77. d. Emergency response procedures are those procedures initiated immediately after an emergency occurs to protect life, protect property, and minimize the impact of the emergency (loss control). Maximizing profits can be practiced during nonemergency times but not during an emergency.
78. The post-incident review report after a disaster should not focus on:
a. What happened?
b. What should have happened?
c. What should happen next?
d. Who caused it?
78. d. The post-incident review after a disaster has occurred should focus on what happened, what should have happened, and what should happen next, but not on who caused it. Blaming people will not solve the problem.
79. An effective element of damage control after a disaster occurs is to:
a. Maintain silence.
b. Hold press conferences.
c. Consult lawyers.
d. Maintain secrecy.
79. b. Silence is guilt, especially during a disaster. How a company appears to respond to a disaster can be as important as the response itself. If the response is kept in secrecy, the press will assume there is some reason for secrecy. The company should take time to explain to the press what happened and what the response is. A corporate communications professional should be consulted instead of a lawyer due to the specialized knowledge of the former. A spokesperson should be selected to contact media, issue an initial statement, provide background information, and describe action plans, which are essential to minimize the damage. The company lawyers may add restrictions to ensure that everything is done accordingly, which may not work well in an emergency.
80. Which of the following statements is not true? Having a disaster recovery plan and testing it regularly:
a. Reduces risks
b. Affects the availability of insurance
c. Lowers insurance rates
d. Affects the total cost of insurance
80. c. Both underwriters and management are concerned about risk reduction, availability of specific insurance coverage, and its total cost. A good disaster recovery plan addresses these concerns. However, a good plan is not a guarantee for lower insurance rates in all circumstances. Insurance rates are determined based on averages obtained from loss experience, geography, management judgment, the health of the economy, and a host of other factors. Total cost of insurance depends on the specific type of coverage obtained. It could be difficult or expensive to obtain insurance in the absence of a disaster recovery plan. Insurance provides a certain level of comfort in reducing risks but it does not provide the means to ensure continuity of business operations.
81. When an organization is interrupted by a catastrophe, which of the following cost categories requires management’s greatest attention?
a. Direct costs
b. Opportunity costs
c. Hidden costs
d. Variable costs
81. c. Hidden costs are not insurable expenses and include (i) unemployment compensation premiums resulting from layoffs in the work force, (ii) increases in advertising expenditures necessary to rebuild the volume of business, (iii) cost of training new and old employees, and (iv) increased cost of production due to decline in overall operational efficiency. Generally, traditional accounting systems are not set up to accumulate and report the hidden costs. Opportunity costs are not insurable expenses. They are costs of foregone choices, and accounting systems do not capture these types of costs. Both direct and variable costs are insurable expenses and are captured by accounting systems.
82. Which of the following disaster-recovery alternative facilities eliminates the possibility of competition for time and space with other businesses?
a. Hot sites
b. Cold sites
c. Mirrored sites
d. Warm sites
