Tag: ERM

Flood risk – Insurance update or enterprise wide risk management?

The impact of Flood risk has typically been managed by government controls (building flood barriers, managing release of water via dams, and determining the locations and types of structures that can be built). Owners of properties are then responsible for the financial impact of any remaining risk related to flooding. This is often handled through the purchase of insurance and, sometimes, through reliance on a government disaster payments.

This approach has not been perfect. The National Flood Insurance Program has been around since 1958 and has so far managed to incur a debt well in excess of $24 billion. And 2017 was certainly a bad year for flood victims and insurers. Premium increases can be expected and may not be available for locations where there have been multiple claims over the years. (One location, for example, is said to have been flooded more than 30 times in 50 years).

There are new options for some flood damage control, such as replacing sandbags with chemical filling such as silica, which is relatively light, doesn’t require the labor associated with filling bags, and may be reused if floodwaters contain no significant pollution. Additionally, new technologies are being deployed to prevent flooding. These include hydraulic powered water gates in Tokyo, surge barriers in the Netherlands, and the Fox Point Hurricane barrier, which protected Providence Rhode Island against the surge of Hurricane Sandy.

Insurance of own property and other various controls are, typically, the primary methods to reduce the impact on organizations. So, how is this related to Enterprise Risk Management? read more