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RISK MANAGEMENT
How to protect your assets from natural hazards, by Chris LeBoeuf, senior director of
Engineering, and Steven Fitzgibbon, manager of Natural Hazards Risk Services, ABS Group
rom raging wildfires in Australia at the start of 2020 to the devastating flash flooding across much of Europe in July 2021, recent years have been scattered with natural hazard events that have destroyed property and infrastructure, devastated businesses and taken lives.
BUILDING RESILIENCE AND MITIGATING RISK F
In the US, Hurricane Ida brought back painful memories to the people of New Orleans, a city which is still rebuilding after Hurricane Katrina caused 1,800 deaths and $125 billion of damage back in 2005.
Unfortunately, natural disaster events such as hurricanes, cyclones, storms, floods and wildfires are occurring more often and with greater severity. This can be viewed in terms of economic cost increasing over time. The Asia Pacific region tells a similar story. Here, average annual disaster event-induced economic losses between 2000 and 2009 stood at $56.7 billion – and for 2010-2019, that figure more than doubled to $117.9 billion. The Tohoku Earthquake which struck Japan in 2011 is largely responsible for this, but even when removing 2011 from the period, the nine remaining years average out at $89.1 billion in annual natural disaster damage. In the US, meanwhile, the ten-year average annual cost of natural disaster events exceeding $1 billion increased more than fourfold between the 1980’s ($18.4 billion) and the 2010’s ($84.5 billion) Source: NOAA National Centers for Environmental Information (NCEI) U.S. Billion-Dollar Weather and Climate Disasters, 2021.
These concerning figures translate into a multitude of damages encountered by organisations that operate across a variety of industries, which notably include processing plants, chemicals, energy and industrial sectors with large and highly valuable infrastructure bases.
Unplanned outages and economic losses from production downtime are major consequences of the disruption caused by
50 MARCH 2022 | PROCESS & CONTROL
Chris LeBoeuf (left), senior director of Engineering, and Steven Fitzgibbon (right), manager of Natural Hazards Risk Services, ABS Group
extreme weather events.
Beyond this, there are many secondary and tertiary social and environmental impacts that stem from the primary damage done to these businesses. But why are companies prone to natural disaster events?
Location, location, location Geography plays a critical role here. For instance, onshore operations that are located close to coastal and inland waterways to enable easy transportation of goods or services in and out of their sites can make them especially susceptible to hurricane and flood risks. Earthquakes are another risk factor, primarily in the western states and other regions near fault lines. Key risk areas in Europe include sites along rivers and coasts, including those in regions which are at or only slightly above sea level.
Following the declaration of ‘Code Red’ for humanity by the UN Intergovernmental Panel on Climate Change, there is a greater sense of urgency among key political decision-makers, enterprises and wider society. The COP26 summit represented a defining moment. But companies should not wait for more comprehensive legislation and regulation to prompt them into action.
In many regions around the world, there are little or no regulatory drivers aimed at
Direct concerns may include the reliability and resilience of your organisation’s equipment, facilities to provide worker safety, and across its infrastructure and network to reduce unplanned outages.
However, it is also important to bear in mind that physical damage to buildings and infrastructure represents only the initial source of financial loss.
Resulting business disruption and market displacement can also hit revenue figures hard, depending on the severity of the natural hazard in question. Concerns here can centre around storing materials and disruption to supply, transportation and service availability and access, and cost and availability of energy.
To help quantify some of these risks, organisations should consider a range of factors.
What amount of revenue will be lost if I have to shut down my facility for an extended period of time? Can additional understanding of the risks help my company to manage our operations? Will improvements to preparedness and response reduce direct damage and limit revenue loss following an extreme weather event?
Facility hardening, enhanced preparedness and response planning, and organisational measures to limit the impact of any single extreme event are among the risk mitigating steps companies can take, along with
industrial facilities that require them to withstand extreme weather events. The onus currently is on organisations to determine any natural hazard risk management strategy, and given the growing frequency of these incidents, the time to act is now. The extent and nature of such action is largely dependent on each individual business’s appetite for risk – in other words, the extent to which your business is prepared to deal with disruptions caused by storms, hurricanes, wildfires, floods etc.
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