You Can’t Control Mother Nature, But You Can Be Ready For It

You Can’t Control Mother Nature, But You Can Be Ready For It

For senior financial executives at large U.S.-based companies with operations in Texas, Florida, or Puerto Rico, the 2017 hurricane season served as a risk management wake-up call.

Commercial and industrial property insurer FM Global surveyed these executives at companies with more than $1 billion in revenue and found:

  • Nearly two-thirds (64 percent) of respondents say 2017’s hurricane season had an adverse impact on operations.
  • Of those impacted, 62 percent admit they were not completely prepared to deal with the effects of the hurricanes.
  • Nearly 7 in 10 (68 percent) of all respondents say they will make changes to their risk management strategy going forward.

As a result of hurricanes Harvey, Irma and Maria:

  • 57 percent of all survey respondents say they will put in place or enhance their business continuity or disaster recovery plans.
  • 40 percent will invest more in risk management, property loss prevention, and/or reassess their supply chain risk management strategy.
  • 25 percent will reassess their insurance coverage or their insurers.

    "One reason for insufficient natural-hazard preparation is imprecise terminology," says Dr. Louis Gritzo, vice president, manager of research at FM Global. For example, being in a "100-year flood" zone does not mean you have 99 years to plan. Rather, there’s a one-percent chance of such a flood every year.

    Another reason for insufficient preparation is over-reliance on insurance, which cannot restore market share, brand equity, and shareholder value lost to competitors. A third reason is denial of risk.

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