Is your organization still sorting through the implications of the disaster and its aftershocks? If so, you may find the following list of areas to watch and questions to ask helpful as a way to keep your efforts on track in identifying and mitigating the business and financial risks. For more information visit https:/www.cbiz.com/ras/

1. Risk Alert
STEPS YOU CAN TAKE TO MANAGE THE RISKS
OF NATURAL DISASTERS AND THEIR AFTERSHOCKS

2. STEPS YOU CAN TAKE TO MANAGE THE RISKS
OF NATURAL DISASTERS AND THEIR AFTERSHOCKS
Last month, an earthquake and tsunami devastated the
villages on Japan’s north-eastern coast and triggered power
outages and nuclear threats in surrounding areas. These
events were a humanitarian tragedy, resulting in terrible losses
of lives and property. Today, we are still learning the full extent
of the aftershocks for the business and financial communities.
Manufacturers, retailers, construction companies, not-for-profit
organizations, hedge funds, high net worth individuals – all
are affected in myriad ways. The full effects of the crisis will
likely become clearer in the days and months to come, as more
information becomes available about the many implications for
today’s interconnected world, ranging from global distribution
and supply chains to relief funds and rebuilding plans.
Ten Areas to watch closely
Is your organization still sorting through the implications of the
disaster and its aftershocks? If so, you may find the following
list of areas to watch and questions to ask helpful as a way
to keep your efforts on track in identifying and mitigating the
business and financial risks.
n Suppliers. Have you weighed the risk of disruptions to your
company’s supply chain and identified back-up suppliers?
Keep in mind that it may be necessary to go beyond your
immediate suppliers and consider the impact on your
suppliers’ suppliers to avoid risks of shortages, production
stoppages, and higher prices.
n Distributors. Have you considered the need for alternative
methods of distribution after a natural disaster? In the
wake of Japan’s crisis, retailers, distributors, and relief
workers found they needed to look into emergency
distribution channels as regular shipping lines encountered
delays in shipments into Tokyo Bay and throughout Japan.
n Finance. Are you monitoring the effects on foreign
currencies and investment values? In the financial sector,
hedge funds and insurance companies may need to
calculate and communicate expected losses, while banks
and other companies may need to adapt to more volatile
exchange rates.

3. STEPS YOU CAN TAKE TO MANAGE THE RISKS
OF NATURAL DISASTERS AND THEIR AFTERSHOCKS
n Energy. Are you monitoring the reactions of governments
to the identification of nuclear threats? Resulting changes
in policies, laws and regulations at both state and federal
levels could affect long-term energy plans and decisions
about sites for office or manufacturing facilities.
n Travel. Are your business travel policies and procedures
sufficiently responsive to safety concerns, and are they
designed to help travelling employees in an emergency?
Japan’s crisis underscored the need for mobile travel
monitoring services, as well as contingency plans for
disruptions to business travel.
n Insurance. Has your company arranged for suitable
insurance for natural disasters that could happen in your
region? The answer may not be apparent from a review
of your own policies. You may need to consider coverage
provided under local laws and the liability policies of
nuclear plant operators. In some locations, governments
may provide relief for residential damage but not for
commercial property.
n Disaster Recovery Plans. Does your organization have
suitable business continuity plans and disaster recovery
plans? Reports of earthquakes, floods, and nuclear
accidents raise the questions, “Could it happen here?”
and “Are we prepared for the worst case scenarios?”
n Taxes. Have you checked with your tax advisor regarding
any tax implications and any steps you can take to
avoid unnecessary tax risks? Keep in mind that the
Internal Revenue Service has set parameters for the tax
deductibility of relief donations.
n Accounting. Are you carefully checking the accounting
and disclosure requirements related to natural disasters,
so as to avoid any unnecessary risks related to the
quality of your organization’s financial reporting?
n Compliance. Are you monitoring the reports of radiation
traces in food and other important commodities? Is your
company prepared to comply with regulations, such as
the US FDA’s ban on dairy products and some fruits and
vegetables from affected areas in Japan?

4. STEPS YOU CAN TAKE TO MANAGE THE RISKS
OF NATURAL DISASTERS AND THEIR AFTERSHOCKS
Timely Reminders
You may wish to check with your CBIZ MHM advisor regarding
the risk, tax and accounting implications of natural disasters.
While a complete discussion of these matters is beyond
the scope of this alert, we would like to remind you of the
following:
1. Enterprise risk management. In coping with natural
disasters, companies should have a clear idea of how
much risk is involved and how much risk the company
is willing to take, (i.e., the company’s risk appetite.) For
example, concerns about the risk of an unexpected supply
chain disruption might be mitigated through higher levels
of inventory or use of a larger number of suppliers. But
these actions will likely result in higher costs and lower
productivity. The question for management is whether the
risks justify the costs. CBIZ has a number of resources
available to help you manage these and other risks,
including special reports on ”The Emerging Frontiers of
Risk Management” available on our website at www.cbiz.
com/ras.
2. Tax deductibility of charitable contributions. Under
IRS rules, contributions to non-US organizations are not
tax-deductible. Donors can check the status of charities
by doing a search on the IRS’s website at www.irs.gov/
charities/article/O,,id=96136,00.html, though some
organizations, such as churches and governments, may
be qualified even though they are not listed on the site.
To get a tax benefit, individual taxpayers must itemize
their deductions on Schedule A for the year in which they
made the contribution. IRS Publications 526, “Charitable
Contributions,” and 3833 may be helpful. Publication
3833, “Disaster Relief - Providing Assistance through
Charitable Organizations,” explains how new organizations
can obtain tax exempt status. Both publications are
available on www.irs.gov.

5. STEPS YOU CAN TAKE TO MANAGE THE RISKS
OF NATURAL DISASTERS AND THEIR AFTERSHOCKS
3. Accounting and financial reporting implications.
Natural disasters raise difficult accounting and reporting
questions that may require considerable judgment to
resolve. Examples include the accounting for impairments
of assets and write-offs associated with environmental
exposures. In some cases, the results may be counter-
intuitive. For example, the events in Japan seem
“extraordinary” in every sense of the word, but the
resulting losses will not typically qualify as “extraordinary”
for purposes of income statement presentation.
Companies with international operations face special
challenges due to the tax-accounting implications,
particularly for valuation allowances on deferred tax
assets and any accounting assumptions about indefinite
reinvestment of foreign earnings. Additionally, the events
may trigger more disclosure requirements or have
significant internal control implications.
Questions about this alert should be directed to Brian
Gregory, President and Senior Managing Director, CBIZ
MHM Risk and Advisory Services, bgregory@cbiz.com,
216.525.1954, or Michael S. Gallagher, Managing Director,
CBIZ MHM Enterprise Risk Management Services,
mgallagher@cbiz.com, 713.562.1154.
This publication provides general information and does not
constitute legal, accounting, tax or other professional advice.
Readers are advised to obtain professional advice that is
appropriately tailored to their individual circumstances.
CBIZ and Mayer Hoffman McCann P.C. are associated
through an alternative practice structure. Audit and attest
© Copyright 2011. CBIZ, Inc. NYSE Listed: CBZ. All rights reserved.
ser vices are provided by Mayer Hoffman McCann P.C., an
independent CPA firm.
www.cbiz.com