How will your business be affected?
What will happen if you are hit by a major flood, storm or some other severe natural event?
What if your clients or your most important suppliers are affected?
During the flood in Thailand, in 2011, large areas of industrial compounds were, more or less, inaccessible. What if your key suppliers are located in such an area? Are you prepared and how will your business be affected? In what seems to be an evermore deteriorating climate situation, where storms, floods, heavy rains and the like are increasingly frequent, it is well worth spending some time to consider how you may prepare yourself and your business for such a scenario.
You will, of course, have the most influence over your own facility; but, even here, you cannot fully avoid being hit by, let us say, a flood. If you are at risk of being affected by a flood, you can prepare for it in order to minimize the effects.
You may be able to prepare by obtaining physical flood protection for the most exposed and critical areas of your facility. Or, you could, as several of our clients have done, establish permanent physical protection. This may imply a significant investment; but, it may prove to be the best option, as the effects of severe damage could be critical.
Another approach may include improving preparedness, such as having stored sandbags and necessary machinery available etc. Even though the government will often assist with these undertakings in an actual situation, self-preparedness is, generally, far more beneficial.
Furthermore, planning ahead on how to best utilize your staff in an emergency situation always proves useful, as does ensuring that local management has both the mandate to initiate a prearranged plan and that it is actually prepared to do so.
Our experience is that it is worthwhile to consider pre-nominating a project “organization” for such situations, as the ordinary management organization setup may not necessarily be optimal for dealing with an emergent situation.
Where do you store your equipment?
From time to time, during our claim handling, we detect that critical equipment has been located in areas that are more prone to damage by natural hazards, the reason may simply be that the risks have not been properly considered. Together with our clients, our risk engineers will, of course, try to identify such high risk “hotspots” and try to find better alternatives.
Our advice is that you should always consider where you have located or stored critical machinery, equipment and stock and, rather importantly, where you have based your IT servers etc. If your main IT servers, for any number of perfectly good reasons (such as there being a fire hazard, theft or safety risk) are stored in the basement of your facility and if you are situated by a river, you might also consider what could happen if the basement floods and how you can prepare to avoid this.
Prepare for the worst
It is generally more costly and troublesome to modify and alter your production site, hence, planning ahead, when establishing new operations or expanding your site, is essential. This planning process, along with the ever-increasing risk of being exposed to natural hazards, indicates a need to include this element in such plans. To be prudent, you might consider doing more than that stated in the general governmental regulations, particularly, if the implications for your business are deemed to be severe.
Of course, there will always be different variables and risks to consider and the measures to deal with them may point in different directions; but, natural hazards, such as flooding, heavy rain, windstorms etc., should, nevertheless, be amongst the risks you should consider and prepare for.
As always, it is worthwhile to have a Business Contingency Plan in place, where you have evaluated and included the consequences of others, and not just yourself, being affected by a major natural catastrophic incident.
Handling damage caused by a natural hazard may be significantly different from that of a fire or any other incident that solely affects only you. First of all, everything around you may be affected.
The infrastructure may be severely damaged and accessibility to and from your site may be severely compromised or obstructed for some time. This may affect your ability to bring in materials you need for your production or your ability to efficiently distribute your products.
Leader Major Property Claims, If
Article published in Risk Consulting Magazine 1/2017