In the water’s wake

Firms that were affected by the August floods had one thing in common – the element of surprise. No one could guess how high the water would go or whether it would threaten their operations.

AT EIGHT in the morning on Tuesday, August 13 – the first major day of the flood – it seemed like the high water was still far away. One week later, the Linea Recta advertising agency, headquartered in Modřany, still could not return to its offices. A two-meter high pool of water destroyed the offices so badly that now they cannot be used. “Nobody was expecting it,” says Filip Žák, one of the agency’s managers. “If we had known that it would be such a long time before we could return, we would have taken everything out. Even though we had only five hours until the flood wave came.” Thus Žák summarizes the problems of many firms. Linea Recta was lucky that the situation in Modřany was not severe, and although water washed over the ground floor, it quickly subsided. So after all necessary permits were obtained a couple days later, the firm was able to move most of its undamaged equipment to newly-leased space in Novodvorská.

Reader’s Digest publishing house, with its offices in Karlín, wasn’t so lucky. All data, computer systems and documents for orders were trapped inside the office. So the publishing house, which does 99% of its business through mail orders, had to seriously limit its activities. Luboš Beniak, Director of Reader’s Digest, estimates damages caused by the move to inadequate alternative office space and lost profits to be in the millions of crowns. It is not the killing blow for a firm with a turnover of CZK 1.2 billion, but it is still an unpleasant complication. Losses were not higher because Reader’s Digest had a basic crisis plan prepared. Beniak estimates that even in the case that a real crisis occurred, it would take no longer than two weeks to completely restart the entire operation.

Connections downClients without a telephone or internet connection – this is the problem that many telecommunication operators had to resolve. One such operator was international firm Etel Group ČR, provider of information and voice services for over 1,500 corporate clients. Its exchange facility on Benediktská street, which contains the key technologies, was not damaged, but it was inaccessible. According to the firm’s director, Richard Pinc, the technologies cannot simply be transported, they must go through the complicated process of being “revived”. Therefore, his company was not able to prevent a delay in service that lasted several days. Pragonet and Nextra shared the same exchange facility, and Internet Online in Karlín, was one of the most affected. “Each interruption in operations costs us money because of services we cannot provide,” says Pinc. He doesn’t expect customers, requiring a 100% guarantee of service, especially at a time of crisis, to change operators. “A completely reliable operator does not exist. Even the largest one had problems,” says Pinc, referring to Český Telecom. He feels that the consequences of this event will probably only show up in contractual conditions that will make it easier for clients to withdraw from contracts.

Good crisis management was invaluable to firms during the flood. Linea Recta, a small firm with 25 employees, didn’t have a plan prepared in advance. However, its four managers have worked together for many years and know each other’s weaknesses and strengths extremely well. They divided their responsibilities so that two of them managed work for clients from their homes, one ensured the proper permits and administrative issues concerning the flooded office, and the fourth looked for new premises. They arranged regular telephone meetings with their employees. They handled the situation, and Žák says that it was almost as if they had been at a team-building workshop, which they go to regularly.
Flood scenario
Nevertheless, the larger and more complex firms could not exist without a crisis plan that includes several scenarios on how to proceed in the case of power outages, evacuations, etc. Elvia Assistance can be used as an example. Its partners, and the lives of people with health or accident insurance, depend on the services of this agency, which ensures services associated with insurance claims for many brokers and other contracting clients. Therefore, this company, with 100 employees and a large information and telephone center, cannot afford to interrupt operations for even a short time.
“Our crisis scenario enables us to move to alternative offices within six hours without interruption of operations,” insists Miroslav Doležal, general director of Elvia. So during these six hours the firm moved, under normal operation, into the offices of partner insurer Allianz, transferred the telephone lines, installed alternative technologies and resolved the emergency, with only 10% of its employees being kept away from work due to the flood. Just obtaining an alternative source of power cost them CZK 1.5 million, but considering the half million clients with travel insurance or the almost two million clients with car insurance who might need assistance at that time, this sum was insignificant, Doležal explains.
According to Doležal, some other business and government entities upon which his firm depends unfortunately didn’t behave in the same way. “I believe that the vast majority of companies were not prepared for the crisis. It is a pity that legislation does not impose such obligations,” he says. So, despite the fact that a firm may be hoping to spare its customers the inconvenience of a crisis plan, the result depends on such factors as the panic level of a telecom operator, the functionality of a bank or the professional reactions of other business partners.

Sanjiv Suri Photo: Libuše Rudlinská

Washing away business

Novotného lávka in Prague is an attractive location. Or rather, it used to be. Sanjiv Suri, owner of the luxury restaurant Mlýnec, which has inhabited the site for two years, knows what we’re talking about. Nothing remained in the venue’s larger areas. “It will be like building a completely new establishment,” says Suri, who also operates the restaurants V Zátiší and Bellevue, which were also partially flooded. Renovating them will take several weeks, though Mlýnec might take almost half a year. This means tens of millions crowns lost revenues. Still, Suri doesn’t complain, despite the fact that he cannot estimate the total damages and the impact on his business. “We have to get back as soon as possible,” he remarks. “We don’t have time to think about it too much or feel sorry for ourselves.” He doesn’t intend to change locations, but he is now wondering whether to rebuild the walls or not. “We haven’t given up!” is the message from the other damaged restaurants, which, just a couple of days after the end of the flood alert, came to life and started trying to make back everything that the gap in operations caused them to lose.
For hotels, this process will take a little longer. For example, according to Andrew Farnfield, sales director of the Four Seasons Hotel (located on Veleslavínova street not far from the Vltava), the hotel doesn’t plan to renew operations before the end of October. The estimated income loss is about CZK 100 million. And this despite the fact that the water only seeped in and filled the underground. The most affected hotels in Karlín, such as the unfortunate Olympik (it had a fire several years ago) or the Ibis Karlín, can expect an operational delay of one year, depending on the statics inspector’s verdict. Even hotels the water didn’t reach can feel the damage. “Watching the news on foreign stations, it seems like the Atlantic Ocean poured into downtown Prague,” comments Michal Chour, sales director for the Radisson SAS Alcron hotel, which is close to Wenceslas Square and wasn’t hurt by the flood. “Tourists are frightened, or unwilling to spend their vacations in a problematic area, so they are cancelling their reservations,” he adds.


The aftermathThe floods have subsided, but the crisis isn’t over. For example, Unilever, with headquarters in Karlín and a plant in Nelahozeves, is already back to normal. Yet with such a large firm, the solution to the crisis does not end with resuming operations, insurance proceedings and the calculation of damages. According to Cornelia Roettger, general director of Unilever ČR, it was necessary to reevaluate what should be produced – with priority to cleaning products and groceries. Distribution is also a problem; since much of the general infrastructure was damaged, a new transportation program has been developed. For its employees, the company has prepared a CZK 12 million package for financial assistance, and for its business partners, compensation for damaged equipment, loans, and solutions to problems such as transport are being provided. “Our crisis plan worked. We didn’t lose contact with our customers, which is consistent with our international know-how,” explains Roettger. However, as they were forced to arrange some deliveries from abroad, Unilever wants to ensure that their suppliers will be able to operate during a crisis in the future. “We still want to use Czech suppliers, but we will have to reevaluate the contracts,” says Roettger.
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