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.
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.”