When constructing new buildings overseas, do you build to localregulations or some other guidelines? Does the country where youwant to build have strong construction regulations? If building codesexist, when were they last updated and are they enforced?

The answers to those questions and more could mean thedifference between business resilience and a major disruption toyour business if a catastrophe strikes.

Consider this: As companies grow and expand throughout theworld, they are often faced with constructing a new building in acountry where they have little experience or may not have a deepunderstanding of the customs and building codes of this region.

Related: Here's how to assess building code differences fromstate to state

Knowledge is power 

Failure to understand international building code differences could put yourcompany at a competitive disadvantage. For example, if youmanufacture a just-in-time key component in a building overseasthat has not been constructed to rigorous codes such as those foundin the U.S. and a catastrophe strikes that facility, where doesthat leave you? It may lead to a costly disruption of your supplychain and your business.

Here in the United States, building codes are updated everythree years. Unfortunately that is not often the case in othercountries around the world. In fact, there is a significantdisparity in building codes from country to country, and how oftenthose codes are updated. In India, for example, prior to publishingthe updated national building code this year, the last update wasperformed 11 years ago!

Don't let tragedies forcechange 

For many countries, the impetus to change building codes stemsfrom tragedies such as nightclub fires, earthquakes and factory fires.

An example is the recent tragic event at Grenfell Tower in London. Atleast 80 people were killed as the result of a fire. The building,constructed in 1974, had been renovated in 2016. However, theupdates did not include the addition of automatic fire sprinklers.The cause of the fire is reported to be a refrigerator in a fourthfloor apartment. There were no sprinklers to control the internalfire and the fire spread and reached external openings. Onceignited, the highly combustible new building cladding allowed thefire to spread rapidly up the outside and ultimately through theentire building.

Research shows that having fire sprinklers in a building isthe number one way to limit a catastrophe froma fire, but sprinklers are not mandated in the building codes ofmany countries in Europe, Asia and South America.

Constructing a new building in another country can be quite achallenge. Businesses must be educated regarding each country'scodes including how, in many cases, they are vastly different thanthe standards of the country with which they are most familiar.Identifying and implementing the best possible standards andcodes — regardless of the country'srequirements — is crucial.

Related: Earthquake areas need seismic buildingcodes

Best practices abroad

There are several critical questions to consider whenconstructing a building internationally.

Does the country where you are considering constructing a newfacility even have a building or fire code? Does the code focus onlife safety, property preservation or both? What is the standard?Are the codes enforced? When was the code last updated?

To save upfront costs, many businesses construct buildings tothe local codes and standards of the country where they arebuilding. But companies building overseas should be asking whetherit makes sense to build to local code, or whether the smartinvestment is building to last above and beyond the code, eventhough it may cost more for construction. In other words, whenyou're building overseas, are you being penny wise but poundfoolish?

Building codes are updated every three years in the U.S.,which is often not the case in other countries. (Photo:iStock)

Improve, enhance, update

Catastrophes such as earthquakes, hurricanes and floods havebrought the issue of building code quality and enforcement to theforefront in the minds of construction and risk managers. But mustwe wait for a tragedy?

In 2010, my company, FM Global, one of the world's largestcommercial property insurers, created aninternal International Codes and Standards team. This team isworking within several countries in an effort to develop, improve,enhance and update their national building codes.

For example, the team has focused on a rare opportunity toadvance fire and sprinkler protection within the national buildingcode in India, ultimately helping companies protect themselvesagainst devastating fires. In Brazil, we're supporting the work ofthe Parliamentary Fire Caucus to develop the country's firstnational fire code, which should be released by the end of theyear. This will be a significant outcome for the nation.

There is also work being done by the team in Europe to erasemisconceptions about sprinklers, their cost and their value as aloss prevention tool. In the U.K., for example,building and fire regulations have long been primarily constructedaround life safety, with little consideration to propertyprotection. Our goal is to increase the amount of considerationgiven to property protection. Partnerships are being formed withlocal governments, industrial groups and firefighter organizationsin the United Kingdom, France and Germany to promote sprinklerusage and provide information about the economic and life safetybenefits of sprinkler protection.

Related: Not all fire insurance policies are thesame

Fire loss looms large

In 2016, there were two major fires in meat processingfacilities in Germany, both causing more than 100 million euros indamage. Those fires prompted FM Global to conduct a study ofinternational fires in the food industry. The study found therewere 88 fires over a five year period (2010-2014). The study alsoidentified 11 major food industry fires in the last ten years whichall had more than 10-million euros in damage, and three, includingthe two last year, with more than 100-million euros in damage.

Releated: Understandinghow property is valued after a fire

More striking than the sheer number of fires was the impact ofsprinklers on the overall damage to the facilities. The averagedamage in a factory with a well-designed and fully functionalsprinkler system was 580,000 euros. In contrast, for factorieslacking sprinklers or where the protection was inadequate, the costwas 8,450,000 euros — nearly 15 times more.

Codes and standards need to be revised toreflect the benefits that sprinklers provide when it comes topreventing and minimizing the losses from fires when they occur.But most importantly, you must understand the building code in thecountry you are building — is it up to the standard youneed? And, if you're constructing new facilities overseas to laxlocal codes rather than to a stronger "built to last" standard beaware of the potential consequences. Your decision may provide youan initial cost savings, but when catastrophes strike, thoseinitial savings on construction may be far exceeded by the costs toyour business resiliency, reputation and ultimately the loss ofyour competitive advantage.

Christopher Wieczorek, Ph.D. is vice president, manager ofFM Global's international codes and standards group. He has ledefforts to provide education and data to countries throughout theworld where FM Global's clients are establishing themselves andengaged in new construction.

See also:

4 commercial real estate coverage enhancements thatreally matter

5 ways contractors are building moredisaster-resistant homes