Strategies for Minimising Your Natural Catastrophe Losses Pre-Event

This summer’s natural catastrophe events have once again highlighted the importance of making sure your company is prepared to recover from a disaster.

Today, increased globalisation and ever more complex global supply chains mean that no company operates in isolation. Consequently, no business is safe from natural catastrophe risk, making the argument for proactive risk management and swift post-loss support clearer than ever. And not just for your own organisation, but for those in your value chain and the communities in which you operate.

As a start, companies should consider the work that can be undertaken within their own organisations to minimise the impact a future natural catastrophe event could have on their operations.

The importance of up-to-date exposure information

One of the first steps in having robust pre-event risk management is making sure you know your exposures. Natural catastrophe events are increasing in frequency and severity. Therefore, making sure you have up-to-date and detailed natural catastrophe information is of paramount importance. This information enables you to make informed loss prevention and resilience decisions, including:

• Mapping your own, customer, and supplier locations in terms of natural hazard zones.
• Having up-to-date property surveys with regard to construction, occupancy, protection, and exposure (COPE).
• Checking to ensure the accuracy of data and values, with particular focus on business interruption.
• Using natural catastrophe modelling to identify the average annual loss estimates used in risk transfer assessment.

Minimising losses pre-event

In order to minimise the impact a natural catastrophe could have on your business, you should be proactive in your pre-disaster approach and take the following steps:

• Undertake risk identification and improvement: Know where the disaster hot spots are, and which business-critical areas could be impacted by a natural catastrophe.
• Build flexibility and resilience into the business: Incorporate resiliency in your business model and have emergency response and recovery plans in place to ensure you can continue to do business.
• Understand your exposure: Learn more about your risk exposures by incorporating information from surveys and loss scenarios to establish potential losses under maximum and mitigated scenarios.
• Review your insurance cover: Take control of the insurance process and put yourself in a strong negotiating position through robust information.

In addition, you should consider lessons learned from previous events and test policies by using loss scenario information to check for potential gaps and insufficient limits. While nothing can prevent the devastation that comes from a natural disaster, being proactive in your own pre-disaster approach, and then linking with those in the value chain and the community, can help ensure your business is able to survive.