Floodings: improvisation banned!

The financial impact of flooding reaches records: about 33 billion Euros in 2011 in Thailand and more than 1 billion euros in France in spring 2016. In spite of heavy economic consequences, we regularly find out on the field that companies are little sensitized and badly prepared when facing flooding. Review of the vigilance measures to hedge against this risk.

From the end of May to the beginning of June 2016, a party of Europe was touched by severe flooding that added to natural catastrophes in constant evolution these last years: Katrina hurricane in 2005, the storm Xynthia in 2010, storms in 2011 in Thailand, hurricane Sandy in 2012… Some flooding has recurrent cycles (monsoons, cyclones, storms), others can result from the conjugation of several phenomena (heavy swell and high tidal coefficients) however, it is undeniable that human activity worsen this type of risk. Indeed, the presence of buildings in flood-risk areas and land development (roadway, watercourse, deforestation…) is often responsible when flooding occurs.

 

Industry directly concerned

In a more and more interdependent world, the analysis of this kind of risk cannot only involve the company anymore: it is the whole of the value creation line upstream and downstream that has to be analyzed. It is one of major teachings of flooding of 2011 in Thailand. During these events of an exceptional extent, that lasted several months, not only populations and companies locally based were touched. Hundreds of companies throughout the world found themselves deprived of their supplies of electronical components or in parts destined to the automobile industry, just to quote these two examples.

Carelessness of companies when facing flooding can be explained by many factors: less frequent losses, difficulty of comprehension of the phenomena and the lack of information on prevention measures.

 

Prevention measures and emergency device

Today, technology is capable of collecting high definition satellite data allowing to measure ground humidity or the development of plants. Information used in the field of insurance to map flood areas. Some insurers go even further launching new products as parametric insurance, that exists since 2014. This offer based on the use of a parameter related to a damage or a loss for a policyholder, allows, in particular, to insure the climatic impact on a company performances.

Taking into account economic consequences, some cheap prevention actions can be implemented: installation of movable dams, cofferdams, … Most sensible materials and technical facilities can be, for example, installed in areas that will be out of water (upper floors, mezzanine, lifting of equipment or furniture…).

 

In case of flooding loss, it is particularly important to implement suitable conservatory measures as soon as possible in order to reduce damages and allow a quick restart of activity.  Reactivity remains crucial because damages will be considerable reduced in case of sanitation and decontamination during 24 to 48 hours following the loss.

Then, a technical diagnosis will have to be established in order to determine the goods that can be rescued. For that several factors must be taken into account:

  • Technical possibility to decontaminate the good,
  • Decontamination fees,
  • Good replacement cost,
  • Criticality of the good to be decontaminated, some goods are actually too sensible to be decontaminated, even if they are technically and economically recoverable.

 

An observation rises: facing multiplication of this kind of events, improvisation is not allowed. Anticipation and proactive management are crucial. A wise company that surrounded itself with good skills will considerably reduce the impact of this kind of risks and will restart its activity more quickly.

 

Marouane LOUDIYI Industry and Finance Loss Adjuster