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How Wal-Mart's Disaster Management Strategy Changed After Hurricane Katrina

  • By Jonathan Starkey
  • Published: 2011-03-23

In 2005, retail giant Wal-Mart Stores Inc. was praised for its response after Hurricane Katrina devastated the Gulf Coast. But Rebecca Garrett, Wal-Mart’s Senior Director of Financial Operations, said the company’s financial executives knew they must do even better the next time they were faced with such a disaster.

So after the storm, Garrett and her colleagues set out to implement a plan that would allow them to address a single store’s cash management needs during a hurricane—or even a blizzard. Six years later, Garrett sat down with AFP Exchange to talk about Wal-Mart’s disaster-management strategy and offer tips for corporates facing similar challenges. In this Q&A, Garrett talks about what to do when your bank closes during a storm, explains why it is important to work seamlessly with armored carriers, and admits that, despite persistent planning, Mother Nature can be pretty unpredictable.

AFP: Can you explain your work around store-level disaster management? What was the problem you were hoping to solve? 

Rebecca Garrett, Senior Director of Financial Operations, Wal-Mart Stores Inc.: As you probably know, most of our customers depend on Wal-Mart when they’re making preparations for a natural disaster – a hurricane, for example. Typically we’re the last retailer to close in a community pre-hurricane. And we’re often the first to open once the hurricane has passed. So because we wanted to address both the cash and merchandising needs of any impacted communities, we developed an extensive program for hurricane response. Cash is essential, especially during a disaster. For example, customers may request more cash back at the registers in an environment where maybe an evacuation is mandated or there is not a clear storm path.

Another aspect to this was the need to have ample cash available to take care of associates from a payroll perspective. We also do the balancing act to make sure we’re not holding too much cash in a location, in order to minimize risk. And we wanted to prepare for unforeseen impact to banks. We have a backup plan for those types of scenarios, as well. So what we did was take all hurricane prone areas of the country and zoned them into different regions containing a specific set of stores. And we set the regions up and shared information with armored carriers and our banking relationships to address both pre-and post-storm needs. At any point in time, based on feedback we receive from our internal emergency operations center, or any state emergency agency, we can activate a zone or multiple zones. What that means is, for example, if we know a storm is approaching one of our designated zones, we’ll initiate a call with the banks and carriers for that zone and let them know which zones we’re activating. Then response preparations would begin.

So at this point, everybody is on the same page. All parties know exactly what store locations we’re focused on and what needs will be addressed. By that I mean this: pre-storm, we may say to armored carriers we want you to do extra pickups at the store, just to make sure we don’t have closed stores with excess cash. We may also elect to deliver packs of currency to sustain the stores through their business needs until the store closes. At the same time that we’re doing pre-storm prep, we’re also doing what we call post-storm prep. So we stage post-packs of cash, which are large pre-determined change orders in particular quantities with particular denominations that are filled by the bank prior to the storm and housed with our armored carriers for post-storm deliveries. The packs are not store specific, so we can allocate them wherever we need. It enables us to meet cash needs very efficiently, even if the bank is closed. Then we concentrate on bringing the business back up to serve our customers’ needs and return a sense of normalcy.

AFP: When did you start this planning? 

Garrett: This has been an evolution. The awareness was really raised with Hurricane Katrina. You may recall, Wal-Mart was praised for reacting quickly and turning things on a dime and meeting the needs of the community. But we realized that we could do things better. That is really when this project started. It has evolved and we’ve perfected, and continue to perfect and fine tune, and make improvements along the way to ensure that we’re reacting as quickly and seamlessly as possible.

AFP: Have you faced any obstacles, or seen any pushback? 

Garrett: I believe the cooperation and collaboration between the banks and carriers has been just exemplary. The biggest obstacle is one we can’t do anything about: the weather. It’s simply unpredictable. The best laid plans may go awry depending on the path a storm takes or the severity of a storm.

AFP: Have you had a chance to test this system? 

Garrett: We have, on a number of occasions. Good examples would be Hurricanes Ike and Gustav. Also, fires in California. We did some of the same things in that situation, although the needs are a bit different. Hurricanes seem to present the biggest obstacle. Blizzards are difficult, too, because if it’s severe enough, everything comes to a standstill.

AFP: What benefits have you realized from this project? 

Garrett: The biggest paybacks are simply the ease and seamlessness with which we’re able to supply the store’s needs and how quickly we can respond to the community’s needs. I would say those are the biggest wins. It also saves some stress and probably some labor on the part of the banks and carriers, as well as our internal team, because we have a plan and we all know what to do to execute this plan. There is less decision-making required when you’re in crisis mode. It’s more about putting the plan into action and following the plan.

AFP: Do you have any suggestions for corporates undertaking a similar project?  

Garrett: The best suggestion I can make is to partner with your armored carriers and banks. And plan before the disaster gets there.

Don’t miss the AFP Retail Roundtable, May 2-3 in Philadelphia. Register by April 7 and receive a $200 discount. Go to: www.afponline.org/RR. 

Copyright © 2014 Association for Financial Professionals, Inc.
All rights reserved.

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