Risk Mitigation in Action: How a Plan for a Helicopter Crash Helped in a Snowstorm

The lifecycle of risk management can be broken into three basic phases: identification, assessment and mitigation. Companies with truly mature risk management programs have processes in place for each of these phases, but companies just getting started with risk management are not always as comprehensive in their approach. In fact, it’s not uncommon for an organization to start addressing risk by focusing on identification and assessment, but not yet have defined plans in place for mitigation once an event occurs.

However, it’s important to realize that mitigation is arguably the most important part of the risk management lifecycle. Sure, it’s possible to play it by ear when a risk event occurs—make the phone calls, make the quick decisions on the spot—but it’s not the ideal way to handle this kind of situation. The emotional impact of a major problem is so strong that having a defined plan is essential to optimize rational and structured actions.

At Zurich Insurance Group, we help companies make sure that they’re actively covering the mitigation phase of the risk management cycle by defining business continuity plans for specific risk events. And one of our most interesting takeaways from this experience is that an action plan for a specific risk event can sometimes be applied in cases where an unexpected, different kind of risk event occurs. In our recent webinar with riskmethods, we discussed a case study where an action plan for a helicopter crash was applied after a snowstorm.

The effects of the collapse were devastating. All gas, water and electrical services had to be shut down for safety reasons, and the plant lost 70% of its production potential—70% of production potential on a plant that was responsible for 78% of the company’s annual gross profit.

The roof collapse was bad, but there was some good news: The company had a plan. They had prepared for a scenario where a helicopter crashed into the building—and although there was no helicopter crash, the effects of such a crash were extremely close in nature to the effects of the roof collapse caused by the snowstorm.

Fifteen minutes after the collapse, the plant manager was informed. Five minutes after that, the crisis team was in action. Even though it was the middle of the night on a Saturday, the entire team assembled to survey the damage. At 9:00am the next morning, they had their first official meeting, and put the following actions in place:

• Organized official communication to the country risk manager​, insurance broker​ and the sales department
• Met with an engineering company to discuss the plant restoration
• Spoke with main suppliers to apply recover actions
• Decided where to move production lines

80% of the recovery measures put in place were exactly the same as in the case of a helicopter crash. Eventually, their plan included:

• Relying on support from within the company’s distribution network, with other plants providing backup for the first few days
• Setting up production in a nearby rented facility
• Hiring 100 new workers to do manual assembly ​that replaced automatic assembly lines destroyed by the roof collapse

The results of fast, defined action were tremendous: Although the plant lost 70% of its production potential, the end result was only a 12% loss in gross profit.The story of this Italian plant is not unique, and illustrates a crucial point: Taking the time to make a risk mitigation plan and practice it will save you time and money when a risk event occurs. So: Does your company have a plan?

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