Assessing the most common threats
The largest disasters dominate media coverage. Yet when it comes to insurable losses, the factors most likely to cause damage to an organization may not always be the ones making headlines. To effectively manage these risks, risk managers must first focus on these events through the lens of preventing losses and preserving business continuity.
Although the Mendocino Complex fire is truly massive in scope, last year’s much smaller fire in Napa and Sonoma caused substantially greater losses. The key to the amount of damage was the type of land on which the fires burned.
As the article With Wildfire, Big Doesn't Necessarily Mean Costly states, “The scale of the Mendocino Complex fire is stunning, but relatively little property has been destroyed and insured losses are likely to be correspondingly minor. Smaller wildfires impacting areas where urban expansion penetrates undeveloped wilderness in what is known as the Wildland-Urban Interface (WUI) can result in much more significant losses. The most destructive wildfire of this type in California history was the Tubbs fire of October 2017, which burned parts of Napa, Sonoma, and Lake counties in Northern California, including parts of the city of Santa Rosa. Some 5,643 structures, including 2,800 homes in Santa Rosa, were lost.”
The WUI areas, where natural areas meet the edges of development, are the most vulnerable to wildfire risk. They also are the fastest growing land-use types in the contiguous U.S. That means chances are increasing that company properties, employee residences, or distribution infrastructure may lie inside areas much more prone to wildfire risk. According to NOAA, the average wildfire is less than 90 acres. Analyzing how the WUI overlaps with your organization’s facilities and employee base is key to understanding the risk posed by smaller, more common wildfires.
In the same way that the most common risk from wildfires is different from what commands the most media attention, the largest threat from hurricanes is not necessarily the extreme winds. While the wind damage from the most powerful storms can certainly be catastrophic, flooding is an even greater risk and can be devastating even when wind speeds are not at extreme levels.
According to an AccuWeather article, Hurricane Lane has the potential to be the single costliest hurricane in Hawaii’s history. This despite the fact the storm was weakened—with wind speeds around a Category 1 level—when it made landfall. “The damage from Lane will be mainly from flooding, high tides and beach erosion rather than wind.” The risk from flooding continues to escalate. This explains why two of the three biggest damage totals occurred over the last two years. Even though the Colorado State University 2018 hurricane forecast predicted an ‘average’ number of storms, the damage total may still be much higher than typical.
Justin Smulison at Risk Management Monitor writes, “There is another risk associated with hurricanes that could also explain the rising costs and number of claims. The storms themselves—not their wind speeds—have been moving slower than they did 70 years ago. With the collective pace of weather systems slowing down, the risk for flooding increases.” As these systems slow down, they dump more water and trigger damaging flooding.
Whether it is associated with hurricanes or from other sources, flooding remains a constant threat. One study of natural disasters states, “Floods are the most common natural disaster and the leading cause of natural disaster fatalities worldwide.” In addition to increased rainfall caused by slowing tropical storms, ice jams can also lead to damaging flooding. Ice jams, caused when warm temperatures and spring rains cause snow and ice to melt rapidly, can cause extensive flooding. A Nature article notes that flooding from ice jams “can be more severe since, under the same or lower discharge, they can result in two to three times higher water depths than open water floods.”
Unfortunately, ice jam flooding is also predicted to get progressively worse. The Nature article states, “In a warmer world, more precipitation is expected to fall as rain in snow-dominated regions and the melting of winter snow is to occur earlier in the spring resulting in the shift in timing and magnitude of peak spring runoff.” The article concludes, “Without any preventive or mitigation measures, the flood damages are estimated to increase up to 20 times by the end of the century.”
Winter storm threats
Once viewed as minor inconveniences, winter storms are having greater impacts. One report states, “Mid-latitude winter storms have increased in both intensity and frequency nationally since 1950. Overall, there were twice as many extreme winter storms in the U.S. in the second half of the 20th century as there were in the first half.” In 2018, there have already been two winter storms that each caused over $1B in damages.
A single winter storm this year placed 60 million people in 15 different states stretching from Maine to Georgia under some type of warning or advisory, snowed over a 1,400 mile stretch of the East Coast, and gave Tallahassee, Florida its first measurable snow in 28 years. Events of that magnitude can dramatically affect an organization, its employees, and entire supply chains.
Using data to manage natural disaster risk
The most valuable resource when trying to mitigate the impact of natural disasters is timely information. This begins with understanding the risks and impacts these types of disasters are likely to have in communities where organizational resources are located. Partnering with state and local agencies can yield critical data for planning and preparedness. For instance, the Northeast States Emergency Consortium (NESEC) offers assistance to localities with assessing natural disaster risks for the region. Their website states, “Using the FEMA program Hazus and Esri ArcMap, NESEC can model the impacts of earthquakes, hurricanes, floods and coastal storm surge in your jurisdiction. There is no cost to the requesting city, town or state.”
The next way to use information to combat natural disaster risk is to put real-time disaster alerts into the hands of those who need it whenever preparedness plans need to be executed. Origami Risk can be set up to trigger notifications to appropriate distribution lists when severe weather alerts are issued. Flexible data integration means the system can also be used to tap into a host of other alert services including the GDACS (Global Disaster Alert and Coordination System) feed, the U.S. Geological Survey Earthquake feed, the SkyTruth Environmental Alert feed, and the InciWeb U.S. Wildfire feed. Separate email distribution lists can be created for each feed.
The mapping and simulation information from organizations like NESEC are critical to developing preparedness plans. Integrating alert feeds into trigger-based distribution risks shortens response times and ensures that those responsible for executing plans have the most timely data available. There is one additional way information can help this process.
Once impacted locations begin to go offline, it is critical to track the extent of damage and estimates for recovery. This information allows the organization to adequately plan for disruptions and continually adapt as conditions on the ground evolve. When facing Hurricanes Harvey and Irma, one of our clients used Origami Risk’s flexible audit technology to quickly create and deploy anonymous links to the field. They were able to track essential location information such as reopen dates, estimates related to inventory loss and physical damage, clean-up expenses, and potential payroll exposure.
Compass Group responds quickly to hurricane
Following Hurricane Harvey’s landfall, a collection link was sent to designated contacts. 48 hours later, the first responses began to arrive.
The trends surrounding the impact of natural disaster risks are not encouraging. However, when armed with timely information, a focus on the risks that are most likely to cause impact, and the right RMIS technology, your organization can take the necessary steps to proactively mitigate these risks.