December 9, 2020
The 9,000 separate wildfires that swept across parts of California this year, destroying more than 10,000 buildings and killing 33 people, were all the more difficult to tackle because of the novel coronavirus (COVID-19) pandemic. This disaster problem has also been experienced on the U.S. Gulf Coast and East Coast with a fiercer-than-usual Atlantic hurricane season.
When two crises strike at the same time, the job of the responders becomes that much harder to carry out: It may be difficult to reach affected areas while their numbers may be depleted because of illness. Meanwhile, tried and tested evacuation techniques have often not been allowed, given social distancing guidelines. In addition, for many organizations, a major challenge to preparing for the impact of overlapping crises is the COVID-19 pandemic has reduced financial resources and left personnel stretched thin as a result of layoffs or furloughs.
A recent Aon-commissioned survey of C-suite leaders and senior executives revealed that the pandemic exposed a broader range of risks businesses face and the need to address them. Two-thirds of business leaders in the U.S., the European Union and the U.K. say the pandemic has exposed new vulnerabilities that require significant changes in how they prepare for the future.
The wildfires and the extremely active hurricane season speak to the need for businesses and governments — that might be used to thinking about planning for one crisis at a time, if at all — to begin including the threats of co-occurring and ongoing disasters in their resilience and recovery plans.
The good news? Dealing with unexpected risks becomes more manageable when an organization aggressively prepares for expected risks. The Aon survey also showed companies that were most prepared for the pandemic were those already investing resources into evaluating other risks, ranging from governmental policy to intellectual property protection.
“As traumatic as the COVID-19 pandemic has been, it’s not the only disruption leaders have had to manage this year,” says John Bruno, chief operating officer at Aon and chief executive officer of Aon’s Data & Analytic Services. “Gone are the days of preparing for a single risk at a time. The companies best prepared for the unpredictable are those who have built rigor around preparing for overlapping expected risks.”
Responses to the wildfires in the Western U.S. and this season’s hurricanes in the midst of the COVID-19 pandemic are providing a dramatic example of the potential impacts of co-occurring disasters.
“If you furloughed a lot of employees who used to be the ones to respond after a hurricane, who’s going to do the work, and who’s going to show up to make sure that the building is secure?” asks Jill Dalton, managing director, Aon Global Risk Consulting. “After the flood, are they going to show up to mitigate the loss? They may not be employed anymore. Or they might be sick. It could potentially really add to a loss.”
At the same time, businesses that might have closed because of the pandemic have made it difficult to get materials and workers needed to restore damaged facilities.
“In the Lake Charles, Louisiana, area, they’re saying that it’s hard to get materials, it’s hard to get contractors because some businesses have gone out of business,” says Dalton. “So, the supply of materials and people — experienced people — is less than it was.”
While more active hurricane seasons and more frequent and extensive wildfires are likely products of climate change, a changing climate can cause other co-occurring crises. Beyond the lives lost and homes and businesses damaged by climate change-related disasters, the events can interrupt critical infrastructure and affect supply chains and production.
The Impact of Co-Occurring Disasters
Co-occurring disasters force organizations to think and act differently.
For example, as storms approached the Atlantic coast, officials scrambled to try to evacuate people from storm- threatened areas in a way that would also protect them from COVID-19.
And in Asia, an early case study of the threat was provided by Cyclone Amphan, which forced the evacuation of millions of people from low-lying areas in India and Bangladesh. Even though both countries were enforcing COVID-19 lockdowns at the time and had increased the number of shelters, the event still appears to have led to spikes in COVID-19 infections in several storm-affected areas.
Fighting wildfires has historically involved bringing in crews from other areas to help contain the fires. But with the pandemic, decision-makers will need to consider whether some firefighters might be unwilling to travel into COVID-19 hot spots to assist. Or that others might be ill and unable to respond. Meanwhile, social distancing requirements may make it more difficult to create the fire camps used to house firefighters and first responders.
How Technology Can Help Address Disasters
Aware of the COVID-19 risk, insurers made greater use of digital tools in handling claims after storms like Hurricane Laura in late August.
The pandemic even affected National Oceanic and Atmospheric Administration (NOAA) efforts to deploy its hurricane hunter aircraft to collect real-time hurricane data. Positive COVID-19 tests made staff coverage difficult for mission operations. Flight crew numbers were reduced by half to meet pandemic guidelines. So meteorologists and researchers who previously would have been on the flights monitored data remotely, using new software.
New technology is also playing a role in addressing wildfires. Drones equipped with thermal imaging scanners that can be used in areas inaccessible to piloted aircraft were used to map fires. Satellites helped identify new fires and track their spread. And sensors and video feeds, coupled with GPS data, helped guide the air tankers to drop their fire retardant where it would be most effective.
Advances in InsurTech — technology used to optimize insurance — will also help organizations better manage some of these risks and close protection gaps, Bruno says.
“The global pandemic is triggering a digital pivot — one that will see the InsurTech space attracting renewed investment flows,” says Bruno. “The resulting solutions will help resolve the many dislocations created by the COVID-19 outbreak and will ultimately reimagine how businesses view long-tail risk and how they manage through and mitigate that risk.”
Expanding Risk Awareness in Resilience Planning
Even businesses that might not be located in affected areas might need to factor the impact of disasters into their own resilience plans.
The pandemic has challenged the supply chains of many businesses. For some, wildfires in Colorado this summer might have added to the challenge. Colorado’s Grizzly Creek Fire closed a section of Interstate 70 for weeks, forcing truckers to find alternate routes through the Rocky Mountains, leading to delayed deliveries.
This is a disruption businesses should be planning for, says Anne Parkin, director of Aon Property Risk Control.
“A good business continuity plan will already include issues related to transportation, issues related to suppliers being unable to get raw materials to the organization due to whatever the cause might be,” she says. “So, transportation would just be one of those areas that a business continuity plan should realistically include.”
The Importance of Preparation
This year has highlighted the need for organizations to plan for ongoing, long-tail risks, and to include the possibility of co-occurring disasters in their business continuity plans.
Aon’s survey shows that preparedness for any disaster is less a matter of predicting which particular threat will hit, but rather an attentiveness to the process and discipline of preparing for threats in general.
“Dealing with unexpected risks is easier when you’re in the habit of preparing for expected risks,” Bruno says.
Today, any business continuity planning must take into account the impact of COVID-19 on individual locations, the availability of suppliers and vendors, and the availability of employees assigned to critical roles in crisis management and disaster recovery.
And, Bruno notes, “The strongest companies are looking to the future with risks in mind, but they aren’t just looking at the pandemic. Instead, these companies are placing the pandemic in the same tier of risk as threats to their brand or changes in their workforce. Planning for the future requires balance, not reacting to the events of this year.”
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