Lessons Learned From Sandy

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Please cite as:

Osorio, Arturo E., Lessons Learned From Sandy: Business Recovery and Resilience (November 16, 2015). Available at SSRN: http://ssrn.com/abstract=2739228

You may reach the corresponding author at: Arturo E. Osorio, Ph.D. Assistant Professor of Professional Practice - Entrepreneurship Management & Global Business Email: [email protected] Rutgers Business School 1 Washington Park Room 1028 Newark, NJ 07102-3122 Senior Fellow, Joseph C. Cornwall Center for Metropolitan Studies http://www.cornwall.rutgers.edu/ Fellow, The Center for Urban Entrepreneurship & Economic Development (CUEED) http://www.business.rutgers.edu/CUEED

The report Lessons Learned From Sandy: Business Recovery and Resilience published results from the research project funded by a grant from the Small Business Administration. While every effort has been made to ensure the accuracy of the material in this report, the author and the sponsor will not be liable for any loss or damage incurred through the use of this report

Lessons Learned From Sandy

11/16/2015

B U S I N E S S E S R E C O V E RY & R E S I L I E N C E

This analysis identifies dominant local conditions after a natural disaster and the subsequent needs of small businesses in the area. We highlight the role of SBDCs as supporting the recovery of communities by helping local businesses. The analysis also advances that local SBDCs need to be helped before they are able to help their constituencies.

Arturo E. Osorio Fernández 2015© All Rights Reserved

Lessons Learned From Sandy

ACKNOWLEDGMENTS The following analysis of recovery efforts in New Jersey after Sandy is the culmination of a 12 month study directed by Arturo E. Osorio, PhD., a faculty at Rutgers Business School, Senior Fellow at Joseph Cornwall Center for Metropolitan Studies and Fellow at Center for Urban Entrepreneurship and Economic Development (CUEED) at Rutgers, The State University of New Jersey. This project was funded thanks to a “Phase 2: Hurricane Sandy Small Business Revitalization Opportunity” from the Small Business Administration. This grant was allocated, and administered by the New Jersey Small Business Development Center (NJSBDC). We want to acknowledge our colleagues at NJSBDC for their help to make this study possible. In particular, we want to thank Roy B. Lee for his support and skillful coordination of the collaborative network funded under the Sandy 2 Grant. We would also like to express our gratitude to Jasmine Cordero at CUEED for her insightful perspectives on the operations of micro-enterprises. We are particularly grateful to Ka-Neng Au, the librarian at Rutgers Business School for organizing the “Community Resilience & Superstorm Sandy” website for this project (http://libguides.rutgers.edu/sandy). We are also thankful to Quintus Jett, Ph.D., a faculty at the school of Public Affairs at Rutgers for his advice regarding the geo-spatial analysis. Finally, we want to thank our team of research assistants Brian Staples, Jose Polanco, Christopher Guale, Yonit Cody, Chris Bickerstaff, and Christian Cardenas for their contributions. We extend a special thank you to Texas A&M Geoservices (http://geoservices.tamu.edu/) for providing batch geocoding services pro bono to this study. This document presents information aimed at assisting in the formulation of policy and practice recommendations that shall allow for expedient recovery of small businesses after future disasters.

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EXECUTIVE SUMMARY We want to thank New Jersey’s Small Business Development Center (NJSBDC) headquarters office for their grant to support this work. We would also like to thank our colleagues at the NJSBDC for their help to make this study possible. In particular, we want to thank Roy B. Lee for his support and skillful coordination of the collaborative network funded under the Sandy 2 Grant. We would also like to express our gratitude to Jasmine Cordero at CUEED for her insightful perspectives on the operations of micro-enterprises. We are particularly grateful to Ka-Neng Au, the librarian at Rutgers Business School for organizing the “Community Resilience & Superstorm Sandy” website for this project (http://libguides.rutgers.edu/sandy). We are also thankful to Quintus Jett, Ph.D, a faculty at the school of Public Affairs at Rutgers for his advice regarding the geo-spatial analysis. Finally, we want to thank our team of research assistants Brian Staples, Jose Polanco, Christopher Guale, Yonit Cody, Chris Bickerstaff, and Christian Cardenas for their contributions. NJSBDC has identified the need to better understand the resilience of local businesses in New Jersey as well as the role of NJSDBCs in supporting local recovery. The ultimate goal of NJSBDC is to ensure the economic sustainability of the area and restitute the flow of products and services to local communities, after a disaster. As such, significant efforts have been made by NJSBDC to provide support to businesses in the area within the framework of their federal mandate of operations optimizing the resources available to them. As part of this strategic position, and taking advantage of their local nature, the Federal Government has tacitly assigned to SDBCs the role of first line of economic recovery to support small businesses after a local disaster took place. This context has opened new understandings on the operations of local SBDCs, who have traditionally only being seen as working with local businesses under normal operational conditions and, only when a disaster strikes, expected to help after the fact. This “after the fact” approach has put an unnecessary strain on the SBDCs disaster recovery operations as they have not been systematically supported in their continuity plans including the development of strategies to aid local businesses during and after a disaster. Hence, the efficacy and scope of their support to local businesses after a disaster, while expected, has remained unclear. The overall report provides a way to understand the tacit leadership role of SBDCs during disaster and recovery as it assess the needs of small businesses during times of duress. In concrete, this report presents information to help SBDCs to develop continuity plans as well as to elaborate strategies to help their clients after a disaster. This analysis identifies dominant local conditions after a natural disaster and the subsequent needs of small businesses in the area. Supported by an in-depth analysis, we advance a typology of operational demands place on local SBDCs after a disaster. The analysis relies on an underlying supply chain perspective as it advances that SBDCs are the first link in the local recovery chain. Thus SBDCs need to be helped before they are able to help their clients. The analysis highlights the critical role that SBDCs have by aiding to restore the local flow of products and services in disaster areas. This report shares findings regarding the storm’s impact on businesses recovery services provided by NJSBDCs and partners, including lessons learned and recommendations to overcome future disasters. Storm’s impact on business 



Disruption of operations and not the storm marks the disaster time line for business owners. The beginning of the recovery was marked by the resuming of operations, and not the end of the storm. Likewise, the end of the recovery period was signaled by reaching a new normal and not just by resuming operations. This accounting of the events puts the restoring of businesses in a time line that precedes the recovery of the local communities as these communities rely on their local businesses resuming operations to initiate their recovery. Proximity of peers matters for business to recover. Business operating inside of an above average geographical concentration of business (i.e., business cluster) had faster times to resume operations and faster times to go back to normal when the damage in the area was the worst. Page ii

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Economic access matters to speed up recovery. Business recovery after a disaster often relays timely access to economic resources. This is particularly true when the damages (e.g., replace vehicles, repair buildings, and replenish inventories) can be addressed with capital infusions. Yet, during disasters the economic needs can be larger than what the business may be able to afford on its own. Thus timely access to external sources can serve to support an adequate and timely recovery. Access to resources needs a purpose to be effective. Disaster recovery strategies aim to restore capabilities. Businesses that have a better understanding of their recovery needs, in overall, recovered faster. This recovery trend was more salient among businesses that have operate the longest thus being able to refine their operations over the years. Weather matters, but at different rates and for different reasons. The local magnitude of the disaster and onsite conditions were not uniform throughout the storm’s path. Yet, a deeper analysis suggests that even when there were many local realities, there were communalities across that, if addressed, could result in faster recovery rates across the overall area. Local and internal disruptions affect differently the resuming of operations and the long term recovery. When facing recovery after a disaster, local businesses are also affected by the impact of the disaster on nearby businesses and the magnitude of the damage within the home community. Yet this impact does not reflect the same when resuming operations shortly after the disaster than when seeking to restore normalcy over time. Likewise, as the effects of the disaster over the community affect the business operations and later its recovery, economic support helping to restore the community also, indirectly, helps local businesses to recover as their customers and employees resume their normal lives Inadequate disaster area awareness hinders recovery. It is not enough to have a federal and state level recognized disaster area to help recovery. Residents and service providers in the area need to be aware of the denomination to be able to access the resources attached to the disaster recognition. Thus there should be a protocol to help local SBDCs to learn about disaster and recovery information regarding their territory.

Recovery services provided to NJSBDCs and partners 







Operations disruptions. Operations of SBDCs in the disaster area were disrupted because of the storm. Similar to other organizations in their area, local SBDCs were subject to the same wind and water damage conditions, as well as loss of power and communications. Economic access. While local businesses had access to state and federal grants to help with their recovery as well as commercial loans and the support of family and friends, this was not the case for the SBDCs. SBDCs were, tacitly presumed to be part of the recovery plans/economy of the host institutions (colleges and universities) yet in some instances local institutions did not included the SBDCs in their efforts or plans as they thought of them as capable to access other sources of support. This lack of explicit agreements in some instances resulted in delay responses by the SBDCs. Information availability. One of the main recovery services provided by the SBDCs was access to information regarding economic support and recovery strategies. Yet these services faced a major constrain as not all the centers were clear about resources available to clients. This was aggravated by the incremental release of recovery resources. Expectations Management. SBDCs provide help to small business owners to improve their operations, increase their revenue, and develop resilience. In the process of attaining these goals, centers may help clients to secure loans and grants. This has resulted in a word of mouth reputation where centers are considered points of access to economic resources rather than intermediaries or advisors. In the aftermath of Sandy many small businesses, who had not contacted the SBDCs before, approached centers to request funding, to no avail. Small business owners left in disappointment with long lasting negative impressions of the SBDCs as they did not get the desire funding. Page iii

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Lessons learned and recommendations to overcome future disasters. 



Lessons learned by SBDCs as first respondents. The true responsibility of SBDC is to ensure the continuity of communities by supporting their small businesses. Small businesses contribute to the well-being of their communities by providing local access to products and services. Thus, to mitigate disruptions in communities, the SBDC needs to operate as part of local emergency response teams so to restore the operations of small businesses. As first respondents helping communities to regain normalcy, SBDCs efforts may be group in two areas; SBDC self-continuity and SBDCs serving small businesses. Lessons learned by businesses. Business recovery is to be understood as intrinsic part of the planning for business continuity, and needs to be executed as part of a long term strategy rather than a short term response to disruption. Effective business recovery is a multi-step planned action aimed to restore a new type of business normalcy. This contrast traditional views in the field that address recovery as resuming old as “it was before.” New realities require a new understanding of the operations, including adjustments. Thus, disaster recovery may be best understood as a three stage process broadly divided into; preemptive planning (or risk management), disaster period, and post-disaster (or recovery).

Recommendations to businesses  

Disaster period recommendations. During the disaster period a series of basic actions need to take place to ensure the continuity of the organization. These actions include (1) impact assessment and (2) be ready to access local support, including non-conventional community resources. Post disaster recommendations. After the disaster has passed small business need to initiate recovery under the following premises; (1) undertake disaster response as a stress test of entrepreneurial capability, (2) governmental resources to restore business continuity and recovery may take months to arrive, (3) informal economies (i.e., economies that may not be governmental monitor, often emerging as part of a grassroots respond to environmental pressures, including disasters and disruptions in the market place) become more important following a significant disaster event, (4) some reinvention might occur to a business after a disaster leaving it either better or worse off, and (5) disaster may come as a bonanza for selected few.

This study is the first step in the process to provide with a new and broader understanding of the role of SBDCs during disaster and afterwards trough recovery efforts. Thus we would value comments and suggestions so that we can continue to improve our knowledge and understanding of these highly significant efforts of community development and disaster recovery. We also recognize that we have produced a ‘snapshot’ of a single disaster event; thus more value would be added by subsequent up-dates of the work. However, with this knowledge comes a degree of accountability. The SBDCs have a responsibility to support the recovery of communities by helping small businesses to resume operations after a disaster. Innovation and collaboration must be the way forward for SDBCs to help communities’ continuity by restoring the local access to products and services after a disaster.

Arturo E. Osorio, Ph.D. Senior Fellow Cornwall Center for Metropolitan Studies Fellow Center for Urban Entrepreneurship and Economic Development Rutgers Business School Rutgers, The State University of New Jersey

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Table of Contents ACKNOWLEDGMENTS ...................................................................................................................................I EXECUTIVE SUMMARY .................................................................................................................................II TABLE OF FIGURES .................................................................................................................................... VII LIST OF TABLES ......................................................................................................................................... VIII BACKGROUND ............................................................................................................................................ 2 Disaster Recovery and Resilience Planning ..................................................................................................................... 2 Role of Small Business Administration during Disaster Recovery................................................................................. 3 PHASE I: IDENTIFICATION OF TARGET SANDY IMPACT AREAS IN NEW JERSEY ....................................... 3 Analysis of Weather Conditions ........................................................................................................................................ 4 Analysis of Property Damage and Economic Impact .................................................................................................... 5 Sandy Impact Areas in New Jersey .................................................................................................................................. 6 PHASE II: BUSINESS IMPACT TYPOLOGY .................................................................................................... 7 Sample Selection .................................................................................................................................................................. 7 Survey Process ...................................................................................................................................................................... 8 Business Phone Survey....................................................................................................................................................... 9 Business E-mail Survey ...................................................................................................................................................... 9 Centers E-mail Survey ..................................................................................................................................................... 10 Centers Phone Survey ..................................................................................................................................................... 10 Storms’ Impact on Business ................................................................................................................................................ 10 Disruption of operations, and not the storm marks the disaster time line for business owners ......................... 11 Proximity of peers matters for business to recover................................................................................................... 11 Economic access matters to speed up recovery ......................................................................................................... 12 Access to resources needs a purpose to be effective............................................................................................... 12 Weather matters, but at different rates and for different reasons ...................................................................... 13 Local and internal disruptions affect differently the resuming of operations and the long term recovery. .. 14 Inadequate disaster area awareness hinders recovery .......................................................................................... 15 PHASE III: RECOVERY SERVICES PROVIDED TO NJSBDC AND PARTNERS ............................................... 16 Operations disruptions ...................................................................................................................................................... 16 Economic access................................................................................................................................................................... 16 Information availability ..................................................................................................................................................... 17 Expectations Management ............................................................................................................................................... 17 PHASE IV: LESSONS LEARNED AND RECOMMENDATIONS TO OVERCOME FUTURE DISASTERS ............ 17 Lessons learned by SBDCs as first responders ............................................................................................................. 18 SBDC self-continuity ........................................................................................................................................................ 19 SBDCs serving small businesses ..................................................................................................................................... 19 Lessons learned by Businesses .......................................................................................................................................... 20 Preemptive planning ....................................................................................................................................................... 20 Disaster period................................................................................................................................................................. 21 Post-Disaster ..................................................................................................................................................................... 21 Recommendations to Businesses ....................................................................................................................................... 21 Page v

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Disaster period recommendations ................................................................................................................................ 22 Post disaster recommendations ..................................................................................................................................... 22 REFERENCES .............................................................................................................................................. 24 ATTACHMENTS .......................................................................................................................................... 25 Attachment A Timeline of Federal Response to Hurricane Sandy............................................................................. 26 TABLE OF TERMS ....................................................................................................................................... 30

Lessons Learned From Sandy

TABLE OF FIGURES Figure 1: MAP OF WEATHER IMPACT IN NEW JERSEY .................................................................................................. 4 Figure 2: NUMBER OF CLAIMS PAID PER ZIP CODE ........................................................................................................ 5 Figure 3: NUMBER OF CLAIMS PER BUSINESS .................................................................................................................. 5 Figure 4: OVERALL SANDY'S IMPACT RANKINGS ........................................................................................................... 6 Figure 5: OVERALL IMPACT RANKINGS WITH BUSINESS CLUSTER CENTROIDS OVERLAY ................................... 8 Figure 6: BUSINESS RECOVERY TIMELINE ........................................................................................................................ 11 Figure 7: BUSINESS ENVIRONMENT PRESSURE ON BUSINESS ................................................................................... 14 Figure 8: INTERNAL OPERATIONS ..................................................................................................................................... 14 Figure 9: IMPACT DISRUPTIONS ON NEARBY PEERS IN THE AREA............................................................................ 15 Figure 10: TRICKLEDOWN IMPACT FROM LOCAL HOUSEHOLDS INTO NEARBY BUSINESSES .......................... 15

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LIST OF TABLES Table 1: SAMPLING CONTROLLING FOR CLUSTER SIZE ............................................................................................... 8 Table 2: TYPOLOGY OF BUSINESS DISRUPTIONS ........................................................................................................ 10 Table 3: DISASTER AREA AWARENESS ............................................................................................................................ 15

Lessons Learned From Sandy B U S I N E S S E S R E C O V E RY & R E S I L I E N C E Using as exemplar the NJSBDC recovery services, this project uses a geo spatial analysis and feedback from surveys and interviews to provide the basis for creative solutions, best practices and resilience preparation programs for the future disaster recovery needs of small businesses. To achieve these goals, this report develops a novel mechanisms to first identify geographies with large concentrations of businesses affected by extreme weather conditions such as Hurricane Sandy, and subsequently analyze the needs of these businesses as well as the availability of institutionalized support services at these locations. By looking at all businesses within the affected areas in New Jersey, and not only targeting NJSBDC’s clients, this report complements the efforts undertaken by the NJSBDC and its partners that seek to assess the role of this organization in New Jersey, by looking at customer satisfaction metrics. Additionally, this report provides a view of the in-house recovery operations of several NJSBDCs, a process that is often taken for granted. Finally, this report may be used in the context of the Sandy’s report by the United States Government Accountability Office (GAO-15-515) to provide a more comprehensive view on strategies that could help the state and the federal governments enhance the local resilience of communities for future disasters. To achieve its goals this project is divided in four stages. Phase I. This initial step is a geo-spatial analysis to identify the areas where Hurricane Sandy’s conditions brought economic losses to local businesses. This stage relies on data from the National Oceanic and Atmospheric Administration’s National Weather Service (NWS) to identify the locations where weather patterns had the largest impact in New Jersey. We complement the NWS data with information regarding insurance claims, claims paid, and counts of business throughout the state. We finalize this Phase I including information from additional reports that provide a ground view of local conditions after Sandy. Phase II. Develops a typology of business needs resulting from Hurricane Sandy’s impact in New Jersey. Anchor on Phase I geospatial analysis, we use publically available data as well as phone and email surveys to identify the nature and magnitude of Sandy related business disruptions in New Jersey. Aggregating the data, we develop a typology of business needs after disaster. Phase III. Identifies the services provided by the SBDC and its partners in areas affected by the hurricane throughout New Jersey. Looking into the locations identified in the initial analysis we document the services offer at each place and how they are made available to local businesses. Framed by the typology developed during the second stage, we introduce a comparison between the services and the different types of business disruptions to assess the impact of the disaster recovery services. Phase IV. This final stage introduces a discussion on next steps to enhance business resilience on the face of future disruptions, including extreme weather disruptions. Informed by the overall analysis, this section includes recommendations to help SBDC and its partners to provide truly transformative solutions to help small business to become resilience while confronting future disasters. Also, in an attempt to avoid duplicate efforts and help future works, this project has first identified available resources on Hurricane Sandy and developed, in collaboration with the Business School librarian, a digital portal to access all resources associated with this event so future projects can take advantage of them. Portal is at http://libguides.rutgers.edu/sandy. A brief description of this portal is also included in this report.

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BACKGROUND In November 28, 2012, New Jersey’s Governor, Chris Christie declared that in the state the estimated Sandy’s related costs are about $36.8 billion dollars1. This initial dollar figure rose higher in the subsequent months as businesses by the shore were unable to open in time for the summer of 20132. Disruptions to businesses were beyond the direct wind and water damage. For instance, it was estimated that about 2.7 million homes and businesses lost power during the storm, which prevented the majority of businesses in the state from operating in any capacity for extended periods of time3. Although an exact number of business closures due to Hurricane Sandy may never be known with certainty, FEMA estimates that storms similar to Sandy claim roughly 40% of the impacted businesses4. While Sandy affected businesses of all sizes throughout the state, the bulk of the impact felt on the small businesses that are often at the hearth of local communities. As Carol Chastang, the Small Business Association Spokeswoman, stated “[S]mall businesses are particularly vulnerable to economic loss after a disaster, because they don’t have the financial assets that big companies do. Larger organizations often have staff dedicated to managing business continuity and emergency planning.”5 Furthermore, FEMA reported that after experiencing a natural disaster like Sandy one in four businesses never reopen6. Perhaps more significantly, the same FEMA report suggests that 75% of companies without business continuity plans fail within 3 years of the disaster7. While Sandy lasted only a couple of hours on the ground, its effects were longer lasting and its impressions unforgettable.8. In the months and years after Sandy, the Small Business Development Centers of (SBDC-NJ) has made efforts to support the recovery of small business in New Jersey. In addition to these efforts, SBDCNJ has also developed disaster preparation programs to help its clients to be ready in the case of a new disaster. Recovery efforts have sought to restore the socioeconomic health of local businesses while readiness programs have focus on the resilience of small business in New Jersey. This report is an account of the work done by the SBDC-NJ disaster recovery programs in the context of the needs and expectations of local small businesses through the Sandy affected areas in New Jersey. Likewise, the project also assessed the conditions at the different SBDC offices within the affected area.

Disaster Recovery and Resilience Planning Communities, organizations, and individuals are all immerse in an ever changing environment that can be turbulent and unruly, at times. The pressures that these shifting conditions exert on these constituencies vary in both severity and frequency. When the changes have a high likelihood to put at risk the continuity of the community or the organization, or the life of individuals these changes are assed as threats. Threats are unpredictable and vary on gravity with each occurrence. Threats may include natural catastrophes, pandemic disease, terrorist attacks, economic recession, equipment failure and human error, among others. http://www.nj.com/politics/index.ssf/2012/11/christie_administration_cost_o.html http://www.nj.com/politics/index.ssf/2012/11/christie_administration_cost_o.html 3 http://www.nj.com/politics/index.ssf/2012/11/christie_administration_cost_o.html 4 http://www.nydailynews.com/new-york/hurricane-sandy/hurricane-sandy-year-business-article-1.1493143 5 http://www.thefreelibrary.com/Before+disaster+strikes%3A+having+a+continuity+plan+can+help+keep+your...a0334944817 6 http://www.usfa.fema.gov/pdf/efop/efo47103.pdf 7 http://www.usfa.fema.gov/pdf/efop/efo47103.pdf 8 http://www.futurity.org/hurricane-sandy-mental-health-973262/ 1 2

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A disaster is a severe threat that has come true and as a result of its occurrence there is a disruption on the regular operations of a community, an organization, or an individual’s way of life. Disasters exceed the ability of the affected community, organization, or individual to cope using its own resources in a reasonable amount of time thus requiring external interventions to recover. Disaster recovery is the actions aimed to rebuild or reconstruct what was lost or disrupted because of a disaster.9 Resilience is “the ability to prepare and plan for, absorb, recover from, and more successfully adapt to adverse events.” Increasing a community or group’s resilience serves to reduce losses sustained from disasters.10 Resilience also includes plans to facilitate the request and use of external support as part of the subsequent recovery efforts.

Role of Small Business Administration during Disaster Recovery The Small Business Administration (SBA) Office is a federal agency with a mandate to help Americans to start, grow, and support small businesses. Small businesses are identified based on their number of employees and the businesses’ annual revenue. The actual cut point to qualify for help from the SBA is defined year-to-year following industry standards11. Yet businesses are never more than 100 employees or $750,000 in revenue. In the context of a local disaster the SBA is structured to help local businesses to get back on track by providing loans and consulting services to affected businesses located within the disaster areas. To achieve these goals, at the state level the SBA relies on the SBDC to enact its mandate and support local businesses. The SBDC acts as the first line of support for small businesses during the recovery after the disaster. This support includes guidance to access recovery funds as well as business training, business performance evaluations, business consulting services, and procurement and contractual services. Through these services to local businesses, the SBDC helps to restore local economic flows and aids to the healing of communities by restituting the local access to products and services. In all, the ability of local SBDC centers to provide timely access to their services after a disaster is often a tipping point in the recovery of local communities, and by extension regions at large.

PHASE I: IDENTIFICATION OF TARGET SANDY IMPACT AREAS IN NEW JERSEY Two premises guide this project; weather patterns vary from place to place and businesses tend to cluster throughout regions. Thus Phase I takes into account local weather conditions and their local socioeconomic impact. To isolate the target areas for the study a new methodology was developed as part of this project. This methodology serves to create a ranked impact map that identifies areas where Sandy was more likely to have resulted on large economic loses because of its impact on local small businesses. This economic impact heat map was developed based on 3 types of data namely, weather conditions on the ground, business claims paid per zip code, and number of business claims paid per zip code. The following sections detail the analysis if the data and the development of the impact area heat map.

Disaster Resilience, p.112-13 Disaster Resilience, p.16 11 https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf 9

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Analysis of Weather Conditions In October 29, 2012 Hurricane Sandy (unofficially known as "Superstorm Sandy") made landfall in New Jersey, becoming the most destructive natural disaster in this state’s recent history and the second-costliest hurricane ever in the United States (National Oceanic and Atmospheric Administration, 2013). Yet, its impact was not uniform throughout the state or even its path. Thus a close analysis serves to identify the areas where weather conditions were truly catastrophic in economic terms. As described by Hoopes Halping (2013), in some areas of New Jersey, high winds, extraordinary volumes of rain, and rising tides, brought direct damage to local communities and their environments. This damage included the destruction, total or partial of buildings, as well as infrastructure disruptions such as flooded roads, blackouts, and loss of cellular phone services. Environmentally, tidal surges and rain caused flooding and excessive damage to river marshes, as well as the destruction of coastal protective barriers including dunes, bulk heads, and jetties. To get an overall assessment of the weather and its impact in the area we systematically develop weather impact heat maps. This analysis identifies the locations throughout the state where Sandy related weather conditions amounted to critical status thus signaling the areas of interest for this study. Data from the National Oceanic and Atmospheric Administration’s National Weather Service (NWS) was used for this analysis. Classifications for the weather impacts were determined by ranking the raw data of 11 different components including total rainfall, days without power and top wind gusts. These components were ranked on a scale of 0 to 5 with higher scores representing a higher level of impact. In turn these component scores were added together to determine the total weather impact score with a potential range of 0 to 55. The maximum observable score was 24 corresponding to areas where strong winds, substantial flooding, and copious rainfall came together in a defined geo-space. For the purposes of calculating the overall storm impact score, as well as comparability to the business claims paid per zip code and business claims per business per zip code categories, the weather impact scores were then broken down using a simple histogram into values of 0 through 8. By being on a 0 to 8 scale it allowed for an easy and consistent way to compare the weather impacts with the other two categories used in damage assessment. The weather impact rankings were converted on a palette of 7 different colors with greens representing zip codes of lower impact and reds/oranges representing zip codes of higher impact12. Utilizing this geo-color coding on this map, a visual pattern emerged with the coastal, northern and central areas of the state hardest hit with weather related impacts from Hurricane Sandy. Coastal areas in the south were also affected, yet not as much as the northern and central parts. Finally, isolated inland areas were also identified as weather impacted areas. See weather geo-analysis in Figure 1.

FIGURE 1: MAP OF WEATHER IMPACT IN NEW JERSEY

Groupings were used rather than the 8 ranges used in our histograms as 7 is the limit within ESRI Maps for Office, this adjustment did not alter the results or the impact markers Page 4 12

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Analysis of Proper ty Damage and Economic Impact While the effects of the storm were substantial they were restricted to specific areas and varied in intensity from place to place depending on local conditions. Likewise, its impact on businesses was also not uniform as not all businesses were in the path of the storm, and even when they were, the storm conditions varied throughout the event resulting on different levels and types of damage. To identify the locations in New Jersey where most significant damage to property took place during 2012 we employed insurance claims data from the New Jersey Department of Banking & Insurance. This data was accessed through an OPRA Request (# C91512). Data was divided in three broad claim categories; residential, business, and personal vehicular. Files included two sets of information that were independently process as part of this analysis. The first set of data, insurance claims, included official counts of all claims that were placed and processed during 2012 in New Jersey. The second set, claims paid, included only those claims that after processed and assessed were deemed appropriated and were subsequently paid by the corresponding insurance agency. FIGURE 2: NUMBER OF CLAIMS PAID PER ZIP CODE Both sets of data were processed and geo-tagged based on where the damage property was located. Both business claims paid per zip code and business claims per business per zip code were ranked from their raw values into simple histograms of values 0 through 8, with 8 being the highest impact.

Combining this sets of data, the next step involved a geo-analysis to identify where the largest level of property damage took place during 2012 in New Jersey. As with the weather impact map, both of the resulting maps were built using the rankings data for individual zip codes and displayed information, a the zip code level, using a color coded area scheme in ESRI Maps for Office with 7 individual groupings in each map. Within these analyses two patterns emerged. The first pattern emerged using the data of Business Claims Paid per Zip Code (see Figure 2). This analysis suggests that the highest overall number of claims paid were primarily attributed to areas of northern and central New Jersey. This strongly suggests that the bulk of the damage took place in that region. Comparing the number of claims per zip code with the number of businesses at that location, the second FIGURE 3: NUMBER OF CLAIMS PER BUSINESS pattern emerged. This second analysis served to identify the spaces where the proportion of damage per businesses was the largest. This second analysis indicates that in the northeastern areas of New Jersey, despite the large number of businesses and damaging Page 5

Lessons Learned From Sandy

weather, the actual level of disruption at the business level was not as damaging as individual businesses have a low rate of claims per business. This would suggests that in these zip codes that the damage was distributed throughout the community and disruptions came from multiple failures rather than single point system disruptions, hence requiring a dilution of aid services as large constituents required simultaneous help. This stands opposed to the northwestern and central areas of the state where the rate of claims per business was much higher, thus indicating those impacts were more scattered and also indicating a lower level of business density. See Figure 3.

Sandy Impact Areas in New Jersey Weather impact analysis helped to identify the areas where the brunt of the storm took place, yet it did not indicate where the worst of the damage to properties took place. Conversantly, reports of property damage included all the claims for the year thus not identifying the Sandy related claims. As the next step the weather and the claims analysis were integrated to locate the areas where weather disruptions most likely resulted in property damage. The data from this additional analysis served to identify the communities where Sandy related weather conditions directly resulted on the disruption of local business operations. This analysis served to provide an initial typology of the four types of impacts in the area: 1. High priority areas: Localities with high counts of insurance claims, high NWS impact index, and a high concentration of local businesses. 2. Medium-High priority areas: Localities with high counts of businesses, high NWS disruption index and low numbers of business insurance claims. 3. Medium-Low priority areas: Localities with low counts of businesses, low NWS disruption index and high numbers of business insurance claim. 4. Low priority areas: Localities with high counts of businesses, both low and high NWS index, and high number of residential and vehicular claims. The outcomes of the analysis were coded into a Sandy’s Impact Index that indicated the extent of Sandy’s impact in the area. The overall scores of the Sandy’s Impact Index ranged from values of 0 through 24. This was the result of simple addition of all 3 component rankings from the previous geo-analysis. The highest ranked zip code 07097 was observed at a score of 20. It was determined that high priority areas would include zip codes with a Sandy’s Impact Index of 13 or higher. The total number of zip codes of this category was 162. To further the analysis and assess contiguous areas, all zip codes were mapped to assess the overall impact of Sandy throughout the state. For this geo-spatial analysis the Sandy’s Impact Index was broken down into seven ranges (i.e., 0-6, 7-8, 9-10, 11-12, 13, 1415 and 16+). These ranges corresponded to the magnitude of the impact where a green shade on the map indicates a lower level of impact (dark green corresponding to 0-6) while a red or orange shade indicating a higher level of impact (red corresponding to 16+). Thought this analysis a visual pattern emerges highlighting the zip codes with the worst businessFIGURE 4: OVERALL SANDY'S IMPACT RANKINGS related impacts of Hurricane Sandy took place. High scoring areas along the coast or with tidal portions of major rivers running through them were likely affected Page 6

Lessons Learned From Sandy

by storm surge related flooding in addition to wind-related impacts noted in many areas of the state. Less densely developed areas along the northern and western frontiers of the state with high scores would likely indicate high wind impacts including fallen trees and power lines or roof failures. See Figure 4. Concurrent with the ranking analysis we identified the different NJSBDC offices within each target area. This served to mark jurisdictions and local areas of services.

PHASE II: BUSINESS IMPACT TYPOLOGY After the high priority areas were identified, along with their 162 conforming zip codes and the local NJSBDCs, as a next step a typology of businesses and their recovery needs was developed. To ensure accuracy in the characterization of the businesses’ recovery needs after Sandy, a random selection protocol was developed. The protocol’s design ensured a sample selection that target businesses within areas affected by Sandy. Furthermore, as part of this protocol, sampling priority was given to areas with the most significant weather disruptions that also contained largest concentrations of small businesses that had undergone operational disruptions because of the storm.

Sample Selection Cluster analysis has as an underlying premise that businesses are not evenly distributed throughout regions or cities. Thus acknowledging that within different locations, there are pockets of higher concentrations of businesses while other nearby place may only include a limited number of businesses, if any at all. These unequal distributions are due to local zoning regulations, transportation, and access to resources such as supplies and human capital among other reasons. These clusters also mean that the impact of disasters vary depending on the local concentrations of businesses. The inclusion of a cluster analysis allows to developing protocols that comprise organizations that shared the same type of weather conditions during the disaster. Likewise, this approach also provides for a higher likelihood to group businesses by shared socioeconomic environment prior to disaster, and afterwards during recovery. The cluster analysis protocols for this project incorporate all current business records in the target high priority area as recorded by Reference USA13. Accordingly 192,500 small organizations14 were included. Reported Reference USA records included business name, address, telephone number as well as website information where available. The richness of this information allows for a comprehensive typology of the business and the region. As first step of this analysis, using the street addresses all 192,500 business records and the 12 NJSBDC locations were geocoded. Texas A&M Geoservices15 was selected to provide this service. Texas A&M Geoservices, was elected because of their proprietary automated processes that facilitated the conversion of USA street addresses into its corresponding latitude and longitude coordinates. Using the latitude and longitude coordinates from each organization, a cluster analysis was performed to detect the largest concentrations of local businesses throughout the high priority areas as well as to identify the type of businesses that were on close proximity from each other. This analysis served to determine sampling pockets to ensure a fair representation of the different types of business in the region, as well as the different levels of disaster they endured. This cluster analysis based or geocoding also allowed overcoming arbitrary zip code boundaries that were inherit to the data set as it was originally coded by street addresses.

Reference USA (http://www.referenceusa.com/) via Rutgers University Libraries Reference USA includes non-profits, religious organizations and local government departments in its records. 15 A special thank you to Texas A&M Geoservices (http://geoservices.tamu.edu/) for providing batch geocoding services pro bono to this study. Page 7 13 14

Lessons Learned From Sandy

The cluster analysis was done using the R programming language. Employing RStudio and the ‘leadercluster’ R package together were selected as the development environment and primary algorithm package. A base line assumption was made that clustered businesses will be in very close physical proximity hence it was stablished that clusters will have a radius of no more than 1 kilometer16 (0.5 mile). To compute haversine distances the process was set to no more than 25 consecutive runs to determine the result. This protocol resulted in 1,995 small business clusters located throughout the targeted zip codes (see Figure 5). The function generates the clusters, their members and the center point or centroid geographic coordinates for each cluster. After determining these clusters, the ‘leadercluster’ function was run on the generated centroids to check against overlaps and other possible errors. This resulted in 1,989 clusters (of the clusters) indicating both minimal and acceptable levels of cluster overlap. These confirmatory analyses also took into account the building and population density of many of the areas in the study group. Following this corroboration, an additional map was produced where clusters’ centroids were overlaid over the impact areas across New Jersey to have a final verification that the selected business populations were located at the core of the disaster areas. As with the other maps produced, this was achieved using Microsoft Excel and ESRI Maps for FIGURE 5: OVERALL IMPACT RANKINGS WITH BUSINESS CLUSTER CENTROIDS OVERLAY Office. After the clusters were identified a characterization on cluster size and cluster location was used to determine the adequate sampling size at each one of the target areas. The goal of this characterization was to ensure that there was a fair representation of the different types of Number of Businesses clusters as well as a proper understanding of all areas affected Cluster Size to be Sampled by the storm throughout New Jersey. Ten ranges were developed 5 or less 0 to accurately sample the clusters (See Table 1). Guided by the 6 to 10 0 11 to 25 3 pre-established ten ranges with their corresponding sample size 26 to 50 4 we use R and the ‘dplyr’ R package, to develop a random sample 51 to 100 7 of 13,053 records throughout the high priority area. All extracted 101 to 250 12 records from this run were deemed adequate to be included in a 251 to 500 25 telephone surveying. At the end, a subset of 3,947 businesses was 501 to 750 40 751 to 1000 65 called. Additionally, using the corresponding 162 zip codes Greater than 1000 75 included in the of the target areas 25,000 small business were TABLE 1: SAMPLING CONTROLLING FOR CLUSTER SIZE also selected to invited to participate on an online version of the same survey. At the end 28,947 businesses were invited to participate in this study. Detail participation numbers and response rates are discussed in the following “Survey Process” section.

Survey Process The survey process included two different constituencies; local small businesses and leadership at the local NJSBDC in the target area. Local businesses were divided into two samples; phone surveys and email contacts. Both groups were provided with the same survey instrument. After all phone surveys were completed 25% of the respondents were randomly selected to receive a follow up call to ensure they were properly

16 The

‘leadercluster’ package requires the use of metric measurements for radius and other distances. It specifically operates in kilometers when calculating clusters based on haversine distances. Page 8

Lessons Learned From Sandy

surveyed and verify if there was any additional information to add to their responses. In the case of online respondents, after completing the survey they were given the option to have a follow up phone interview to revisit the survey in its totality or in part. All NJSBDC in the target area were contacted first via email to ask them answer a full survey about their own Sandy recovery experience, as well as the services they provided to local small businesses in the subsequent recovery efforts. A follow up call was placed to all NJSBDCs respondents to better understand the conditions under which recovery of small business took place in their area. The phone interview also assessed the inhouse conditions at the SBDC office during the disaster and recovery.

Business Phone Survey Set as a calling center, all callers used a standardized an adaptive, comprehensive but brief browser-based survey during the calls. The survey was set to learn about how local business faired during and after Sandy. The system of choice to program the survey was Qualtrics17. This system was selected for its comprehensive platform throughout al operative systems, ability to storage data in a cloud on real time, high security, and privacy settings. Responses comprised business demographics including but not limited to seasonality, part-time vs. full-time employees and the existence of multiple locations. The survey included areas related to Hurricane Sandy impact on business operations, awareness of, application for and awards of federal, state, local and in-kind assistance, the role of SBDC’s in working with businesses on recovery and/or resiliency efforts and future disaster resiliency and recovery planning by businesses. Understanding that not all respondents may have had the same experiences, the survey included conditional questions linked to a flow logic. Thus questions asked to participants were based on prior answers regarding the types of aid received, demographics of the business and operational impact of Sandy. To standardize the interactions between surveyors and respondents, the survey also included and adaptive script for the callers to follow while placing calls to businesses. Including all prompts for information to be input by the interviewer prior to placing a call, the full survey includes a total of 10818 questions. The average answer time for the full survey was 15 minutes. The survey was done in two distinct waves. During the first round 339 calls were placed resulting on 20 useful responses (5.89% response rate). On the second wave 3,947 calls were placed resulting on 110 useful responses (2.78% response rate). In total 4,286 calls were placed resulting on 130 useful surveys (3.03% response rate). As part of the protocol a 10% random sample of businesses received follow up calls to verify their data and to ensure that the calling protocols were properly followed. In addition to the direct calls, the overall process included callers training; pre-call preparations, call backs, and quality assurance follow up phone-calls.

Business E-mail Survey Using the phone survey, an additional email survey was developed and distributed. The e-mail was launched to fulfill two goals. First to have a larger reach and second to allow for the participants of the phone interviews to provide their answers online if they were to choose to do so. As it was the case for the phone surveys, participant businesses of the online version were selected based on the hot spot areas identified through the geo-spatial analysis. The digital version of the survey is identical to the telephone version with the exception of the interview script and the caller’s control questions that were removed. An additional question was also included to provide the option to the respondents to be contacted by telephone to complete the survey. As with the telephone survey,

Qualtrics (http://rutgers.qualtrics.com/) is a browser-based survey system with which Rutgers has a university-wide license. Since the survey is designed to be adaptive, based on responses to certain questions, the number of questions actually asked of a subject can be significantly lower. Page 9 17 18

Lessons Learned From Sandy

with which it shares the core engine, the online instrument is designed to be adaptive, displaying and/or skipping questions based on earlier responses. The full online survey, after removing the control questions includes a total of 92 questions. As it is the case with the phone survey the average answer time for the full survey was 15 minutes. The email survey included 25,000 distinct businesses. Once the invitations to participate were sent a follow up email was sent within a week. At the end 107 useful responses were capture (0.04% response rate). The substantially lower response rate of email surveys compared to phone surveys was expected and was attributed to the impersonal nature of the email.

Centers E-mail Survey To better understand the conditions under which local businesses got support to recover from Sandy, local NJSBDCs were also surveyed. Using the business e-mail survey as a base, existing questions were modified or dropped to reflect a change in the audience and the topics being researched. Additional questions relevant only to the SBDCs were added to this survey. The survey additionally aimed to assess the NJSBDCs’ observations on disaster preparedness. Responses from top management at each center were collected. The overall answer time for the NJSBDC survey was 15 minutes. Centers Phone Survey As a follow up of the online survey, participant local NJSBDC were included in a round of follow up interviews. Interviews focused on how the different centers overcame the Sandy related conditions to be ready to provide help to their local clients. This interview also explore about readiness programs at the center to ensure service to clients after disaster as well as services available to clients as part of the readiness preparation programs. All interviews followed a guided interview format designed to help participant to share each center’s unique experiences after Sandy. Phone interviews were set to last between 10-15minutes each. A full discourse analysis was used to help the interpretation of the findings.

Storms’ Impact on Business As a first step we compile the data to explore the nature of the damage. This helps to determine the different types of damage in the area, the effects of these disruptions on the requirements to resume operations and to reach normalcy. Results suggest that the large majority of all affected businesses got more than one type of disruption at the same time. The most common temporal disruptions were loss of employees (56%), loss of customers (47%), and loss of power (24%). The most salient permanent disruptions included damage to facilities (33%), loss of inventories (19%), damage to vehicles (15%), and loss of customers (13%). See Table 2. Concurrently with all the local distress brought by the storm some businesses saw a temporal increase in their operations (1%). These businesses provided supplies and equipment necessary to the reconstruction and restoring of operations in the area. After the damage analysis took place, to help the characterization of businesses disruptions in the disaster areas data was also coded in three large groups; landlocked, costal, and rivers. We also coded data based on the businesses environment where the business was located. This last analysis also took into account the impact of the storm on customers, employees, suppliers, and competitors.

Supply Chain Disruption Temporary loss of vendors and/or suppliers

26%

Temporary loss of customers

47%

Permanent loss of vendors and/or suppliers

3%

Permanent loss of customers

13%

Infrastructure Disruption Loss of Power

24%

Temporal loss of access to place of business

1%

Temporal Labor Loss Employees' ability to work temporarily impeded

56%

Assets Disruption Loss of inventory

19%

Facilities damaged

33%

Vehicles damaged

15%

Supporting others Increase Sales

1%

TABLE 2: TYPOLOGY OF BUSINESS DISRUPTIONS

Page 10

Lessons Learned From Sandy

Disruption of operations, and not the storm marks the disaster time line for business owners Our first finding refers to the timeline of the disaster, as experienced by the businesses in NOAA issues advisory 22-Oct the target areas. A statistical analysis on the Sandy makes land fall in NJ, FEMA collected data suggests that business owners activates NBEOC 29-Oct and managers considered the impact of the Disaster disaster not marked by the arrival and end of 31-Oct SBA issues a disaster declaration for Perido Atlantic, Cape May, Essex, Hudson, the storm but by the disruption and resume of 2-Nov Middlesex, Monmouth, Ocean & Union their activities. Hence the disaster was accounted as a process that started with the Power restore in the area stop of operations, and ended with the re12-Nov opening of the business, even if not at full Resume Average business resumes operations capacity. Thus, the beginning of the recovery Perido was marked by the resuming of operations, and not the end of the storm. Furthermore, the end of the recovery period was signaled by Average business goes back to normal 31-Dec reaching a new normal and not just by resuming operations. This accounting of the Start New events puts the restoring of businesses in a time Normalcy Period line that precedes the recovery of the local communities as these communities rely on their Sandy relief funds are released 29-Jan local businesses resuming operations to initiate their recovery. See Figure 6 for business recovery timeline. See Attachment A for full timeline.

FIGURE 6: BUSINESS RECOVERY TIMELINE

Proximity of peers matters for business to recover Business operating inside of an above average geographical concentration of business (i.e., business cluster) had faster times to resume operations and faster times to go back to normal when the damage in the area was the worst. These counterintuitive findings confirm anecdotic evidence that showcase certain coastal areas as exemplars of recovery. Further analyses suggest four elements at play at these locations: 1. Economies of scale to deliver recovery related services. Businesses located inside of clusters got faster access to resources. Help was easily distributed as everyone is at the same location. 2. Larger reach with minimum effort on infrastructure recovery. As everyone relies on the same shared services the local damage may impact the largest numbers of operations thus making a larger damage impact. Yet, as the problem is shared solving this one problem speeds up the recovery of a larger number of businesses by restoring services to everyone at once. 3. Collaboration, when present, helps to recover. Collective spirit served to promote mutual help in times of duress thus there were more hands in place to address common problems thus making of local constituencies the first respondents that hold the ground until institutional help was stablished. 4. Local damage, within the communities also affected the local businesses. Several businesses reported loss of customers as part of their disruption. A closer analysis suggests that the larger the local damage, the larger the impact on the businesses. Conversantly, the faster the recovery of the area as a whole, the better the business recovery fairs too. 5. Media coverage matters. Disaster areas that including a large constituency in a reduce area were more prone to make it into the news thus calling more attention to their local needs thus rising on the priority rankings for help. Page 11

Lessons Learned From Sandy

Economic access matters to speed up recovery Business recovery after a disaster often relays timely access to economic resources. This is particularly true when the damages (e.g., replace vehicles, repair buildings, and replenish inventories) can be addressed with capital infusions. Yet, during disasters the economic needs can be larger than what the business may be able to afford on its own. Thus timely access to external sources can serve to support an adequate and timely recovery. In overall these are the main issues associated with access to capital during recovery: 1. Internal resources and insurance are key to recovery. Recovery requires resources. Internal funding is the first line of recovery to acquire the lost resources, yet it may not be enough. Insurance provides the complementary, and often needed, extra funds needed to help business recover. Our analyses suggest that the loss of assets require strong and quick infusions of capital to be overcome and jumpstart the business. 2. Internal funding and insurance alone may not always be enough to recover. Internal funding, even when complemented with insurance funding may not always be enough to help businesses to restore operations in extreme cases of duress. Federal and state governments can provide with bridge funding to address the gap. These additional funds are allocated in the form of preferential loans at discount interest rates and in some extraordinary cases as reconstruction grants. Yet business needs to be aware of these options and have a clear plan to access, use and repay loans, when necessary. Also these funds need not only to be available, but to be timely available. 3. External financial resources can help to reach normalcy, but not to resume operations. After a disaster, businesses first need to assess the damage and rely on their own strength to resume operations. Pipelines and delivery times can force businesses to face recovery on their own for the first part of the restoration process. Even if capital were to be made immediately available to businesses, the ground conditions surrounding the businesses will delay the re-start thus straining the already challenging recovery process. Thus businesses need to know how to implement temporal fixes in hopes to access additional resources down the line. In all, while financial resources may not speed up the basic re-start of operations, funding can help to restore normalcy, and in some cases will also reduce the time required to move from basic operations into full capacity. 4. Disaster may just be bonanza by other name. Disaster means disruption of operations. Thus businesses need to develop plans and measures to ensure the restoration of operations. When assets are lost or extra resources are required to restore operations, business opportunity may emerge in the area for business capable to help peers to recover. Services and opportunities may be in areas such as cleaning, equipment repair, sales of equipment and vehicles, and the sort.

Access to resources needs a purpose to be effective Disaster recovery strategies aim to restore capabilities, including developing new operational realities that define a new normalcy for the business. Businesses that have a better understanding of their recovery needs, overall, recovered faster. As businesses were capable to identify the nature and extend of the disaster were more likely to determine the necessary steps to resume operations and later to restore normalcy. This recovery trend was more salient among businesses that have operated the longest thus being able to refine their operations over the years. Recovery needs were broadly characterize in three main areas: 1. Assets disruption. The size of the disruption is measured by the impact of the damage on the operations of the business and the ability of the organization to respond in a timely manner. The loss of assets can become critical to the point of threatening the continuity of operations. Thus the presence of adequate contingency plans and recovery strategies including insurance protection is key to replace assets lost during disaster, including buildings, vehicles, machinery, and even inventory. In the absence of insurance or inadequate coverage, loans and grants can be used to replace inventories, equipment, vehicles, and buildings. Yet, access to capital without a clear understanding of the timelines Page 12

Lessons Learned From Sandy

of acquisition, true replacement cost, and payment strategy may increase the recovery burden as business can face financial commitments with no cash flows to match. 2. Supply Chain disruptions. Disruptions may also result from events taking place upstream and / or downstream of the business operations. The upstream disruption refers to the inability of suppliers to continue to provide the necessary elements to support the operations of the business. The downstream disruption is the inability of customers to place and / or receive orders. Both types of supply chain disruptions can be either permanent or temporal. Upstream permanent disruptions may come from displacement of suppliers, closing of operation, or any other event that may prevent the supplier from continuing to provide products and services. Thus permanent upstream disruptions require businesses to identify new vendors, or alike, to restore the access to supplies to ensure continuity. Downstream permanent disruptions are the definitely loss of a costumer because of the costumer’s closing and or inability or need to continue to require the product or service. Thus permanent downstream disruptions require business to identify new customers, or alike, to restore the sales volumes. Temporal disruptions are similar to permanent disruptions but with the difference that are not definitely as they are eventually overcome, thus solutions may be of temporal nature, or may not be needed at all if the disruption is brief. 3. Knowledge Loss. Businesses rely on the expertise and experience of their employees to sustain operations. Thus losing employees may disrupt the business as capabilities are lost and install capacity may decrease as well. After a disaster, employees may not be ready to immediately return to work or may not even return at all.

Weather matters, but at different rates and for different reasons While the storm covered large areas and moved fast inland leaving behind a path of destruction. The local magnitude of the disaster and on-site conditions were not uniform throughout the storm’s path. Local variations resulted in areas where flooding damage took forefront, while at other places it was sustained winds, rain, gusty winds, or a mix of some of the several elements. All this resulting in damages and disruptions that was unique to that area. Yet, a deeper analysis suggests that even when there were many local realities, there were communalities across that, if addressed, could result in faster recovery rates across the overall area. In overall, these are the different types of damages and their consequences: 1. Flooding matters, regardless of where you are. Businesses located in the flooding prone areas fared worse, in overall, than those located in dry land, yet it affected everyone. The worst of the flood, the longer it took for businesses to restore operations and also the longer it took for businesses to go back to normal after restoring operations. Yet data suggested the existence of typing points for the impact of flooding and tides. This is the impact of flowing increased as the amount of water increased to a point where the damage was of such magnitude that insurance and governmental aid were trigged and at this point the impact of the damage substantially diminished as the recovery efforts were no longer financed by the business alone. Once the cost of recovering from the flooding was covered by the business’ insurance and / or governmental aid then the restoring and recovering was done faster, with the caveat of the time lags embedded in the release of the funds. It is worth noticing that not all flooding were the same. Storm tides caused larger resume and recovery times while storm surges mostly affected resuming operations and not recovery. Likewise, rain related damage was faster to overcome but to recover from it was equivalent to the recovery of inundations in general. 2. Wind related damage mostly only matters to recovery but not to resume operations. For businesses, sustained high speeds wind or strong gust made a difference to their ability to resume operations. Yet, both, high speeds and strong gusts were relevant factors that impacted the length of time required for businesses to reach normality. When considering the impact of gusty winds, it was found that they negatively impacted the length of time needed to go back to normal. This is, the stronger the wind the Page 13

Lessons Learned From Sandy

shorter it took for business to recover. In the case of sustained wind speeds the relationships was direct, thus the stronger the wind, the longer it took to businesses to recover.

Local and internal disruptions affect differently the resuming of operations and the long term recovery. When facing recovery after a disaster, local businesses are also affected by the impact of the disaster on nearby businesses and the magnitude of the damage within the home community. Yet this impact does not reflect the same when resuming operations shortly after the disaster than when seeking to restore normalcy over time. Likewise, as the effects of the disaster over the community affect the business operations and later its recovery, economic support helping to restore the community also, indirectly, helps local businesses to recover as their customers and employees resume their normal lives. 1. Business Environment pressure on business. While DISASTER RECOVERY IMPACT ANALYSIS Business accounting for socioeconomic forces in the area and per sq mile their impact on the recovery of the local business two RESUME NORMAL elements are key; number of business per square mile and the average number of persons per business in the area. Immidiately after the disaster higher densities of businesses in the area help busness to recover faster. Yet after the initial recovery has taken place, the same Persons density may have a negative effect on the long term per Business, recovery as local levels of business competiton increase IMPACT thus putting additional strain in the recoverng of FIGURE 7: BUSINESS ENVIRONMENT PRESSURE ON businesses. Likewise, consumers also matter. While BUSINESS considering the number of consumers served by each businesses the effect is the oposite. During the intial re-start of operations large numbers of consumers per business put an additional burden on the already weaken businesses as larger number of consumers put disproportioned demands on the already disaster-strained operations of local businesses. Yet as the business recover the high numbers of consumers result in increase number of transactions thus increasing revenues. 2. Internal operations. For the purpose of this analysis DISASTER RECOVERY IMPACT ANALYSIS internal operations include the business’ supply chain / Supply Chain/Human human disruption score (i.e., loss of vendors and Disruption Score employees), assets disruption score (i.e., loss of vehicles, Asset Disruption buildings, and inventories), and years of operations Score (i.e., institutional memory). The analysis suggest that all the first two elements, supply chain / human disruptions and assets disruptions have a small but similar impact shortly after the resuming operations where the bigger Years Operating the impact on any of these two categories, the larger RESUME NORMAL IMPACT the short term consequences for the business. Yet these FIGURE 8: INTERNAL OPERATIONS effects do not stay constant. Over time the magnitude of these two disruptions increase as the consequences of these two problems compound as the business seeks normalcy understood as doing everything just like before. We suggest this compounding problem comes because businesses seek to restore a business and operational reality that may no longer exist for them. In contrast to these two elements, years of operation (i.e., institutional memory) has an opposite effect on the business recovery. This factor suggests that the longer the business was in operation prior to the disaster the better its 0.01 0.

-0.01

MAGNITUED

-0.02 -0.03 -0.04 -0.05 -0.06 -0.07 -0.08

5.

4.5 4.

MAGNITUED

3.5 3.

2.5 2.

1.5 1.

0.5 0.

-0.5

Page 14

Lessons Learned From Sandy

recovery will be. This effect, even when small, only increases over time. We suggest that experience allows to prioritize recovery task and to adjust to new business environment realities after a disaster. 3. Impact disruptions on nearby peers in the area. Businesses DISASTER RECOVERY IMPACT ANALYSIS are part of a local business environment where they are located nearby peers and competitors. This means that Business Claims Filed Per businesses within regions are interconnected by local Business flows of cash, products, and services. Hence recovery RESUME NORMAL needs to be considered in the context of the full business environment including the structure allowing these flows. An analysis on the impact of Sandy in the area suggests that local disaster gets magnified by the Bus Claims Paid Per number of businesses affected. Thus the larger the Business RAW IMPACT number of businesses affected, the bigger the impact FIGURE 9: IMPACT DISRUPTIONS ON NEARBY PEERS IN on the individual business itself as it has no support of THE AREA peers and the flows of products, services, and cash are disrupted. This impact is the strongest during the initial period and gets diminish over time as the whole region recovers, thus accelerating the individual business recovery. Evidence of this relationship comes when considering the impact of insurance payments in the area. While initial flows of payments help the recovery, the real impact of this support comes to full force when restoring normalcy in the individual business. It is at this later point where the number of claims paid to local small businesses in the region allows for the restoration of the community including the access to products and services. 4. Trickledown impact from local households into nearby businesses. Businesses have an interdependent relationship with local households as those represent DISASTER RECOVERY IMPACT ANALYSIS Hosehold customers, employees, and service providers. When Claims Filed per business disaster strikes and local households get damage, the impact of this disruption in the community has an immediate negative effect on local businesses. This problem gets aggravated over time and comes to a full RESUME NORMAL bloom when business try to reach normalcy as normalcy, understood as restoring the former status quo, may no longer be available because of the disruptions and Household Claims Paid damage suffered by the local households. Conversantly, per business IMPACT when local households get economic support to help their FIGURE 10: TRICKLEDOWN IMPACT FROM LOCAL recovery, local businesses also recover. This recovery HOUSEHOLDS INTO NEARBY BUSINESSES impact also becomes stronger as new realities of normalcy are determined over time. It is worth mentioning that both effects of disaster on the local households and the infusion of resources to help recovery are marginal when resuming operations yet become significant over time as the external support puts the community on track for a new stability. 20.

10.

MAGNITUED

0.

-10.

-20.

-30.

-40.

15.

10.

MAGNITUED

5.

0.

-5.

-10.

-15.

Inadequate disaster area awareness hinders recovery Availability of federal and state support to help business to recover after a disaster is linked to an event and the region where the event took place. In the case of Sandy, the disaster-event that triggered the availability of federal and state support was the storm itself while the location where the aid became available was the geographies directly affected by the path of the storm. Thus a federal and state bills delimited the entirety of the state of New Jersey as the location where Sandy related

Disaster Area

-20.

Yes

Affected 34%

Businesses Unaffected 10%

Don't know 9%

No

30%

60%

18%

Don't Know

36%

30%

73%

Total

100%

100%

100%

TABLE 3: DISASTER AREA AWARENESS

Page 15

Lessons Learned From Sandy

recovery support was made available to all local residents and businesses in need. Yet even when available this support was not utilized by all the businesses that have the need. Of the sampled population only 34% off all the affected businesses in New Jersey were aware that the area was a declared disaster area and governmental aid was available. Furthermore, of those who were aware about 10% did not apply as they considered that they would not qualify, even when they needed the resources and used a private source to secure funding to recover including bank loans, loans from friends and family, assistance from the parent company, to name some sources. Awareness of this situation resulted in the Congress directing the SBA to reopen their loan program until 2016.

PHASE III: RECOVERY SERVICES PROVIDED TO NJSBDC AND PARTNERS While much has been discussed about the need for better support to help the recovery of local businesses after a disaster, little has been said about the challenges faced by the institutions providing this support in the first place. As part of this report we also explored the conditions surrounding local NJSBDCs after Sandy to better understand the operational challenges these centers faced while helping their clients to recover after the storm. These challenges are broadly categorize within the following areas; operations disruptions, economic access, information availability, and expectations management.

Operations disruptions Operations of centers in the disaster area were also disrupted because of the storm .Similar to other organizations in their area, local SBDCs were subject to the same wind and water damage conditions, as well as loss of power and communications. Furthermore, similar to the rest of the entities in the disaster areas recovery for these centers was not an overnight event. While one center was able to resume operations within 48 hours after the storm, other centers required up to one-to-two weeks to re-open their activities. Furthermore, resuming operations was not at full capacity. Similarly to the rest of the businesses in their areas, SBDCs took up to a month to reach normalcy. Among the reported challenges the centers faced to resume operations included temporal loss of employees and vendors. These disruptions came on the backs of the loss of power and physical damage to properties. While the type of disruptions and the subsequently delays to resume operations faced by the centers were to be expected, these recoveries periods negatively impacted the recovery of businesses in the area, to no fault of the centers. Thus, while centers were struggling to resume operations, they were faced with the pressing needs of their clients who were under the same duress. A major consequence of this problem was that even when open, the centers were not completely ready to serve local businesses aiding to the local confusion.

Economic access While local businesses had access to state and federal grants to help with their recovery as well as commercial loans and the support of family and friends, this was not the case for the SBDCs. Governmental relief funds did not included the centers. SBDCs were, tacitly presumed to be part of the recovery plans/economy of the host institutions (colleges and universities) yet in some instances local institutions did not included the SBDCs in their efforts or plans as they thought of them as capable to access other sources of support. Centers were left to get volunteers as well as to access insurances, when available, to resume operations including the restoration or replacement of assets damaged by the storm. This lack of explicit agreements and clear inclusion of the SBDCs in the home institutions recovery plans created a bottleneck in the flow of resources available to local small businesses as the SBDCs struggled to find ways to finance their recovery while providing help to their clients. Furthermore, as SBDCs became overwhelmed with requests as they were trying to restore their operations they loss their ability to go out to help businesses on location. They had to leave behind those who needed the help the most as they were not even able to go out to look for it. Page 16

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Information availability One of the main recovery services provided by the centers was access to information regarding economic support and recovery strategies. Yet these services faced a major constrain as not all the centers were clear about the financial services available to their clients. About 10-15% of the centers who participated in this study did not know they were in a Sandy disaster designated area, even when they were located in a disaster area and the center got its operations disrupted because of the storm. Furthermore while most of the centers were aware of the existence of the “Storm Recovery Loans through UCEDC” only about half of the participants were aware of other financial help available to their clients including “Stronger NJ Business Loans,” “Stronger NJ Business Grants & Forgivable Loans,” “Rebuild NJ Loans,” and ‘Retail Fuel Station Grants.” Similar concerns were also identified regarding knowledge support provided through consultants working at the centers. In the most extreme cases this initial confusion resulted in businesses not seeking out any other governmental support hereafter. Nevertheless in several instances this knowledge gap was eventually overcome with direct support of the NJSBDC central office.

Expectations Management The mandate of the SBDC offices is not to provide loans or grants but to help small business owners to improve their operations, increase their revenue, and develop resilience. In the process of attaining these goals, some centers may help clients to secure loans and grants. This has resulted in a word of mouth reputation where centers are considered points of access to economic resources rather than intermediaries or advisors. In the aftermath of Sandy many small businesses, which did not have prior contact with the centers, approached them to request funding to help their recovery. As the centers are not qualified to provide loans or grants these small business owners left in disappointment as their immediate expectations were not meet. Furthermore, the advice by staff and consultants at the centers about protocols to apply for the required funding was reported as unnecessary busy work that added complication to the already painful situation of the disaster. Conversantly, current clients may have not been contacted by the SBDCs to help their recovery.

PHASE IV: LESSONS LEARNED AND RECOMMENDATIONS TO OVERCOME FUTURE DISASTERS Because of the catastrophic impact of Hurricane Sandy, many studies have looked at it as an exemplar of an extreme weather event. These studies have looked into the social, economic, and environmental impacts of it. Extant reports have assessed, among other things, Hurricane Sandy’s impact on communities at large (e.g., Hoopes Halpin, 2013), have discussed the impact on insurance costs due to extreme weather such as Hurricane Sandy (e.g., Cleetus, 2013; United Nations, 2013), have considered the macroeconomic and fiscal impacts of Hurricane Sandy on the economy of New Jersey taking into account both the economic losses resulting from the hurricane and the offsetting positive economic impacts associated with recovery and reconstruction spending in the months and years following the event (e.g., Mantell et al., 2013). These reports have also studied the environmental impact of the Hurricane on local ecosystems (e.g., Drexel University, 2013) 19. Yet no report have created a typology of business needs nor have tracked and assessed the recovery services provided to small businesses affected by the hurricane. Addressing this gap, this report focuses on the small business recovery in New Jersey after Hurricane Sandy. In concrete, we develop a two steps approach. First develop a typology of small business needs after disaster, afterwards we track and evaluate the services provided by the Small Business Development Centers (SBDC) and its partners to small businesses in New Jersey as part of Sandy’s relief efforts.

See Rutgers database Library “Community Resilience & Superstorm Sandy” at http://libguides.rutgers.edu/sandy for a complete list of reports and resources on Hurricane Sandy. Page 17 19

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The socioeconomic impact of Sandy was magnified by disruptions in the local supply chains including gasoline shortages that further slowed response and recovery, limiting the effectiveness of generators and adding time and cost to transportation. While the overall impact of this event was sizable for the communities in the path of the Hurricane, the consequences of the event did not stay local within these communities. Environmental damages rippled through the area (U.S. Fish & Wildlife Services, 2014) and the negative socioeconomic effect on businesses traveled throughout the supply chains where the affected business were included (United Nations, 2013). Cherryl and Donzelle Sharp had a successful business that they grew from nothing into an $8 million a year operation.20 Precision Infrastructure Incorporated, the Sharp’s business, was unprepared for the storm and saw its business sustain $250,000 in damages and $5 million in lost contracts that it struggled to get back. Donzelle Sharp stated what many other small business owners around New Jersey felt, “for a smaller firm like outs, it was a substantial loss”, a loss that a 75-employee firm may not be ready to handle.21 To ensure SBDCs can provide the required support to local small business after a disaster, their first responsibility is to ensure they are ready to provide support when, and as needed. In accordance with our initial findings, we first list recommendations to ensure the continuity of SBDCs under duress. Afterwards we introduce the lessons to ensure the continuity of small businesses during, as well as recommendations to help implement those lessons.

Lessons learned by SBDCs as first responders The true responsibility of the SBDC is to ensure the continuity of communities by supporting their small businesses. Small businesses are the backbone of communities throughout the United States. They contribute to the well-being of residents by providing local access to products and services22. Small businesses also help to the livelihood of their communities as they are local sources of employment23. These conditions are particularly true in New Jersey where 98.4 percent of all businesses are classified as small (Small Business Administration, 2013). Hence, when disaster strikes and the operations of small business are disrupted, local communities are very likely to lose their access to supplies and services, as it was the case in 2012 with Hurricane Sandy in New Jersey. Thus, to mitigate disruptions in communities, the SBDC needs to institutionalize its regular involvement as part of local emergency response teams so to restore the operations of small businesses and help communities to regain local access to products and services. As first responders helping communities to regain normalcy, SBDCs efforts may be grouped into two areas; SBDC self-continuity and SBDCs serving small businesses.

http://www.blackenterprise.com/small-business/100-days-after-hurricane-sandy-businesses-recover/ http://www.blackenterprise.com/small-business/100-days-after-hurricane-sandy-businesses-recover/ 22 The 23 million small businesses in America account for 54% of all U.S. sales. The 600,000 plus franchised small businesses in the U.S. account for 40% of all retail sales (SBDA. 2014. Small Business Trends, Access date. 2014 26-May. Small Business Administration. Available at http://www.sba.gov/content/small-business-trends.) 23 Small businesses provide 55% of all jobs and 66% of all net new jobs since the 1970s. The 600,000 plus franchised small businesses in the U.S. provide jobs for some 8 million people. Since 1990, as big business eliminated 4 million jobs, small businesses added 8 million new jobs. (SBDA. 2014. Small Business Trends, Access date. 2014 26-May. Small Business Administration. Available at http://www.sba.gov/content/small-business-trends.) Page 18 20 21

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SBDC self-continuity SBDCs need to ensure the continuity of the services in the community if disaster strikes. Thus centers need to strengthen their operations by developing strategies that allow them a quick recovery in case of a disruption. Also centers need to implement backup plans so their clients have access to information and resources, even when the local SBDC is not yet back in operation. Thus, SBDCs need to implement these three strategies: 1. Quick recovery strategies. SBDCs are organizations with local presence. As such they need, similar to their own clients, protocols to ensure them timely access to capital and resources. This plan will ensure that operations come back on line in record time to ensure their clients’ recovery. This strategy needs to include a way to request support, and to signal the community once the center is back on line. This also requires a clear understanding on the typo of support that host institutions may offer to the resident centers. Furthermore, to swiftly resume operations, SBDCs need to have ability to quickly determine resource allocation priorities. A clear understanding of the operations helps to assess the nature of the disruption and its operational consequences. This understanding translates in strategic actions that ensure efficient use of scarce resources. To have current strategies to implement preempt planning needs to run on regular cycles that allow for updates whenever key events in the operation of the venture take place. 2. Strengthening operations. When a SBDC goes offline because of a disaster, local small businesses still need to have access to its services regardless of the status of their local SBDC. Thus, SBDCs need to establish a network base program to ensure that other nearby centers, which are still operational after the disaster, can serve as backup to continue providing services to local small businesses in the affected area. This backup strategy will ensure that small businesses have prompt access to any help available through SBDC, even when their local unit is temporarily not operational. Also, there should be a mechanisms to transfer back clients once their assigned local unit is operational again 3. SBDC best practices network. Throughout the state, the different centers face different conditions and develop best practices to address the needs of their clients. Having the ability to share these best practices can allow for a quicker learning and better quality of services to clients to clients, thus strengthening local communities.

SBDCs serving small businesses SBDC need to provide local support to small businesses to ensure businesses’ continuity. Thus centers need protocols to ensure they have the most current, and adequate information available to share with their clients. These protocols need to include strategies to guarantee the information reach those who need, when they need it. Thus, strategies to be undertaken by this center include: 1. Access to information. Information is essential to recovery after a disaster; where to find resources and how to access them are foundational elements for a timely recovery. SBDCs need to incorporate proactive protocols so they reach out to their clients after a disaster rather than waiting for the clients to contact them. This proactive plan can be part of a larger strategy where the clients, in turn, can help the outreach efforts as they will refer neighbors in distress to their local SBDC. 2. Operations best practices repository. SBDCs have regular contact with small business in the area as they help them to improve their operations. Taking advantage of these interactions, SBDC staff can document the best business practices of their clients. These best practices database can be further coded by industries, events, and locations so to help SBDCs to develop an in-house repository of best practices tailored to the local realities of their clients. Furthermore, if this effort was to be undertaken at a larger scale may result on a nationwide business library ready to provide help to local organizations and facilitate the operations of the SBDCs. 3. Quality knowledge. Having strong and fast networks to convey information to clients in case of a disaster is an asset that may not be wasted or taken lightly. SBDCs need to have timely access to accurate information so to provide the most recent and adequate knowledge to clients. During Sandy, many small businesses did not reach out for help as they presumed they did not qualify, or in some cases did not even Page 19

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know the help was available in the first place. Thus SBDCs can help the local recovery by stablishing trustworthy information channels that link state headquarters, local centers, and clients. This also helps, at a later time, after recovery as local small businesses come back to get further help and growth their businesses. 4. SBDCs as local nexus. SBDCs have an extensive knowledge of the capabilities of their clients. In case of a disaster it can be critical for a small business to gain local access to resources to them to speed up their recovery. In the mist of the disaster it can take days or weeks to locate those resources. Local SBDCs can serve as a connector helping clients to reach out other businesses that may help their recovery by providing those must needed products and services It is also worth noticing that among the services that need to be available to small businesses to ensure their recovery after a disaster, it is also necessary to include those listed in the following sections label “Lessons learned by Businesses” and “Recommendations to businesses.”

Lessons learned by Businesses Business recovery cannot be understood in isolation from the regular business operations nor as an extraordinary event in the life of the business. Business recovery is intrinsic to any planning of business continuity and increases the chances of business survival if executed as part of a long term action rather than a short term response to disruption. Thus, to be effective business recovery needs to be understood as a multistep planned strategy aimed to bring into place a new business normalcy. This method contrast traditional views in the field that address recovery as the methodical replacement of loss assets and capabilities, often ignoring the new businesses environment and operational conditions brought by disaster itself. These new realities often require a new understanding of the operations, including adjustments to survive similar events as they come in the future. Given the vulnerabilities faced by many businesses to disasters and the deficiencies many have in preparing and responding to disasters, a resiliency of a business is appropriately viewed in whole community perspective that include participation of both government and private interests. This is particularly relevant as local businesses are the main service and products providers of their communities leaving residents without access to basic supplies as soon as their operations are disrupted by a disaster. Disaster recovery may be best understood as a three stage process that would ideally start with the early planning and documenting of operations and ends when the business resumes operations working under what it is considered the new normalcy. These three stages can be broadly divided into; preemptive planning (or risk management), disaster period, and post-disaster (or recovery).

Preemptive planning Preemptive planning, also referred to as risk management period, focuses on developing the foundations for resilience. The goal at this stage is to develop a solid strategy to ensure the organization’s continuity under conditions of duress, including, but not limited to an extreme catastrophic event. Thus, this period is devoted to identify the organization’s critical operational paths along with the best strategies to reduce the risk inherent to these critical junctures. The objective of this risk management analysis is to ensure, that during and shortly after a disaster, the basic needs of the organization will not go unattended until a more formal help is established and the new normality is restored. Thus, during the preemptive planning, businesses also assess the local conditions to define the mechanisms that will increase their likelihood of their survival if a disaster event is to occur in the area. Preemptive planning also includes the accommodations that businesses may do to ensure their readiness to solicit and receive help after a disaster. Thus this period also comprises the creation of back-up files and documentation that can validate financial requests and ensure continuity if hardcopies are no longer available. Also, at this stage organizations may develop strategies of collaboration including but not limited, to developing business relationships with local financial institutions, local business chambers, and government officials. This preemptive planning stage is an ongoing process that should be revisited on Page 20

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regular basis to ensure that risk management strategies truly reflect the realities of the organization and not a dated image from its past.

Disaster period This stage, also referred to as the response time, includes the interval between the warning of an imminent catastrophic event is received up to, and including the end of the macro damage assessment –or after the incident has occurred and the threat is deemed by experts as no longer existent. It is at this second stage that two key actions take place within the organization: 1. Execution of preemptive plans. This is when businesses, in as much as possible, implement all the risk management plans developed during the preemptive period. The goal of this action is to minimize the impact of the imminent catastrophic event. 2. Run impact assessments. The initial impact assessment seeks to determine both; the magnitude of the business’ disruption resulting from the catastrophic event, and the source of the disruption itself. The goal of this assessment is to a. identify and prioritize the requirements to overcome the disruption b. enact emergency measures to ensure the continuous operation of the organization while the source of the disruption is overcome c. identify the necessary resources to restore normalcy in the post-disaster period

Post-Disaster The post-disaster period is also referred to as recovery time. It is here when the restoration and reconstruction takes place. This is when disaster data is aggregated and the recovery lessons are initially documented. The recovery period includes these three phases: 1. Relief period. This is the time when basic operations are resumed and the damage assessment is underway. This period also includes the initial request of resources to restore normalcy. If restoring the business to its original conditions and operations is deemed as not feasible, or cost effective, then the actions at this time, may focus on scraping the facility and salvaging the remaining resources to start operations elsewhere, or liquidate assets to minimize economic losses. 2. Recovery period. This is the core of the post-disaster period. This is when resources start to arrive and the concrete actions to ensure normalcy are initiated. This period is marked by the restoring of critical business functions, and the development of the new post-disaster operational guidelines. 3. Restoration period. This is the time when all the capabilities of the business are re-established and the business is considered to be back to its new normal. This period, if properly managed, is marked by the integration of new strategies that can facilitate the survival under similar types of disruptions in the future. It is worth mentioning that the longer a business has been in operation the more operational experience the institution has accrued thus the more resilient the organization becomes. It is also relevant to highlight that after restoration, the business operations may include important changes that come in response of a new post-disaster reality. Finally, at the end of the restoration stage, the pre-emptive planning is resumed.

Recommendations to Businesses Businesses, especially micro and small businesses, are vulnerable to the economic and community disruptions from even a modest-sized disaster event of a predicted type. A disaster will rapidly bring the closing of a business, particularly those that lack the resources and contingency plans for an extended downtime. For instance, owners of small businesses typically lack the means to develop and execute a continuity and risk management plan. Some businesses may have centralized facilities that if damaged will permanently disrupt their operations by limiting their access to their own resources. Below are the general recommendations we have identified to support business owners and managers, when they are making decisions to ensure the continuity of their business, including a speed up recovery after a Page 21

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disaster. These recommendations are informed by the overall research on business recovery after Hurricane Sandy in New Jersey. We have distilled these findings from the extensive history of real occurrences, best practices, and academic evaluations concerning the complications of disaster response. The recommendations are organized according to the three stages of recovery that business may undergo to overcome disaster, as previously discussed.

Disaster period recommendations 1. Impact assessment In the first hours or days after a disaster, the emergence of local first responses in addition to alreadyplanned support efforts can mean the difference between continuity or total failure. Owners and managers of businesses should have adequate plans to participate, and if needed, take advantage of these ad-hoc community responses. Thus preemptive planning should not be limited to the in-house operations of the organization but should also consider its role as part of the collective efforts of the business cluster is it is to survive in the long run. 2. Organizations need to be ready to access local support, including non-conventional community resources After a disaster event, the most responsive support is likely to be locally: for example, town or city government, nearby businesses, as well as members within the community including neighbors. This support will typically be a combination of resources sought by business owners and resources offered to them. Private sector support from nearby interests groups (e.g., local businesses, local nonprofits, and local community members) will often see to have a vested interest in supporting local businesses in its recovery. This comes from a tacit understanding that sustainable local quality of life relies on the availability of the products and services provided by local businesses. From the public sector, recovery aid to businesses comes at three tiers of access, precision, and speed. At the first tier, businesses’ best option for government support is from their local town or municipal government. Hence, response is the fastest, access is immediate, and precision is the most accurate. This first tier is available to the extent that the local government is operating and is able to deploy the kinds and levels of needed resources with lower transportation cost and better knowledge of on the ground conditions. The second tier in responsiveness will be regional (e.g., county) resources. At this tier resources may not arrive as fast and logistics will require local support to be effective. Finally, at the third tier, the state and federal support is located. Here resources may arrive at a substantially slower speed and logistics may have the largest level of complexity, yet the availability of resources will be the strongest and the diversity of resources will be maximized. From the private sector, other businesses (small and large) nearby and in the immediate vicinity of a business are most responsive and offering of assistance, due to shared interest in re-establishing their own business and restoring local economic activity. Here local supply chains will rely on its own mechanisms to support local needs and repair damage from the disaster to normalize operations. These opportunities for local collaboration include: clearing the destruction from a business’ property, securing the business from further loss (e.g., additional property damage and safety risk, or property loss due to theft), and identifying new or supplemental resources to ensure the continuity of the damaged business.

Post disaster recommendations 1. Disaster response is a stress test of entrepreneurial capability A disaster is an existential threat to a business, due to a variety of potential factors: e.g., interruptions of power, loss of customers, facility damage, damage to nearby infrastructure that allow suppliers and employees access to the business. Responding to the uncertain and emerging conditions following a disaster requires significant entrepreneurial decision making, because disrupted elements of a business must be filled in or re-established with the least downtime if the business is to recover. Business owners and managers need to Page 22

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be ready to accept or reject resources as the business may not be ready to take advantage of it and its use may present an additional burden. 2. Governmental resources to restore business continuity and recovery may take months to arrive Federal resources represent a significant help to restore operations. This is true for the most significant disaster crises. Yet, these resources may not arrive immediately as they may take weeks (or months) to be available to the businesses. Thus businesses need to be able to start the recovery process on their own and consider access to these resources as the second stage of their recovery. In the United States, the federal government’s strategic framework for emergency management focuses on the development of local resilience. This plan relies on the mobilization of a variety of public and private capabilities following a disaster (FEMA, 2011). Federal resources and capabilities are formidable and significant, but they may be temporarily overwhelmed and/or may require time to be mobilized as needed. During the initial days and sometimes weeks after a disaster event, local communities often need to rely on their own, and on the availability of resources and support from their immediate vicinity. Thus, we recommend that preparation efforts take into account this response gap. Hence, we suggest to develop a decentralize strategy that relies on strong local networks that include redundancies. This will facilitate the flow of resources within close geographical proximity to address immediate local disruptions. To develop this local network, local regions and communities need to foster their own relationships and capabilities in advance of a significant disaster of uncertain type, scale, or severity occurs and so they can hold their ground while waiting for more formal assistance to arrive. 3. Informal economies become more important following a significant disaster event Businesses should be further prepared to receive support from local nonprofit organizations and/or volunteers from the local neighborhood and community. These resources will often be ad-hoc, especially during the hours and days after a significant disaster event. Business owners should be prepared to discover or negotiate terms for the resources they receive, and to develop contracts or agreements that best suit the circumstances of their business prior to disaster combined with the losses that occurred during and after, as a consequence of the disaster. Informal economies often rely on the existence of strong local capital to properly operate and prevent abuses. Thus, communities with long standing traditions of cooperation are more likely to take advantage of informal economies to move forward and ensure a speedy recovery. Therefore, they may not need to rely on formal agreements and institutional mechanisms to move forward. 4. Some reinvention might occur to a business after a disaster leaving it either better or worse off. Disruption may sometimes bring unexpected innovation. A business may need to change dramatically in its operations in order to survive. There may be temporary (or permanent) changes in its storage and operating locations, in its use of supplier organization, or its workforce. There may also be further changes in its business model due to disruption of existing customers, which sometimes includes the opportunities for new customers. There are also cases where a disaster creates the opportunity for an owner to quickly improve a business to a state that is better than it was prior to the disaster. 5. Disaster may come as a bonanza for selected few For some businesses, the nature of the local disaster makes them central to local recovery efforts, or at least to the actions associated with the survival of the disaster itself. This can put an additional strain on organizations as they may not have prepared for an excess of demand while trying to get off the ground. Thus adequate planning needs to not only consider what to do to keep running the businesses but to assess its centrality in the local supply chain to accelerate the local recovery and properly satisfy local economic pressures.

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REFERENCES American Sustainable Business Council (2013). Climate Change Preparedness and the Small Business Sector. July 2013. http://asbcouncil.org/sites/default/files/small_business_climate_report.pdf Jett, Q. R., Pyke, D.F., & Johnson, M.E. (2006). Minority Business Enterprises (MBEs) Mastering the Supply Chain: A Perspective. Tuck School of Business at Dartmouth. Prepared for the National Minority Enterprise Development (MED) Week 2006 conference. 51 pages. Washington, D.C.: U.S. Department of Commerce, Minority Business Development Agency. Catalog of U.S. Government Publications. SuDoc number C 1.102:M 66/5. Item number 0231-B-04. http://purl.access.gpo.gov/GPO/LPS120953 United States. Federal Emergency Management Agency, Department of Homeland Security. (2011). A Whole Community Approach to Emergency Management: Principles, Themes, and Pathways for Action. FDOC 104-008-1. December 2011.

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ATTACHMENTS

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Attachment A Timeline of Federal Response to Hurricane Sandy October 22, 2012  NOAA National weather service issues a public advisory that “Tropical Depression 18” had officially become Tropical Storm Sandy October 26, 2012  FEMA deployed “Incident Management Assistance Teams” as a liaison and to coordinate with other emergency operation centers. The teams were deployed to: NJ, NY, DE, CT, PA, VT, MA and NH  President Obama was briefed by Craig Fugate (FEMA Administrator), Dr. Rick Knabb (National Hurricane Center Director) and John Brennan (Homeland Security Director). Craig Fugate followed up on meeting with a media update  The US National Guard deployed 61,000+ personnel along the eastern coast. States impacted by the deployment were: NJ, NY, DC, PA, DE, VA, CT, MD and MA October 27, 2012  President Obama briefed by Janet Napolitano (Secretary of Homeland Security), Craig Fugate (FEMA Administrator), Dr. Rick Knabb (National Hurricane Center Director) and John Brennan (Homeland Security Director)  Napolitano and Fugate reach out to governors from numerous states in the path of the storm, including Governor Christie  Fugate and Knabb conduct congressional briefings for members of congress  FEMA activates National Response Coordination Center (NRCC) based at FEMA headquarters to bring together federal agencies and coordinate response  U.S. Department of Energy deployed emergency response personnel to FEMA Regional Response Coordination Centers (RRCC) in MA, NY and PA --- they were not sent to NJ October 28, 2012  President Obama signs emergency declaration for NJ, CT, MD, DC, NY, MA and PA  President Obama joins a call with governors and mayors of potentially impacted areas to discuss preparedness. Among those officials who participated in the call was Governor Christie and Newark mayor, Cory Booker  FEMA’s Mobile Emergency Response Support (MERS) personnel in route or arrived in NJ, NC, PA, NY and DC  Small Business Administration (SBA) urged small businesses to take steps to perform and use SBA preparedness checklist (www.sba.gov/prepare) October 29, 2012  Hurricane Sandy makes landfall along the cost of Southern New Jersey (near Brignatine, NJ)  President Obama signs pre-disaster emergency declaration for PA, DE and Rhode Island  FEMA activated its National Business Emergency Operations Center (NBEOC) to provide private sector members with updates from FEMA, DHS, USNORTHCOM and other security agencies  At the request of state of NY, 139 ambulances positioned and 211 additional deployed to the state and 160 DHHS personnel also deployed. At the request of state of NJ, two 50-people Disaster Medical Assistance Teams were deployed to provide triage and basic care services at two shelters within NJ October 30, 2012  President Obama declared major disaster for NJ, NY and CT. Individuals and businesses who experienced losses could begin applying for assistance Page 26

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FEMA established a National Power Restoration Taskforce 7,400+ National Guard troops placed on duty to help the governors of: NJ, DE, CT, PA, NC, RI, NH, MD, VA, MA and NY HUD speeds federal disaster assistance to those in NJ and NY

October 31, 2012  President Obama, Governor Christie and Craig Fugate (FEMA Administrator) toured the NJ coast and received briefings from state/local officials  Ray LaHood (US Dept. of Transportation Secretary) made available $4 million in quick release emergency relief funds to North Carolina to begin repair efforts  SBA issued a disaster declaration for the following counties in NJ: Atlantic, Cape May, Essex, Hudson, Middlesex, Monmouth, Ocean and Union. Small businesses in these counties were eligible for Physical and Economic Injury Disaster Loans o Small businesses in the following counties were eligible to apply solely for SBA Economic Injury Disaster Loans: Bergen, Burlington, Camden, Cumberland, Gloucester, Mercer, Morris, Passaic and Somerset o Businesses and non-profit organizations of any size would be able to borrow up to $2 million to repair or replace disaster damaged or destroyed real estate, machinery and equipment, inventory and other business assets. o The SBA has option to increase a loan by up to 20% of the total amount awarded to make improvements that lessen the risk of property damage by future disasters of the same kind  US Department of Agriculture Farm Service Agency (FSA) urged farmers and ranchers affected by the hurricane to keep through records of all losses, including livestock deaths, feed purchases and extraordinary costs  IRS granted taxpayers and tax preparers in impacted areas until November 7 to file returns and accompanying payments. The relief primarily applies to businesses whose payroll, excise tax and payments are normally due on this day November 1, 2012  President Obama conducted phone calls with state and local officials from NJ, CT, and NY to discuss response progress and unmet needs  Janet Napolitano travels to NY and CT to meet with state and local officials while Richard Serino (FEMA Deputy Administrator) heads to NJ  More than 36,000 disaster survivors from NJ, NY and CT had applied for federal disaster assistance and more than $3.4 million in individual assistance was approved. Assistance could include grants for temporary housing, home repairs, other programs to help business owners recover from effect of the disaster, etc.  Janet Napolitano activated the “Surge Capacity Force” to support federal efforts in NJ and NY. Established by the Post Katrina Emergency Reform Act, is composed of employees from throughout the Department of Homeland Security and other federal agencies that can be deployed to support disaster operations  CBP fully staffed air and sea ports in the impacted areas to receive passengers and cargo as they return to operation – a pivotal step for businesses  DOT made available $17 million in quick-release emergency relief funds to NY, NC and Rhode Island to begin repairing damage to roads, bridges and tunnels  Public health emergency declared for the state of NJ November 2, 2012  President Obama directs the Department of Energy to loan the Department of Defense ultra-low sulfur diesel from the Northeast Home Heating Oil Reserve. The fuel was to be distributed to local, state and federal responders in NJ and NY Page 27

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President Obama directs the Defense Logistics Agency to purchase up to 12 million gallons of unleaded fuel and up to 10 million gallons of diesel fuel for distribution in areas impacted by the storm to supplement ongoing private sector efforts. Fuel to be distributed throughout NJ and NY Janet Napolitano issues a temporary blanket waiver of the “Jones Act” to immediately allow additional oil tankers coming from the Gulf of Mexico to enter the Northeastern ports in an effort to bring more fuel to the region Federal and state personnel begin conducting joint preliminary damage assessments in NH, NC, VA and Rhode Island at the request of each state. Assessments were designed to give the governor of each state a better picture of the damage and to determine if a request for further federal support was needed FEMA’s National Business Emergency Operations Center remained active IRS announced tax relief to victims of the hurricane. Postponed various tax filing and payment deadlines that occurred starting in late October. As a result, affected individuals and businesses will have until February 1, 2013 to file these returns and pay any taxes due. The IRS also announced qualified disaster treatment of payments to victims of the hurricane, making disaster assistance benefits received by individuals’ tax free H.R .6581 (112th Congress) – Referred to Committee on Appropriations  Discusses supplemental appropriations for the SBA in FY2013  AKA the “Hurricane Sandy Recovery and Rebuilding Supplemental Appropriations Act, 2013”

November 3, 2012  Napolitano announced expansion of the temporary blanket waiver of the “Jones Act” to facilitate transportation of feedstock, blending components and additives to produce fuels  Napolitano traveled to both WV and NY  The FEMA National Response Coordination Center (NRCC) remained activated 24 hours a day  More than 1.6 liters of water and 2.1 million means transferred to impacted states  DOE continued to work with industry partners resulting in normal operation being resumed at two major refineries in DE and NJ as well as pipeline companies restoring services to six pipelines servicing NJ, PA and northern Maine  EPA exercised its authority under the Clean Air Act to temporarily waive certain federal gasoline requirements for gas sold and distributed in more than a dozen states  U.S. Army Corps of Engineers continued to support emergency power missions in NJ and NY. Devised technical plans to start pumping operations at many sites including: Jersey City PATH, WTC and South Ferry Station  More than 139,000 individuals in NJ, NY and CT registered for disaster assistance and more than $120 million was approved in aid  Twelve joint federal/state Disaster Recovery Centers opened in impacted states (two of which in NJ). Specialists from state, FEMA and SBA were on hand to answer questions and provide information on the types of assistance available to survivors November 4, 2012  Napolitano met with state and local officials from New Jersey. Toured Monmouth County and Hoboken. Participants included: Governor Christie, Lieutenant Governor Kim Guadagno, Senators Frank Lautenberg and Robert Menendez, U.S. Reps Rush Holt, Frank Pallone and Albio Sires and Majors Paul Smith and Dawn Zimmer  DOE established a toll free hotline for gas station owners and managers to call for assistance in getting their operations back up and running. Information collected will be used to coordinate response with both state and local authorities  DOT added NJ and CT to the states to receive a quick release of emergency relief funds to begin repairing damage to roads, bridges, etc. Amount to be shared among all states was bumped to $29 million Page 28

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At the request of State of NJ, the CDC established a federal medical station in Middlesex, NJ. More than 182,000 individuals in NJ, NY and CT registered for assistance and more than $158 million was approved in FEMA assistance

January 6, 2013  H.R. 41 (113th Congress) – Became Public Law Number 113-1  Amends the National Flood Insurance Act of 1968 to increase from $20.725 billion to $30.425 billion the total amount of notes and obligations (federal borrowing authority) which may be issued by the Administrator of the Federal Emergency Management Agency (FEMA), with the President's approval, for the National Flood Insurance program January 29, 2013  H.R. 152 (113th Congress) – Became Public Law Number 113-2  Introduced in the House as H.R. 152 by Rep. Hal Rogers; Passed the House on 01/15/2013; Passed the Senate on 01/28/2013 and signed into law by President Obama on 01/29/2013  AKA the Disaster Relief Appropriations Act, 2013  Provides for $17 billion in immediate support to those impacted by Hurricane Sandy  Title III discusses SBA  Makes supplemental appropriations to the Small Business Administration (SBA) for: (1) Salaries and expenses for grants to, or cooperative agreements with, organizations to provide technical assistance related to disaster recovery, response, and long-term resiliency to small businesses that are recovering from Hurricane Sandy (2) The Office of Inspector General and (3) The Disaster Loans Program Account  Breakdown of awards to each agency is as follows (a total of $60 billion to be dispersed): Agency Federal Emergency Management Agency (FEMA) Disaster Relief Fund (DRF) Department of Transportation, Federal Transit Authority Emergency Relief Department of Housing and Urban Development (HUD) Army Corps of Engineers Department of the Interior Department of Health and Human Services Department of Veterans Affairs Small Business Administration National Guard Department of Agriculture Amtrak Federal Aviation Administration Agriculture Commerce, Justice, Science Department of Defense Energy and Water Financial Services Homeland Security Interior and Environment Labor, Health and Human Services, and Education Transportation, Housing and Urban Development

Appropriation $5.4 billion $5.4 billion $3.9 billion $1.35 billion $287 million $100 million $235 million $161 million $24.2 million $6 million $32 million $14.6 million $218 million $513.25 million $88.335 million $3.997 billion $651 million $6.544 billion $1.166 billion $725 million $19.773 billion

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Lessons Learned From Sandy

TABLE OF TERMS Adaptive Survey – A computer-based survey that displays and/or skips later questions based on responses to earlier questions in order to provide a more customized experience for the survey taker and more targeted information for the surveyor. Cluster – geographic grouping of businesses based on a specific area size Development of Instrument – process by which survey instruments were developed Disaster – infectious disease outbreaks, acts of terrorism, social unrest, financial disasters, and natural disasters and hazards that lead to significant disruptions of normal business operations E-mail Survey – e-mail version of the survey instrument Emailsplease.com – data service providers that offers consumer lists of emails and addresses Excel – spreadsheet software package of Microsoft Office Geocoding – assigning latitude-longitude coordinates based on reported street addresses. This procedure serves to further develop spatial analysis by locating the addresses on an standardize plane. Haversine – a calculation of distance between two sets of coordinates based around the circumference of the Earth Qualtrics – industry-leading provider of Online Survey Software R – open-source statistical/mathematical programming language R package – an extension or bundle of extensions for the R language Recovery – activities where an entity or group uses its resources to rebuild or reconstruct what was lost during a disaster Reference USA – premier source of business and residential information for reference and research Resilience – the ability to prepare and plan for, absorb, recover from, and more successfully adapt to adverse events RStudio – graphical development environment for the R language Sample – subset of population to be used for surveying Small Business – any commercial, for-profit entity with less than 500 employees this includes franchises of larger brands but not brand owned and operated establishments Telephone Survey – telephone version of the survey instrument Texas A&M Geoservices –Geocoding services available at the University of Texas A&M

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