The recent announcement by the justice department that the Obama administration is stepping up enforcement of disaster preparedness, business continuity, and environmental protection laws and moving that enforcement from corporate compliance divisions to criminal investigation and organized crime divisions is vital to companies of all sizes. We’ve all witnessed what can happen when disaster strikes a corporation. Whether it’s oil spilling into the Gulf of Mexico or radiation leaking into the air and ground, the effects of a disaster are lingering and far-reaching.
Here’s what the justice department’s new focus on enforcement means: If a large company, such as BP, does not have a viable disaster plan in place, they are going to be criminally charged. But this is more than just criminal liability at a corporate level; the justice department is now going after individuals in the corporate C-suite, as well as all the way down to individual front line employees. It’s similar to how the justice department deals with organized crime by going after the capos as well as the foot soldiers and even the corrupt sanitation worker who took the garbage and the pay off money. The justice department is now looking at corporations and asking them a simple question: Was there a benefit to the individual who ignored basic business continuity, safety, and disaster preparedness issues, regardless of whether there was a written plan?
The message to all businesses and corporations is clear: Just having a binder called “Disaster Plan” sitting on the shelf and collecting dust is no longer enough. A real plan is more than words on paper. It has to be both active and followed, which means having frequent updates, drills, and a “culture of safety” and “culture of preparedness” in the organization. In other words, does Joe the janitor have any idea what the disaster plan is AND does he know what his role is during a disaster? Just as a child knows to stop, drop, and roll in the event of a fire and to crawl under the smoke, every worker at every level needs to know his or her role during a disaster. If an inspector were to walk up to Joe and ask him what his role would be during a blowout oil spill, Joe needs to be able to articulate his duties, even if his role is nothing more than putting on his life vest and directing people to the nearest life boat. If that’s Joe’s role, he must know it.
Does having this level of preparedness involve more money, time, and prep work? Of course it does. This is a huge burden initially. But looking long term, it provides a level of economic protection. It’s much like the old MasterCard commercials: Preparedness manual online – $60; Disaster drill – $5,000; Avoiding the multi-million dollar lawsuit, regulatory fines, and jail time – priceless.
New Life for an Old Law
This law is not new; its enforcement is. Similar laws already exist and are enforced in the European Union. In the United States, this PS Prep law (Private Sector Preparedness law) was actually passed in 2009 as one of President Bush’s last measures, but it was largely ignored as the recession and H1N1 pandemic took center stage.
Currently, the PS Prep law requires business continuity and continuity of operations planning for all businesses with more than 100 employees, and it will soon apply to companies of all sizes. So even if you’re a small business will only 20 employees, if you receive any federal funding, federal contracting, or have an SBA loan, you will need to meet PS Prep certification. Currently, all publically traded companies are already being held to PS Prep certification guidelines by the companies that rate stocks, even though certification doesn’t yet exist from the government.
If this news comes as a surprise to you, you’re not alone. Most businesses don’t know about this law, as it was “sneak through legislation.” In other words, it was “packaged” with other legislation that was bound to pass. The only difference is that no one in Washington enforced PS Prep, until now.
The Good and the Bad of It
With certification requirements such as this comes a few challenges. Unfortunately, having a certification process allows for large companies to gain a permanent market niche, as those who get in first will always have an advantage over those who come in later. Here’s why: If you’re already in the marketplace, you’re considered a market expert. Any new regulation requires that market experts be part of the panel that determines the requirements. Once the first set of rules are established, everyone gets certified under those rules. Then, the people who made those initial rules modify them. Since they are already certified and don’t have to be re-certified, they make the rules tighter and more difficult so newcomers can’t effectively compete.
We saw this happen in medicine when the initial push for board certification came about. In reality, there is no difference skill wise between a board certified surgeon and a residency trained surgeon. Over the years, the original market experts—the physicians who were at the forefront of board certification—have changed the certification rules so that a non-board certified doctor can’t even practice anymore, even though they are just as qualified as a board-certified physician. Therefore, with any type of required certification, such as PS Prep, you’re creating not only a market niche for yourself, but a permanent market niche where everyone thereafter has a harder time staying in the market because the initial market experts added more difficult requirements.
Additionally, while disaster preparedness is always a good thing, certification has some dangerous implications. For one, certification implies an endpoint as opposed to a process. It’s much like eating healthy versus dieting. If you change your eating habits and adopt a healthy lifestyle, you may or may not lose weight, but you will live longer than if you diet repeatedly. That’s because changing your eating habits prepares you for a healthier lifestyle, whereas dieting is an endpoint. It’s a short-term fix that addresses a short-term goal.
Likewise, disaster preparedness certification is an endpoint. The temptation is for a company to get their certification, stick it on the wall, and then go back to the old ways. Nothing changes. In contrast, disaster preparedness as a process and safety as a culture are ongoing daily events. And that is where the Obama administration appears to be going with this most recent announcement. The justice department will take lack of disaster preparedness to the criminal division and will do criminal investigations on those individuals who ignored it and on those who created a culture of un-safety and un-preparedness for some form of personal benefit.
While this level of enforcement is customary in Japan and Britain, this is a titanic shift in enforcement in the United States.
The newly enforced regulations definitely impact the economics of a disaster. Therefore, no matter what size business you are, take heed: Get your PS Prep certification now. Get it early and keep it up to date. If you lose it, you’re going to have higher costs and more frustrations in the future to meet the tighter regulations down the road. Yes, disasters happen. But when you’re prepared with a “culture of preparedness” and a “culture of safety,” the damage can be minimal and your company can prevail.