When it comes to floods–the number-one natural disaster in the United States–everyone faces a degree of risk. And as risk managers know, one of the biggest enemies of corporate America is unacceptable risk.
History reminds us that underestimating the threat of flood can be costly for corporations and the communities they support. The good news is that corporate risk managers can identify, evaluate and mitigate the danger of rising water.
In addition to promoting mitigation activities to protect against physical loss to commercial buildings and contents, corporate leaders can better protect the financial welfare of their businesses and employees by purchasing and advocating sufficient flood insurance.
This year marks the 15th anniversary of the Great Midwest Floods of 1993. As you may recall, nine states–Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska North Dakota, South Dakota and Wisconsin–suffered widespread flood devastation between April and October.
Property damage surpassed $15 billion when the Missouri and Mississippi Rivers, along with their tributaries, crested nearly 20 feet above flood stage. It ranks among the most costly and destructive floods ever to strike the United States.
Although events such as the historic 1993 floods are relatively rare, it is important to know that floods can happen anywhere at any time. They can result from heavy rains, melting snow, inadequate storm water drainage systems, failed protective devices such as levees and dams, or tropical storms and hurricanes.
In fact, August 2007 saw severe flooding resulting in federally declared disasters in five Midwest states–Illinois, Minnesota, Nebraska, Ohio and Wisconsin. Just last month, devastating floods occurred throughout the Midwest. The question isn't if, but when a flood will occur.
In particular, an organization located within the vicinity of a levee needs to be aware of the unique risks associated with these structures. From California to Maine, thousands of miles of levees run along rivers, lakes and coastlines to help reduce the risk of a flood.
No levee provides full protection from flooding, however. In more serious flood events, levees can be overtopped, or fail, and the damage that results can be catastrophic–a fact that New Orleans, La., and Aberdeen, S.D., residents know all too well.
Levees also can erode and decay over time. They require regular maintenance and upkeep to continue to offer the level of protection they are designed to provide.
At least 25 percent of businesses that close as a result of a disaster never reopen–mainly because of insufficient insurance. Most business interruption policies include coverage for natural disasters such as fire, lightening, hurricanes and winter-related damage including burst pipes, but could exclude flood damage.
There are several steps that can be taken by corporate risk managers to reduce the risk of flood damage, such as:
o Work with your community to prevent financial loss and protect your property. Call your local community official to discuss ways you can help mitigate flood damage. For every dollar spent on mitigation, an average of $4 is saved.
o Call your insurance agent to ensure that your flood insurance coverage is up to date and your policy limits adequate.
o Understand your coverage. Normally, there is a 30-day waiting period from the date of policy purchase before flood insurance becomes effective.
o Learn your flood risk and act now. Visit FloodSmart.gov to learn how to reduce the chance of flood loss and encourage your employees to do the same. In addition to protecting your business, information is provided to help educate your employees about flood, flood insurance and disaster preparedness.
o Inventory and photograph the contents of your office.
o Store important documents in a safe, elevated and waterproof place.
o Plan for a secondary location in advance so you can stay in business without shutting your doors.
o Create an emergency communications plan so all employees are accounted for and know how to respond.
As a corporate risk manager, you are the key to protecting the financial assets of your company. I hope you will take advantage of the many flood mitigation resources available through the NFIP.
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