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Weathering the Storm: Three Ways Banks Can Prepare for Severe Weather

Aug 3, 2020

From tornadoes to typhoons, severe weather can wipe out a business in a matter of seconds.

Despite the fact that suspending business for a period of just a few days can lead to permanent closure within three years, only 25 percent of small businesses have a disaster plan in place.

If shuttering the doors forever isn’t reason enough, when a business is unable to manage and mitigate the physical risk to employees and customers alike, it opens itself up to lawsuits and bad press. For many financial institutions, this poses a unique challenge.

Uninterrupted service is crucial to the customer service promise. Customers can’t make a deposit, close on a house, meet payroll or any of the other transactions that allow their lives to continue when a bank closes early due to a severe storm. Whether employees go home early or seek shelter in place, a comprehensive disaster response plan can be an invaluable tool when forced to make quick decisions due to incoming severe weather.

Fortunately banks can turn to several regulations for guidance to help ensure they’re prepared in the event of a weather crisis:

  • EFA Act, 1989 regulates hold periods for deposits made to commercial banks, as well as how banks use deposits on hold. In order to meet this regulation, federally chartered financial institutions must have business continuity plans in case of an emergency
  • FFIEC assigns a bank’s board of directors as responsible for the implementation of a comprehensive business continuity plan. The regulation also includes suggestions on how a bank might plan for business continuity in case of fire, water or flood damage, severe weather, air contaminants, and hazardous spills.
  • Basel II, Basel Committee on Banking Supervision, 2003 regulates risk in the financial industry by requiring minimum capital to meet economic risk, increased supervision of risk assessments, and transparency in those processes. Similar to the 1989 EFA Act, banks must put in place both business continuity and disaster recovery plans to ensure uninterrupted operations to limit losses, and ultimately meet the requirements of the regulation.

A disaster response or business continuity plan can also clarify how to uphold the supply chain. With a plan already in place, a bank will have established clear processes such as how to prepare facilities and ATMs prior to a storm; who is responsible for transporting cash; how to protect sensitive documents; and how to ensure power supplies remain running, among other considerations.

Build Up Your Bank’s Disaster Protocol

While a devastating weather event may never befall a particular location, other emergencies can happen. Preemptive planning can help, and it often includes the following:

1. Ensure a protocol is in place for every potential severe weather event

Protect employees traveling to and from work by instituting a business continuity plan. Determine which weather conditions may require the closing of some — or all — offices or branches in the same county.

During the winter of 2014, a sudden drop in temperature brought about 2” of snowfall and icy conditions, effectively shutting down the city of Birmingham, Alabama for two days. With frozen sheets everywhere, travel became treacherous, if not impossible, across the city. Many people were stranded on highways and forced to take shelter in their vehicles while they waited for rescue. Regions Bank, a large financial institution based in Birmingham, Alabama, had few options to ensure the safety of employees and customers.

“We usually ask StormGeo for projected precipitation amounts,” explained Kyle Puchta, Vice President of Corporate Security Business Continuity with Regions Bank. “We ask about the temperature and get an idea of how long the precipitation will be around. We ask for any travel or road conditions.”

Regularly scheduled conference calls with meteorologists kept the bank executives informed with up-to-the-minute information.

But this wasn’t enough. Because the Birmingham forecast called for snow, not ice, all sanding and de-icing equipment had been rerouted to the southern parts of the state where the forecast was calling for freezing rain and ice. This meant northern areas of the state had no choice but to fend for themselves. The institutions that didn’t plan ahead were forced to wait out the storm.

2. Spot potential weaknesses

Coordinating a business continuity plan isn’t always enough. Identify where that plan might break down during an actual emergency by organizing periodic vulnerability assessments.

Practice your outage preparation plan. Consider all possible variables with inclement weather. What if the phones go out or email is down? What if internet access fails? Do you have backup communication?

Don’t be afraid to ask for help in assessing your plan. Disaster response consultants have worked with many banks and other businesses to determine whether their plans are sustainable in the event of a hurricane, tornado outbreak, ice storm or whatever type of weather might be a potential interruption of their business. They can help to make sure strategies hold up before a crisis occurs by helping institute and test those plans.

3. Keep communication constant.

Communication is a critical component to a business continuity plan. Create a process on how employees will communicate before, during and after an emergency. Maintain records of cell phone numbers and email addresses for all staff, and update regularly.

However, don’t assume group texts or emails will reach everyone. Consider setting up a centralized communication portal or a password-protected page on your site for messages related to business continuity procedures. Regardless of the communication method selected, it is critical that you test the system during non-emergency times to ensure that everything works properly and employees know what to look for and what actions to take when the actual storm arrives.

In case of power outages, invest in two-way radios like walkie-talkies. Have battery-operated phone chargers at the ready. Distribute a few of each of your branches.

Besides staff, decide how and when to contact outside stakeholders, such as clients, vendors, service providers and media. “We get calls days ahead of an event letting us know about changes,” reported one vendor. Make sure best communication practices are clear and shared to all employees.

While there will always be more important and pressing issues at hand, developing a disaster response plan is a worthwhile investment for financial institutions. With new technology helping meteorologists forecast more efficiently, effectively and accurately, you have no excuse not to be prepared. Don’t let your branches shutter from avoidable damages due to poor planning.

Take the Next Step

Looking for ways to cut costs and damages from severe weather? Need assistance improving your company’s operations and response? Let StormGeo help.

Our meteorologists and business continuity experts work around the clock to give your business the most accurate weather, customized to your needs. Get in touch with one of our team members to learn how StormGeo will empower you to make your best business decisions in times of emergency.