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RISK MANAGEMENT Natural Hazard Risk Reduction Program Natural Hazard Risk Reduction Program acquiring insurance policies.


Another option is to use the engineering and risk management expertise of third parties. Independent risk assessments and audits can serve as vital tools in quantifying actual risks, with engineering-based studies revolved around rigorous site-specific technical assessments enabling process and control facilities to measure their exposure to numerous natural hazards. This offers advantages over the advice and subsequent cover from insurance firms, which may not offer this level of rigorous evaluation and technical understanding.


Regardless of what approach is taken, companies must build risk into their cost of business and plan for a certain degree of extreme weather disruption every year. While damage from natural hazard events is increasing year-on-year and there are clear trends in the loss data to support this, organisations that do not adapt to better manage their exposure and risks to these extreme environments will experience greater levels of damage that will impact their supply chain. An organisation’s assets such as its people, systems and its market reputation, will be significantly impacted whilst dealing with the aftermath of an event.


Insurance alone is not the answer as this only covers the physical loss. There is the insurance claim itself which will increase the knock-on effect of increased premiums and also additional criteria for being deemed to be ‘insurable’. Experience proves time and time again that to remain insurable companies must demonstrate that they are pro-actively addressing their exposures. But there are opportunities to protect your business by avoiding some of these common mistakes: Not focusing on the projections of climate change (e.g. UKCP18 projections) • Choosing to ignore changes in returning weather patterns will become more costly over time as extreme weather cycles begin to shorten. What was a 100-year event yesterday, becomes say a 50-year event today. • Delaying decisions today for tomorrow’s board room agenda. Delaying action to


FOUR GOLDEN RULES


Best practice for managing the risks of potential natural catastrophes is linked directly to your strategy. Here are the four golden rules:


1. Perform regular risk audits 2. Examine new build projects at CAPEX stage for exposure to environmental elements


3. Develop design guides and mitigation processes to manage risk 4. Perform due-diligence reviews.


protect your business increases the risks to you, your business, its people and your community in which you operate – particularly as the effects of climate change kick-in.


Designing facilities and their systems for today’s weather and environment • Designing for ‘today’ may


suffice for near-term weather patterns, but the levels and severity of extreme environments will change with climate change. • Infrastructure, transport, systems and property need to be designed with a ‘horizon view’ and the likelihood of events happening not just for tomorrow, but to 2030 and beyond. • Roof and below grade drainage systems may be


LEVEL 2 Facility


Vulnerability


isk reduction programs support and guide managing natural hazard risk. The approach begins with a review of hazard exposures that drive risk reduction programs from critical vulnerability identification and assessment to targeted risk treatment strategies, all devised to enhance operational resilience.


Do you know if your facilities are exposed to Natural Hazards?


LEVEL 1 Hazard


Exposure YES Do you know the


financial exposure of your Portfolio?


YES Do you know the


Critical V ulnerabilities at your High Risk


Operations/Locations ? YES


Do you know how to address the identified Critical Vulnerabilities?


YES TREAT AT (Lower Risk)


LEVEL 3 Risk


Mitigation


Detailed Engineering Design


Independent Reviews of 3rd P arty Designs


Design Guidance Documents


TOLERATE AT (Manage Risk)


TRANSFER (Share Risk)


TERMINA INATE AT (Remove Risk) NO


Facility Vulnerability Audits


Supply Chain Review NO


NO


C AT Modeling/Facility Hazard Mapping


CA


New Facility/Process C APEX Reviews


CAPEX R


CATCAT Modeling Portfolio Analysis


R esilience Study


NO


Cost/Benefit Analysis


Risk Mitigation Strategies


Training of Personnel Emergency Response


Planning


Business Continuity Planning


Facility VulnerabilityyVul Audit Output


Vu nerability (PML, MFL etc. to


determine insurance coverage levels needed)


Hazard Mapping/ CAPEX R


C APEX Review for Facility Relocation


acceptable for the ‘here and now’ rainfall patterns but will its design cope with mass water flows to reduce flooding risks? • Temperature changes can mean that in hotter climates AC systems are unable to work effectively, and critical products can spoil.


A step-by-step approach Risk reduction programs support and guide how to manage natural hazard risks. As the illustration shows, the approach begins with a review of hazard exposures that drive risk reduction programs from critical vulnerability identification and assessment, to targeted risk treatment strategies – all devised to enhance operational resilience. Step 1: Hazard exposure • Do you know if your facilities are exposed to Natural Hazards? • Do you know the financial exposure of your portfolio? Step 2: Facility vulnerability • Do you know the critical vulnerabilities at your high-risk operations and locations? • Do you know how to address the


identified critical vulnerabilities? Step 3: Risk mitigation • From detailed engineering design through to independent reviews of third-party designs, the training of personnel, emergency response planning and business continuity plans, there are various approaches to treat, tolerate and transfer risk. • Terminating and removing the risk needs hazard mapping and CAPEX reviews for facility relocations for example.


The recent COP26 conference had four priority goals; these were the securing of net- zero by 2050, to keep 1.5˚C within reach, adapt and protect communities and natural habitats, and mobilise finance and work together to deliver.


The need to accept that the climate has and will continue to change due to our global inertia means we have to now deal with the effects, as lowering emissions alone will not solve the challenges. Never has such a challenge been so prevalent for organisations and governments to collectively work together to address and meet these challenges. Some organisations and authorities may lack the in-house technical and engineering expertise to properly plan and execute an entire natural hazard risk management strategy.


Expertise in the field of process safety (including accidental hazards such as fires, explosions and toxic spillages) and structural plant engineering is critical for companies to get the support from the cradle-to-grave process. Specific services, such as risk assessments and independent audits; equipment elevation audits (flood risk); natural hazard audits (from backup power systems to data protection); flood and storm surge risk analyses; reviews of emergency response plans; and much more – such as a Natural Hazard Risk Management Toolkits, offer insights and resources to assist industrial facilities in reducing their exposure to natural and man-made hazards.


Knowledge sharing is crucial if organisations with assets prone to natural hazard risk are to future-proof themselves effectively. With more industrial businesses around the world being impacted by natural hazards there is a clear message; risk from natural hazards is growing. As climate change continues to produce extreme weather events which may become more frequent and severe, the time to act is now.


ABS Group www.abs-group.com


MARCH 2022 | PROCESS & CONTROL 51


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