Business Survival Lessons Learned From the Rubble

The Aftermath of the Kobe Quake

In August of last year, Computing Japan ran an article outlining the
danger that earthquakes pose to computers and information systems, and
giving general guidelines on how to form a disaster prevention plan. Like
everyone else, though, we wrongly assumed that the danger zone was the
Kanto region, and limited our discussion to the Tokyo area.
This follow-up attempts to correct that mistake. While it concentrates on
what happened in Kobe, the lessons learned are applicable to any
earthquake zone.
by R. A. Lemos and Thomas Caldwell
The January 17 earthquake left many Japanese politicians and businessmen
scrambling, alarmed by Nature's object lesson: over 5,200 dead, some
300,000 buildings damaged or destroyed, and a city in chaos. The total
economic cost of the disaster and cleanup is likely to exceed ·15 trillion
(US$150 billion); the personal and productivity losses are incalculable.
Before the Great Hanshin Earthquake, if a prospering manager had been
told that his company could be put out of business in less than a half-
minute, he likely would have laughed. Yet that is what the quake did to
many companies in and around Kobe. In a mere 22 seconds, Nature
accomplished what many companies' competitors could not - find their
weaknesses and exploit them.

Not fire, not ice

In his famous poem, Robert Frost does not mention the possibility that the
world might end by the ground heaving and raging like a storm-blown sea.
On January 17, though, it must have seemed like the end of the world to
many Kobe residents.

By the end of the day, some neighborhoods had been totally razed; other,
nearby areas received only moderate damage. While at first the damage
appeared to be random, later analysis showed that much of it had occurred
along the coast. The damage was concentrated along an "epi-line," a
jagged ribbon of destruction that had torn through the city, leaving no
visible clues as to the epicenter.

For many of the survivors in Kobe, the disaster had only begun. Numerous
small, family-run businesses were severely damaged (and, in some cases,
destroyed). Since the business often represented the families' invested
savings, there is no source of revenue for them to rebuild.

Some larger businesses were mortally wounded when the buildings housing
them were damaged beyond repair. Many more businesses, though, survived
large-scale property damage only to be hobbled by the loss of data and
information systems. Today's companies are defined by their data, and
nourished on a constant flow of information. If the data is destroyed or
the information withheld, it is difficult for a company to survive.

Choose a safe site

Protecting your company from such a fate requires forethought and
preparation, but the process can be relatively simple in execution. Just a
few common-sense precautions can make a world of difference.

The first thing to consider is the foundation of your business - not just
the facilities you use, but the land on which those facilities are built.
Earthquake intensity varies with the type of ground; firm earth and stone
are fairly stable, while wet and loose soil results in strong seismic
motion. Waterlogged land and poorly packed landfills, like Kobe's manmade
Port Island and Rokko Island, can undergo severe liquefaction (a
phenomenon in which vibrations cause loose soil and wet ground to turn
into a quicksand-like suspension), which typically leads to serious
property damage.

When looking at candidate sites for your next office in Japan, avoiding
buildings that are based on suspicious ground would be a good first step
in limiting possible damage to your business. An examination of the areas
of Kobe designated as shindo 7 - the most devastating level of intensity,
as measured by the Japanese system ó reveals a belt of one kilometer by
twenty kilometers that suspiciously parallels the shoreline. (The shindo
system is based on property-damage levels, with shindo 7 being assigned
when more than 30% of the buildings in a given area are damaged beyond
repair.) Until a detailed examination is conducted in Kobe, however, it
cannot be known whether dangerous land, unsafe buildings, or a combination
of both were responsible for the high level of damage.

For its magnitude, the Kobe quake inflicted an enormous amount of damage.
This has led many to believe that general safety measures for earthquake-
resistant construction are still not adequate in Japan. The Loma Prieta
(the 1989 San Francisco) Earthquake was of similar magnitude and duration,
but few areas suffered damage that would have been classified as shindo 7.
Considering that several Japanese construction companies are suspected of
having inadequately hardened their landfills, staying away from any
building on reclaimed land may be the first and best step to business
survival. (Selecting your office building based on its foundation land's
relative stability may hardly seem feasible, but many in Kobe now
understand that, in Japan, taking such factors into account is
necessary.)

Choose a safe building

After you have eliminated office buildings that are constructed on what is
possibly dangerous ground, you should examine the structure of the office
building itself. Small companies, for example, often base themselves in a
traditional Japanese home, but that may be flirting with danger. It used
to be taken for granted that Japanese wooden houses have a lot of "give"
to them, and that during an earthquake they would suffer minimal damage.
Kobe proved otherwise.

Recently-built ferroconcrete buildings supported by steel girders were
shown to be much more reliable and stable. In a study of 50 heavily
damaged or destroyed buildings in central Kobe, carried out by the Japan
Architecture Association, 55% were constructed of ferroconcrete, 38% were
supported by steel girders, and 7% utilized a hybrid construction. (The
study did not look at wooden buildings.) Photos of buildings with a middle
floor compressed flat have been widely publicized. This phenomenon
occurred in buildings that had steel girders supporting only the lower
floors; the upper structures consisted only of ferroconcrete. Thus, you
should carefully review building construction when choosing your firm's
next potential home. Those buildings with no supporting steel girders
probably should be dropped from your list of candidates.

Construction date turns out to be a fairly reliable indicator of building
durability. Because of the more lenient earthquake regulations of the past
and aging building materials, almost 50% of the buildings destroyed in
Kobe were completed before 1973. Buildings constructed between 1973 and
1982 had a much lower 13% failure rate, while less than 4% of those
finished in 1983 or later will have to be condemned. (The chart on page 22
shows the amount of damage caused by the Hanshin Earthquake and how it
varied with building age.) The Kobe experience confirms that building age
should be an important factor when choosing an earthquake-resistant
building.

Harden your information systems

The information systems that support an enterprise can be roughly divided
into three areas: lifelines (primarily telecommunications, although power
and water lines are important), processing systems (computers), and long-
term storage systems (online and archival data systems). Disaster
prevention plans to keep these systems up and running have various levels
of complexity and cost. Smaller companies cannot usually afford the
measures that larger companies might want -but luckily, they rarely need
such elaborate plans.

Telecommunications, arguably the most important of business lifelines, is
covered in a separate article. (See "Disaster-Recovery Planning for
Telecommunications Security," page 27.-Ed.) Power is necessary insofar as
that it keeps your essential systems up and running. If your connection to
a functioning power grid is severed, your system will go down unless you
have a backup power source. Larger companies often invest in one or more
backup lines to separate power grids, but this is an expensive option. For
small companies, an uninterruptible power supply (UPS) can keep a server
or important data system up and running long enough to perform a
controlled shutdown. If combined with a backup generator, such an
arrangement can keep your company's system up and running as long as
necessary. (Make sure that the generator and its integral systems and fuel
supply are well protected.)

Depending on the extent to which your company relies on processing up-to-
date data, staying up and running may mean life or death to your business.
With forethought, power can be continuously supplied for a number of hours
after an earthquake - but this does not help if the computer at the end of
the plug has been smashed under a desk or thrown out a window (a not
uncommon occurrence during the Kobe quake). When the floor turns into a
trampoline, and previously immovable office furniture suddenly starts slam
-dancing, items on shelves, tables, and desks end up on the floor, crushed
and buried under still other falling items. In a severe earthquake, loose
objects are a danger and can easily be damaged if not destroyed.

Equipment damage caused by an earthquake can be minimized by a few simple
measures. Place the equipment on a stable surface, such as a large table
or desk, the floor, or a modular rack. Clear the area around the system of
objects that may fall over or tumble down. Affix the system components to
the surface on which they rest. (Many CPU boxes have holes to accommodate
brackets and rack mounting, which makes the process manageable.) Having a
long power cord is also important, since whatever object the component is
attached to may move around during a quake; if the components cannot move
with it, they will crash to the floor instead. The Foreign Buyer's Club,
located near Kobe, credits the great slack in the their long power cords
with enabling many computers to survive the quake rather than being pulled
off their desks.

Protect your data

While its parent company, Daiei, is closing 10 department stores because
of extensive damage received during the quake, the Lawsons chain of
convenience stores represents one of the Kobe disaster's success stories.
Through a well-planned point-of-sales network and regular backups, many
Lawsons stores remained open through the disaster and were able to be
restocked within a couple of days. With many other stores shut down,
Lawsons became a central depot for food in the earthquake-ravaged areas.
Their success became a rare public relations victory in the midst of the
disaster.

Whether you believe in Murphy's laws or gremlins, Nature always seems to
find a way to exploit the smallest of oversights (which could explain why
programmers and information technology managers are a superstitious lot).
During an earthquake, a small oversight can become a catastrophic mistake.
When such mistakes lead to the irrecoverable loss of valuable data, as
happened to many businesses in Kobe, a company may not be able to
recover.

The data recovery system can be a simple, manual tape backup or
simultaneous writing to one or more locations, depending on how current a
backup is needed. The most important aspect of a data recovery plan is to
consider how all the various factors will interact to affect business
recovery. The tradeoff between the effort invested in data backups and the
need to keep the protected data current is an important one. Some
companies perform a weekly backup, but they have not studied the question
of whether the firm could recover using week-old data. Where to store the
backed-up data, and how many copies to make, are also important
considerations. In small companies, trusted employees may store the data
at home. Larger corporations often hire a storage service, like Mitsubishi
or Sumitomo Trunkroom.

However the backups are done, the plan should be well thought out. Does
it make sense to simultaneously back-up to a remote site if that site is
just a few blocks distant? Where you keep your backups can be as important
as making them. As an exercise, you should complete a crisis analysis and
brainstorm through what would happen in various scenarios. Your company
could literally rise from the ashes if your data escapes intact. Making
sure that it does should be a top priority.

Plan wisely, and pray

Luck, or a lack thereof, can play a major role in surviving an earthquake.
Chuck Graft of the Foreign Food Buyer's Club remarks, "Our preparation
level was 5 on a scale of 10. Considering that we had stored our backups
onsite, we are extremely lucky to be operating today."

The more prepared your firm is for disaster, though, the better your
chance of being lucky. Give adequate thought to how a disaster might
affect your company, and what measures its employees can take to survive.
Companies that rely on their facilities should choose stable locations;
companies that rely on information should ensure they protect their data
and communications lifelines. You cannot always save your office or
equipment from disaster, but with a little planning, properly backed-up
data, and a reliable alternative means of communicating with your
customers and suppliers, you can save your business.

With a major earthquake (40% probability for magnitude 6 or greater)
predicted for Tokyo by the end of the century, and the possibility of
other major disasters always unknown and unknowable, the management of
your company should be asking itself some basic questions and acting on
the answers. Otherwise, only one question remains: How lucky do you feel?

A fatal error...

There are many examples from the Kobe disaster that could serve as
excellent primers of what not to do. One that graphically illustrates the
consequences of poor planning is that of a foreign firm operating in Kobe,
in the shipping industry. [We'll call it Company A; naming names, after
the firm has collapsed, now would serve no good purpose.-Ed.] Company A
based its business on real-time import/export processing of materials and
customs clearance. Every day, it handled up to hundreds of transactions on
an automated transaction processing system. A local area network of about
80 PC clients linked into a remotely located IBM AS400 system formed the
foundation of Company A's technology infrastructure.

Unfortunately, the company sited its AS400 system only about one
kilometer from its operations facility. The firm kept its backup tapes and
software at another site, also only about one kilometer away. Leased lines
linked the sites locally via NTT circuits, and internationally via KDD's
Venus-P X.25 service to the company's home country operations center.

Fortunately, Company A's operations building in Kobe was only marginally
damaged, and its KDD Venus-P service remained operational. About half of
the PCs remained completely functional, along with most of the LAN, which
suffered minor cable and hub damage. Unfortunately, when the quake hit,
the company lost its domestic leased-line service, and both remote sites
(those housing the computer system and backup system tapes) were
destroyed. The company had no hot- or cold-site facility anywhere in Japan
to back up its AS400.

The company frantically tried to recover its host system by shipping, via
air freight, a new AS400 system that it set up in Yokohama. A recovery
service company was called in to provide additional PCs and a parallel LAN
that was quickly interfaced with the existing LAN. But since all of the
system software and current application data had been lost, there was no
means of bringing the original system back online, so this effort was
ineffective.

Back at the home office, they built a rudimentary application to support
the Kobe operation and attempted to run it over their international X.25
service (at a much lower speed than before). Having wasted valuable time
trying to recover without an adequate plan, however, and now running a
slow system without Japanese-language support, the company lost customers
by the day. Within two weeks, most of its business was gone - customers
having moved to competing shipping agents to have their materials
processed.

Company A has since folded its operations and sold off its only remaining
asset, the main operations building that suffered only minor damage. About
150 former employees are looking for new jobs.

The lesson is clear: Co-locating your backup capability in the same city,
while convenient, does not serve to protect against a widespread
disruption of service. It costs little more to have a backup facility
located 200 kilometers distant, and it is a good deal safer. Company A's
managers had given minimal thought to disaster-recovery planning, and paid
little or no consideration to basic issues. A backup machine, even on a
cold site, would have allowed the company to recover within a day or two.
If your business considers in advance, through a business analysis plan,
the potential loss of your entire business because of one or two weeks of
downtime, you will be in a position to take simple measures to limit the
impact of a disaster like the Great Hanshin Earthquake.-T. Giuffre

And a lucky break

Rokko Island is one of those new, ultra-modern landfills the Japanese
liked to build during the last decade when they had a lot of extra money.
Like most landfill areas, no matter how advanced the construction, the
buildings are still castles built on sand. Rokko Island (which is only 86%
as dense as the Kansai Airport island) sank about two feet after the
quake, due to liquefaction. Most of the buildings had pilings sunk down to
the underlying bedrock, however, and did not sink at all. Instead, the
buildings now stand two feet above the surface of the island.

On Rokko Island is one small foreign capital company that, because of
foresight and planning - and a lot of luck ó survived the earthquake. And,
just as important, they were quickly up and running again after the quake.

To those who live in Japan, the Foreign Buyers Club (FBC) is a well-known
place if you need a steady supply of Shredded Wheat, Gulden's Spicy Brown
Mustard, or some other food from your native land. With over 5,000
customers spread around the country, this relatively small operation (1994
gross sales of about $5 million) is a busy place. The FBC regularly
publishes a catalog of some 2,500 items, including frozen foods, fresh
deli products, and books, and has a database of almost 40,000 others.
Factor in the constantly changing prices and foreign exchange rates, and
you have an enormous amount of data to deal with on a daily basis.

When the quake struck Kobe, the company was ready. FBC's president and
founder Chuck Graft, a bit of a computer nut himself, had stressed the
need for backup almost religiously. The office was also well put together
- not necessarily with an earthquake in mind, but with a lot of room and
space for employees to move around in. More than anything else, this
protected the equipment from falling objects, and long extension cords
prevented computers from being pulled off desks.

Laurie Flippen, FBC's director of marketing says that all the data in the
office is backed up daily and weekly -long-term archive backups are the
rule. The company missed placing only one order with its US supplier
because of the quake, and that was easily carried over to the next one.
While other companies in Kobe were trying to figure out what had gone
wrong, the FBC was able to concentrate on more important things, like
relocating their warehouse and distribution center. "Most of the delivery
companies we work with have relocated their headquarters. Their delivery
schedules were also changed, so it got pretty busy. But most of our
customers were relieved we are still here and in one piece." The FBC was
set up to start deliveries as soon as the delivery companies were able, on
February 27.

Michael Copnall, who heads up the company's book importation arm, says
"It was a bit of a scramble. We were not the only people with things going
in and out of Kobe; It took a little time to convince the port authorities
that food was a bit more important than television sets, but we did."
What it comes down to is: businesses that were ready increased their
chance of survival, and in a few cases came out ahead; many of those that
were not have closed their doors forever. The first few days and hours
after a disaster can determine a company's very existence. If you supply
your customers with essentials, like food, you had better be back on line
fast or say good-bye to them forever. "It is only common sense that if you
lose something, it is not always possible to get it back," says Copnall.
"It pays to take a few extra precautions." - T. Caldwell