Flood Threats Loom Large In 2009

In corporate America, unacceptable risk must be identified, evaluated and mitigated, which can be difficult. However, when it comes to flooding–the number one natural hazard in America–businesses can take steps to reduce the risk of damage caused by rising water.

In fact, one of the worst years we've seen in terms of property loss was 2008–further magnified by the recent economic turmoil. While corporations struggle to maintain their bottom lines, they are forced to prioritize the types of expenses they can incur to protect their assets.

Many corporate risk managers don't realize that floods are a common occurrence and can be financially devastating. Floods happen in all regions of the United States.

This time of year Midwest residents are particularly at risk, as evidenced by the devastating floods they experienced last spring. Recently, Americans nationwide have been impacted by extreme winter weather, which often leads to flooding. Until the spring thaw, the hard, frozen earth prevents melting snow or rainfall from seeping into the ground. Resulting run-off can overfill streams, rivers and lakes. Add spring storms, and you have a recipe for serious seasonal floods.

What's more, flooding can happen anywhere, at any time, as a result of heavy rains, melting snow, inadequate storm water drainage systems, failed protective devices such as levees and dams, or tropical storms and hurricanes. They can destroy buildings and shutter businesses. At least 25 percent of businesses that close as a result of a disaster never reopen, mainly because of insufficient insurance.

As corporations and businesses tighten their belts in today's uncertain economy, it is important that corporate risk managers understand that the best, most cost-effective way to mitigate the risk of flood damage is by purchasing flood insurance. The National Flood Insurance Program (NFIP) enables business owners to purchase federally backed flood insurance designed to provide an alternative to potential disaster assistance–not always available in the event of a flood disaster.

The time to do this is before disaster strikes. Whether it's located in a high-risk flood area or a low-to-moderate risk area, flood insurance will financially secure assets.

Flood insurance is available and affordable, with flexible building and contents coverage options, in both high and moderate-to-low risk areas.

Lower-cost Preferred Risk Policies (PRP) are available for most properties located in areas of low-to-moderate risk starting as low as $550 per year for $50,000 building coverage and $50,000 contents coverage.

Flood insurance policies typically take 30 days to become effective.

The following steps can help ensure the survival of a business, should the unthinkable happen:

o Prepare. Have an emergency plan. Reward employees for doing the same.

o Participate. Take advantage of all the benefits NFIP offers and work with the local community to prevent financial loss and protect physical property. For every dollar spent on mitigation, about $4 are saved.

o Protect. Find out what kind of flood insurance your business needs.

If the property is located in a low-to-moderate risk area, it could qualify for PRP. Information is available at www.FloodSmart.gov.

o Educate Employees and Colleagues. The NFIP's FloodSmart Campaign provides useful resources to easily explain the importance of flood insurance to colleagues, employees and upper management.

One of the most useful NFIP resources is an interactive tool that shows how much flood damage can cost. The Cost of Flooding tool shows just how expensive a few inches of water can be–from one to 18 inches. The tool can be found at FloodSmart.gov and is available for posting on a company Web site.

Another tool is available to educate co-workers to the causes of flooding, which are not limited to devastating tropical storms. Intead, floods happen in more locations and more often than many realize.

FloodSmart offers flood risk scenario animations that provide illustrations of the variety of flood scenarios that can occur, including snow melts, flash floods, and dam and levee failures. This tool also can be found at FloodSmart.gov, and can be posted on a company Web site as well.

Ed Connor is federal insurance administrator for FEMA in Washington, D.C.