US firms warned to prepare for flood disruption

9 August 2016

American firms should recognise the risk of supply chain disruption from extreme weather conditions, a US insurer has warned, and be aware of disasters long in the past. 

Commercial property insurer FM Global said US businesses should start preparing now for the increased, extreme rainfall that a changing climate will almost certainly deliver.

While in general climate change will lead to warmer weather, wet areas of the US will likely become wetter and dry areas drier, the insurer noted in its white paper, Coping with Extremes: the Impact of Climate Change on Extreme Precipitation and Flooding in the US and how Businesses can Prepare Now

“Extreme events have the greatest potential to produce natural catastrophes that affect businesses, jobs and economies on a regional or global scale,” the paper said.

While some regions are likely to see intense rainfall and an increased risk of flooding, others will be prone to prolonged droughts and a potentially increased risk of wildfires.

As well as supply chains, extreme conditions can affect buildings, machinery, data centres, transportation networks employees and sales.

Facilities should be located where there is a 1-in-500 chance or less of a flood every year if possible, FM Global is advising.

“Companies should sharpen their focus on water management, ie diverting water from property, optimising drainage and protecting water supplies, and consider new weather extremes when managing supply chains,” said the company.

It advised firms to be aware of a psychological barrier known as “generational memory threshold”, where a community’s collective memory is too short to remember major disasters long in the past and said the fact there was no recent memory of disasters in an area should not blind companies from taking precautions.

And while much of the US has become wetter, future weather patterns may bring rain less frequently but more intensely.

“Since these anticipated changes are not uniformly distributed geographically, it is recommended that businesses and property owners prepare for locally intense precipitation or drought considerations, depending on their location,” said the white paper.

Previous FM Global research found 96% of financial executives surveyed said their companies had operations that were exposed to natural catastrophes like hurricanes, flood and earthquakes.

However fewer than 20% said their organisations were “very concerned” about such disasters hurting the bottom line.

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