This post first appeared on Risk Management Magazine. Read the original article.
As COVID-19 continues to affect communities and industries
around the world, the looming prospect of hurricane season and other natural
disasters threatens to compound the crisis. Government authorities and
disaster-response entities from emergency services to restoration firms are over-extended
as they respond to the pandemic and may not be able to provide assistance as
readily this year. With some forecasts pointing to above-average hurricane and
wildfire activity, it is more important than ever that companies make backup
plans and assess the potential impact of shortfalls in their disaster response
protocols.
In April, researchers at Colorado State University predicted
that the 2020 hurricane season could be more devastating than in previous
years, noting a 95% chance of at least one hurricane making landfall on the
U.S. coast (compared with the average of 84%) and a 69% chance of at least one
major hurricane making landfall (compared to an average of 52%). This potential
increase in activity is likely due to higher ocean temperatures and the lack of
El Niño conditions, which would usually blunt the force of storms.
Meanwhile, after historically destructive wildfire seasons
in 2018 and 2019, fires remain a concern for businesses and communities alike.
While the early part of the season is expected to see normal activity in the
western United States, the National Interagency Fire Center said in May that
some areas are developing conditions that could create above-average potential
for significant fires.
This is especially concerning because firefighters in
wildfire-prone areas are warning that coronavirus response may hinder their
ability to confront fires. As they devote more time and resources to helping
their communities combat the coronavirus pandemic, their staffs are being
stretched thin, and many are also falling ill themselves. Compounding the risk,
fighting wildfires requires close quarters that can make social distancing
nearly impossible. This could diminish firefighters’ ability to protect
communities and businesses at a time when drier conditions exacerbated by
climate change have increased the potential for more devastating fires.
Overall, it appears U.S. organizations may have to face a
more complex and dangerous natural disaster environment in 2020. On top of the
difficult choices they are already making in response to COVID-19, they cannot
neglect to prepare for natural disasters.
Creating and Updating Response Plans
To address the additional business interruption and safety
risks from natural disasters in the midst of a pandemic, risk professionals
must review their disaster response plans now.
“Having an established crisis disaster response program in
place is the first step in unwinding the complications,” said Lance Ewing,
executive vice president of global risk management and client services at
Cotton Holdings Inc. Companies with plans in place may already be updating them
in the wake of COVID-19 to include pandemic response protocols, but if not, it
is time to re-evaluate them. Once a detailed plan is in place, it is critical
to review it with staff before a disaster strikes. “If the plan has been
practiced or even table-top exercised, it will ease some of the burden,” Ewing
said.
He recommended conducting risk assessments for both the
company and the community in which it operates, now that the pandemic has
changed conditions so drastically. He also suggested making sure that both
internal and external emergency response teams are in place and ready.
Additionally, these teams should be taking into account COVID-19 precautions
like wearing the appropriate personal protective equipment and maintaining
social distance as recommended by government health agencies.
“Once the risk exposure is identified, risk managers can
prioritize mitigation procedures based on severity,” said Jim Wetekamp, CEO of
Riskonnect. “Focus on business-critical risks first, rather than the threats
that risk only minor disruption to service and revenue.”
Protecting or Reinventing the Supply Chain
With shutdowns related to COVID-19, supply chains across the
country are already slowing down or breaking, which may further hinder disaster
response. This includes the necessary supplies to maintain or restart
operations, as well as relief necessities like medical supplies, food and
temporary shelter materials. “Risk leaders must remember that the landscape
constantly changes,” Wetekamp said, “Continuous supplier risk management is
essential.”
Communication within the company is the first step. “Knowing
what you have, what you need and what you want all have to be communicated both
up and down the corporate ladder,” Ewing said. This can lead to finding
“alternative suppliers, something of like kind and quality but not exact,” or
the company finding its own creative solutions. Ewing cited the example of an
alcohol company that could not locate a hand sanitizer supplier and instead
decided to manufacture its own.
Reassessing Coverage
Risk professionals should also review their insurance
coverage well in advance of a disaster. Many businesses may already be in close
contact with their brokers regarding coronavirus-related losses and issues like
business interruption or force majeure claims. These conversations can
incorporate preparation for natural disasters as well, including ensuring broad
enough coverage and closely examining all the exclusions in coverage to avoid
any surprises.
In the new context of the pandemic and the potential damages
or disruptions that could be caused by a natural disaster, companies should
reassess what exclusions might pose onerous risks for the business. With these
new assessments in mind, risk professionals should prepare to negotiate those
exclusions with their company’s insurance carrier.
Keeping Workers Safe
A company’s workforce is its most valuable asset, and
companies should make every effort to keep their workers safe in the wake of
natural disasters. This may be particularly complicated amid COVID-19. Ensuring
adequate housing, medical care and food supply while there are pandemic-related
shortages will be challenging.
“Part of a robust business continuity plan is to have
temporary housing or modular units ready to be delivered from an outside service
provider (along with emergency power to keep them running),” Ewing said. “Doing
an internet search for ‘temporary housing’ after the tornado or flood is not
good risk management.” Risk professionals also need to take food shortages into
account. “As we saw in 2017 with Hurricane Harvey, grocery stores, restaurants
and food storage warehouses all were either damaged, closed or there was no
egress,” he noted.
For some businesses, COVID-19 has forced a shift to working
from home. When employees are scattered rather than centralized, it may be more
difficult to account for their whereabouts and safety in an emergency. Before
disaster strikes, be sure to establish multiple modes of communication and
collect and update any additional contact information, such as personal cell
phone numbers.
By preparing and testing a detailed response plan,
revisiting insurance coverage, and making sure employees are taken care of,
risk professionals can help their companies prepare for natural disasters
during the COVID-19 pandemic. As Wetekamp said, “While it’s hard to fathom
having to deal with a second crisis right now, that’s what enterprise risk
management is all about—staying ahead and preparing to respond.”