In 2021, the United States was struck by 20 disasters that each cost billions of dollars for businesses, communities, and the government, according to Climate.gov of the National Oceanic and Atmospheric Administration (NOAA). There were four tropical cyclones—Ida, Elsa, Fred, and Nicholas; three tornadoes; two floods in Louisiana and California; one winter storm with a cold wave in Texas and throughout the deep south; one drought and heatwave in the summer and fall throughout the west; and wildfires across California, Arizona, Idaho, Colorado, Oregon, Montana, and Washington. There were also eight other occurrences of severe weather conditions in other parts of the country, among them the derecho in the Midwest in December.
Computed according to the 2021 Consumer Price Index, damages from disasters last year reached an estimated $145 billion. Events that wreaked the costliest havoc were Hurricane Ida at $75 billion, the winter storm and cold wave in the middle of February at $24.0 billion, and the combined wildfires at $10.9 billion. Businesses incurred damage to properties as well as loss of income.
The 4th National Risk Assessment published in December 2021 by First Street Foundation and Arup focuses on businesses affected by flooding. In the contiguous United States, 729,999 offices, retail shops, and multi-unit residential properties are in danger of structural damage from floods costing more than $13.5 billion every year. The number of commercial structures is expected to rise by eight percent by 2052, with the cost of damage increasing to $16.9 billion.
Experts expect more and worse disasters to come due to climate change. Businesses must prepare for these. Some are relocating their businesses. There are other ways to prepare for catastrophes, as well.
All businesses need insurance to help cover some losses due to disasters and other incidents. There are several types of insurance policies. For property damage due to natural disasters, a company needs commercial property insurance. You can choose between basic, broad, or special causes of loss to be covered by the policy.
The basic policy covers the cost of repairing or replacing the building, equipment, tools, furniture, product inventory, and personal property in case of damage or loss due to fire, smoke, sprinkler leakage, lightning, strong winds, hail, volcanic action, sinkhole collapse, civil unrest and riots, vandalism, or a crash from a vehicle or aircraft. The broad policy has additional coverage for losses due to water damage from leaking appliances, damage from the weight of ice, snow, or sleet, damage from falling objects, and collapse caused by specific reasons. The basic and broad policies cover only the listed causes of loss.
The special policy is the reverse in that it covers all causes of loss except listed exclusions. These exclusions are flood, earthquake, nuclear hazard, terrorism, war and military action, normal wear and tear, and intentional damage.
Flooding is not included in all three types of policies and must be covered by a separate policy. Other separate policies that will help cover the damages from a disaster are auto insurance for the company’s vehicles, specific equipment breakdown insurance against power surges, and business interruption insurance. The latter will provide funds to replace income lost while the business cannot operate due to a covered event. This is necessary to continue paying rent, salaries, and other bills, including temporary relocation while the damaged space is being repaired.
There are many cases when insurance companies challenge business claims. Hiring an experienced insurance lawyer to represent the business is the best recourse.
Digital Business Continuity
In the current business environment, almost all transactions are online. In the event of a disaster hitting a business location, the business needs to be able to almost immediately continue with its online operations as soon as personnel is safely evacuated to a secure area. This is possible if all the company’s data and operations are hosted on the cloud. It will just be a matter of logging in from anywhere. This is already what is happening for businesses, with most employees working from home.
It is, therefore, vital for a company to invest in a reliable service that backs up all its data in real-time so that nothing is lost in case a natural disaster strikes. Business can immediately resume from the point when catastrophe strikes.
Sustainability in Business
Because businesses are vulnerable to natural disasters, they must also be part of the global and national movement addressing climate change. There are now many regulatory requirements that businesses must comply with to ensure they are doing their share in reducing greenhouse gas emissions. Companies must go beyond mere compliance and find more ways to improve their sustainability efforts. After all, they will also benefit from this.