Dive Brief:
- More than 60% of company executives said they were "not completely prepared" to handle the effects of last year's hurricanes, according to a survey from FM Global.
- FM Global cited over-reliance on insurance and denial of risk as some of the major reasons for unpreparedness.
- Nearly 70% of respondents in the survey said they'll change their risk management strategy to be prepared for future disasters.
Dive Insight:
The impacts of natural disasters in 2017 reverberated through all parts of supply chains. Ports, airports and roads were flooded and closed. Suppliers were strapped, as demand for construction and transportation services skyrocketed. Communication systems were down.
The 2017 hurricane season was incredibly costly. By some estimates, damage from Hurricane Harvey totaled $100 billion dollars — second only to Katrina. And last year's extreme weather served as a wake-up call for many companies to take a closer look at their risk management strategies.
“People routinely fail to understand or acknowledge the magnitude of risk until they’ve experienced a fateful event,” Dr. Louis Gritzo, vice president and manager of research at FM Global, said in a press release.
Home Depot was one company to buck the trend of unpreparedness, and reaped the benefits of strategic planning. The company has distribution centers specifically designed for hurricane zones. Through its pre-loading strategy, Home Depot was able to send supplies to Houston after Hurricane Harvey and still had enough products to send to Florida after Hurricane Irma.
In a way, the sudden demand for supplies and rebuilding materials, though a reaction to unfortunate disaster, was a boon for recovering businesses. A survey from the Federal Reserve Bank of Dallas found business activity increased last September to its highest number in seven months. Activity at Texas factories even increased, even with Hurricane Harvey devastating the Lone Star State.
Two-thirds of executives reported hurricanes having negative effect on their operations, and up-front costs can seem daunting. In the long run, however, rebuilding can stimulate business, and risk shapes strategy for resilience in the future.
