UK businesses must improve resilience to flooding to prevent devastating losses;
While there is growing evidence that climate change is now occurring globally, its impact on the UK is less clear. What is beyond doubt, however, is that rainfall events resulting in floods have become more intense and more frequent in recent years.
The Met Office’s Centre for Ecology & Hydrology put it bluntly in 2014 when it said so-called ‘daily heavy rain events’ (with the potential to cause localised flooding) were now more likely to be a one-in-85-day occurrence than a one-in-125 day event. If this translates into a greater likelihood of damaging (and wider) floods then the figures for residential and commercial properties at risk make for even more serious reading.
Data from the Environment Agency says approximately 185,000 commercial properties are at risk of flooding in England and Wales. For those at risk within flood zones, most won’t need reminding that rainfall records were broken in Winter 2015/16 after storms Desmond, Eva and Frank wreaked havoc across the UK – Storm Desmond alone costing the country an estimated £5 billion.
Citing Met Office climate modelling data, the NFRR (National Flood Resilience Review) concluded in September 2016 it was plausible that rainfall experienced over the next ten years could be between 20 and 30% higher than normal.
The Government has already pledged to spend £2.3 billion over the 2015-2021 period to strengthen the country’s flood and coastal defences and better protect an estimated 300,000 homes.
It has also put in place a recovery package for homes, businesses and farms in those areas of Northern England affected by the 2015-16 winter floods to help get communities back on their feet and to strengthen defences in places such as Leeds, York, the Calder Valley and Cumbria.
Flood Re – an agreement between Government and insurers – has also now been established to ensure that households can continue to obtain flood insurance at an affordable cost.
Despite these initiatives, a House of Commons Committee Report in November 2016 described current flood measures as ‘fragmented’, ‘inefficient’ and ‘ineffective’.
It concluded that Ministers should, despite the current austerity drive, balance the short-term costs against the longer-term pay-offs. In short, the benefits of spending now will outweigh the costs over the medium to long-term. Otherwise: “this level of funding is unlikely to deliver sufficient protection in future decades.”
It added – in its list of 21 recommendations – the need for greater co-ordination among the various agencies tasked with protecting communities at national and local level in order to avoid duplications of effort and competing priorities.
Against this backdrop, businesses need to improve their resilience to flooding and its potentially devastating damage. The importance of insurance protection cannot be understated, given the known issues floods customarily bring. However, insurance is just one of a raft of safeguards that needs to be in place.
Water damage is costly and it can put a huge strain on business operations – sometimes grinding them to a halt. Flooding can destroy the interior and even the structure of premises, meaning an expensive and drawn out refurbishment project – all whilst the business is losing day-to-day revenue caused by the downtime. What’s more, loss of equipment and vital records adds to the escalating costs – not to mention simultaneously keeping staff on the payroll.
Worse still, many businesses also risk losing existing relationships with commercial partners if they’re unable to contribute to the supply/demand chain with their products or services.
A Leeds University impact study into the Calder Valley Boxing Day floods of 2015 found that over 1,600 business premises were affected by the flooding. And while this part of Yorkshire is no stranger to flooding – having seen a month’s worth of rain fall on the area in just 24 hours back in 2012 – the 2015 event was estimated to be 1.3 times more damaging to businesses – with total losses incurred by SMEs almost doubling.
Total losses reported by surveyed businesses amounted to almost £47 million, representing around 12% of their annual turnover; equivalent to 5.4% of the business sector GVA (gross value added) in the Calderdale and Kirklees areas.
Excluding a small amount of enterprises that reported total losses above £500,000, the average loss per firm was around £47,000.
While companies of more than 20 employees suffered proportionately less, almost half of all surveyed businesses had not set aside time for flood planning. And less than a quarter had routinely monitored freely available flood warning information systems run by the Environment Agency.
However, FM Global – commercial property insurance experts – does not treat property loss as inevitable; it believes the majority of loss is preventable.
Employing extensive research, backed-up by the expertise of an on-the-ground engineering force, FM Global works with clients to identify and assess risk to help them develop proactive, cost-effective prevention programmes. These can protect against loss, safeguard business continuity, and enhance a company’s ability to supply its customers.
Potential financial/material damage from flooding is no exception and FM Global believes there is a number of ways flood damage and business downtime can be reduced.
Experts say it’s important to recognise that flood prevention and mitigation requires a systemic strategy to protect property and business continuity. Hence, effective and successful plans will often require the application of multiple recommendations simultaneously and in a timely manner.
For example, in order to successfully implement flood mitigation, a series or system of improvements must be undertaken to waterproof the perimeter of a site or building. Failing to address every water entry point can lead to flood damage. In addition, businesses can build permanent flood defences around the site, or protect a portion of the site’s critical assets by building low-level earthen embankments or flood walls, landscaping, and walls to redirect storm water and sheet flow away from important areas.
The deployment of emergency devices and emergency response plans until permanent solutions are made are options that should also be considered. This can include relocation of equipment and production lines to areas higher than the flood. Plans to make up production while the site is repaired, also makes business sense.
Irrespective of a company’s specific circumstances, what is clear is that corporate insurance against flooding isn’t a luxury, but a necessity.