firm was able to weather the
tragedy in part because of the succession planning
process already in place. “I had reduced my client
service by about 20% and my administrative duties
by about two-thirds,” Schleisman says. “We had
people in line to take over,” including Onken and
firm member Brian Dervin, who was able to take on
many of Greg’s technical assignments.
firm also reached out to other local CPA firms
with which Schleisman had built strong
relationships over the years, seeing them as
potential business partners rather than
competitors. Schleisman set up support agreements
under which the other firms supplied staff as
needed. “They did report reviews and tax return
research and took on problem jobs that it would
have taken us hours to do ourselves,” he says.
Schleisman advises firms to think through
all possible disasters in the short and long term
and analyze how well the practice is prepared to
face them. “Ask yourself, ‘If this partner was
gone, who would do that work?’” Extend this
exercise to all key client-service people,
including support staff and receptionist. And
realistically consider how much excess capacity
you have in peak times. If human resources are
stretched to the limit, you’re at very high risk,
What else can firms do to minimize their
risks? Take time once or twice a year to list
possible crises, put them in priority order and
develop contingency plans to address them (see “
Gear Up for Trouble, ”
Up for Trouble |
framework can be adapted to a
variety of situations, from
natural disasters to loss of a
key client or rifts within a
Lay the groundwork.
Develop a crisis
management team. This might
involve the entire practice in
a small firm, with each person
playing a role in anticipating
and coping with a crisis.
vulnerabilities. Inside the
firm, they could be losing
staff or leaders. Outside,
they could include client
defections or crises,
competition, world events or
fire, flood or other natural
those risks might affect the
firm, including its
facilities, computers and
financial situation, vendors
and business partners.
Prepare for the
Establish a chain
of command for the crisis
management team. Decide who
will do what in various
situations and in what order.
Determine how you
will communicate work in an
emergency, including backup
operations. Decide who will be
in charge of disseminating
information and who will
receive it, including people
outside the firm, such as
clients and vendors.
plans in writing. Keep them
off-site in a safe place the
crisis team can access in an
for various crises at least
once a year.
Update the plans
at least quarterly to reflect
changes in the firm, its
business environment and other
issues, and to include new
crisis management team
If there is a real
leadership. The designated
firm leader should notify the
crisis management team and set
the response plan into action.
He or she should maintain
contact with the crisis team
and remain visible to staff
and outsiders throughout the
single spokesperson should
keep staff and outsiders
informed. Make clear to firm
members and outsiders that the
crisis is being addressed.
Firm leaders should remain in
contact with the crisis team
and any affected outsiders.
Know when it’s
over. Firm leaders should
determine when the practice
can relinquish crisis mode and
resume normal operations.
firm’s response and make
improvements as needed.
Source: Jennifer Wilson,
Above all, avoid the worst mistake of all:
sidestepping disaster planning altogether because
it seems too daunting a task. Don’t make the
effort bigger than it has to be. You don’t need to
create a 40-page plan. Begin with small bites.
Simply pick a disaster and start thinking.