Archive for the ‘Floods’ Category

Deadly Floods in Pakistan

Monday, April 4th, 2016

Torrential rains and flash floods have killed nearly fifty people in Pakistan and injured many more. The country’s prime minister directed the National Disaster Management Authority to provide timely aid to victims. Family members of those killed in the floods will be compensated with $3,000, owners of destroyed homes will receive $1,000, those with partially damaged homes and those who sustained injuries will receive $500. Reading the news of this terrible tragedy reminded me of what I had read in Mega-Disasters: the Science of Predicting the Next Catastrophe (page 64).

In 1970, a powerful cyclone struck East Pakistan, killing almost 500,000 people. The government, based in West Pakistan, failed to attend to the victims. The disaster occurred in the context of political factions favoring a separatist movement. Enraged by the inept response to the disaster, the population was soon engulfed in civil war. East Pakistan declared its independence in 1971 and changed its name to Bangladesh.  U.S. policymakers believe such responses to weather-related disasters may become more common.

The U.S. Naval War College is undertaking research to consider how climate change can impact global political stability. It is sobering to consider the issues of access to water or food security arising from a warmer world.

Should a Business in the Desert Buy Flood Insurance?

Wednesday, January 6th, 2016
Fine Print in the Policy

Fine Print in the Policy

If you owned and operated a small business located in a desert, would you purchase flood insurance?

Most people would say no and might learn, the hard way, that it is a trick question. Residents of Valley Park, Missouri declined to purchase flood insurance after FEMA, the U.S. Federal Emergency Management Agency, determined that the community is not located in a flood plain, such that the purchase of flood insurance is not mandatory. When their properties were recently submerged in flood waters three feet deep, they learned the hard way that in any given year, 20 per cent of the properties that flood are not actually located in flood plains and are experiencing flood for the first time. Homeowner’s insurance typically excludes flood coverage, which is why FEMA recommends that every homeowner have flood insurance.

There is an additional consideration that confounds many business owners – that of contingent business interruption coverage. In connection with developing teaching materials to support Prepare for the Worst, Plan for the Best: Disaster Preparedness and Recovery, I referenced a case study about a small business that makes sunscreens from organic ingredients. As the business is located in an area away from known hazards, the business believed it was relatively safe from weather-related risks. It discovered its vulnerability when it learned that the supplier of its principal ingredient was under eight feet of water in Cedar Rapids, Iowa following the epic flooding in that community. It could have mitigated its risks in one of two ways: diversify the supplier base so it was not entirely dependent on a single supplier of a key ingredient. Or, if the ingredient was unique and unavailable elsewhere, it could have added another form of insurance coverage to its policy.

Contingent business interruption insurance indemnifies the business against losses caused by disruptions to key suppliers, so, in theory, the sunscreen producer (located in the southwestern part of the United States) could have been paid for claims arising from the floods in Cedar Rapids, Iowa. But – here is the less obvious issue – contingent business interruption insurance is only valid against an underlying cover. In other words, the sunscreen producer would have needed flood insurance to extend the claim of losses under a contingent business cover to its supplier over 1,000 miles away. Would a business located in a desert climate have thought to purchase flood insurance? Probably not. So it is important to seek advice when considering commercial insurance coverage.

Protecting Cultural Heritage from Disasters

Friday, October 9th, 2015


Today, the United Nations Office for Disaster Risk Reduction (UNISDR) published a video on YouTube showing how the Louvre Museum in Paris is taking careful measures to protect the priceless masterpieces in its possession against the risk of flooding.  I was absolutely fascinated by this video for several reasons, the first being the work Prisere LLC has done for UNISDR. Protecting cultural heritage is an area of focus for the global frameworks for disaster risk reduction for which UNISDR is responsible. Indeed, UNISDR recently recognized the achievements of the Mayor of Venice for his efforts to protect cultural heritage. This is an issue that resonates at a very personal level.

Time and time again, when we meet people who have been impacted by disaster, they never express concern about the losses of their physical possessions, as they are replaceable. But they always express regret over the loss of treasured family photographs to hazards such as fire and flood (which is why I recommend scanning in those photographs and storing digital copies in the cloud). Now imagine that you are charged with the responsibility not of protecting family photographs accumulated over several decades, but unique art works such as the Mona Lisa and the Venus de Milo, preserved over centuries.

The complexity of the task is daunting. The Louvre is enormous, occupying space equivalent to 35 football fields, with approximately 30 miles of corridors and exhibit halls housing just under a half a million works of art. Nearly nine million people visit the Louvre each year, contributing to the tourism industry and the businesses, such as restaurants, that rely on such attractions. However, the Louvre is completely surrounded by water, as it is located on the Seine River. Paris does have a history of flooding, with the most severe flood in recorded history taking place in January 1910. The Seine’s waters rose to record levels and disrupted Paris for three weeks. The video offers great insight into the nature of the risks (including sewers, ventilation grids and emergency exits, all of which are potential flood hotspots) and the strategy to address them.

Mitigating the risk, by holding back the waters, is the first line of defense. But should the waters flood, a professionally trained squad of 500 volunteers will transport key art works to a specially-designed, secure warehouse removed from metropolitan Paris. In addition to the volunteer squad, the Louvre employs more than 50 staff for firefighting and emergency services. Finally, the French government is undertaking a major infrastructure project, at an estimated cost of 15 million Euros, to build pumping stations around the Louvre to divert flood waters away from the site.

Of course, floods are not the only challenge to preserving our cultural heritage. I attended a private art exhibition in New York not too long ago. The insurer underwriting the policy for the artwork (which just happened to be AXA, a global insurance company headquartered in Paris) had hired plain clothes security people to mingle with the guests at the exhibit. In the event of fire, each security person was assigned a specific painting to immediately remove from the building to a secure location. And it wasn’t that long ago when another insurance company, AIG, had to bring in helicopter services to remove valuable artworks housed by private collectors in the vicinity of wildfires in southern California.

Seeing this video also caused me to pause and reflect about the challenges in preserving cultural sites that do not have access to the same level of resources as those committed to protecting the Louvre. I am currently helping out as a volunteer at a church in a coastal area in Rhode Island that has sustained water damage in the past. The church has cultural and historic significance, and of course, a loyal congregation, but cannot readily access financing to remedy past damage or retrofit the church buildings against the risk of future losses. I am helping to identify funding sources to address these needs. This is an area where each small business owner can help in our local communities.

By the way, the photograph I included in this blog is that of the ceiling of the Paris Opera House, hand painted by Marc Chagall. If you double-click on the photograph, it should enlarge to reveal the detail depicting a scene from “The Magic Flute”. I took this photograph during a private behind-the-scenes tour of the Paris Opera, generously offered by my hosts with Thierry Mugler’s team when I was their guest last year. I have been to Paris, and the Louvre, many times, but this trip was extraordinary (and I don’t have any photographs of the interior of the Louvre to share). It is an extraordinary challenge to think about protecting treasures like the Louvre and the Paris Opera House from disaster scenarios that are much more severe than those in force when these institutions were built. Certainly no one was thinking about climate change back then.






Land and Water Conference at Brown University

Friday, September 4th, 2015
Land and Water Conference at Brown University

Land and Water Conference at Brown University

Today, I attended the Land and Water Conference at Brown University. I was particularly interested in hearing the keynote address delivered by John M. Barry, the best-selling author of Rising Tide: The Great Mississippi Flood of 1927 and How It Changed America and The Great Influenza: the Story of the Deadliest Pandemic in History, among other books. His book on the flu has been updated to address the H1N1 (Swine) Flu epidemic, drawing on lessons learned from previous pandemics. Following Hurricane Katrina, John Barry chaired, at the request of the Louisiana congressional delegation, a bipartisan working group on flood protection.

In addition to the keynote address, the conference offered panel discussions. I was particularly interested in “The Anthropocene” which addressed how climate change disrupted societies in the past, such as the ice age in Europe and examined lessons learned about climate disruption on vulnerable groups. The panelists considered the implications of climate change for farming, food security, water access, mass migration and resource utilization. I found the presentations to be provocative, as they caused me to reflect on how we in the small business community can address community and global resilience by addressing environmental resource utilization. I plan to write more on these topics in the near future.



Guest Blog from Serbia on the One-Year Anniversary of Cyclone Tamara

Wednesday, May 13th, 2015

Today is the first anniversary of the worst natural disaster ever to strike Serbia: on May 13, 2014, Cyclone Tamara struck southeastern Europe, delivering three months’ of rainfall within several days. The continuous heavy rainfall caused severe flooding in Serbia and neighboring Bosnia and Herzegovina and Croatia. The high-level political commitment to disaster recovery carried over into regional initiatives. As Serbia prepared to accept the chairmanship of of the Organization of Security and Cooperation in Europe in 2015, it pledged to continue the emphasis the previous chair, Switzerland, had placed on disaster risk reduction. In connection with advising on that transition, I developed a policy paper for the United Nations Office for Disaster Risk Reduction on the OSCE’s policies and programs on disaster risk reduction. I also have a personal connection to the Serbia floods as well, the very talented web developer Djurica Bogosavljev who is doing graphic design work for one of Prisere’s most important projects. He has kindly contributed this blog to share the experience from Serbia:

Serbia Floods

Sremska Mitrovica, Before and After the Disaster

On May 13, 2014, Cyclone Tamara spread across a large geographical area in Central and South-Eastern Europe. The storm mass reached a density of up to 100 kilometers through the entire troposphere.  The warm air from the south and the east created extreme humidity and near 100 per cent saturation of air mass. Conditions in the Balkan Peninsula were particularly conducive to this low-pressure storm. The cyclones centered over Serbia and Bosnia and Herzegovina where, over the course of two days, between the 13th and 15th of May, Serbia received the highest recorded rainfall since data collection began 120 years ago.  On May 16, 2014, the cyclones began to weaken.

Town Obrenovac was hardest hit, flooding 90 per cent of the village. The next hardest hit site was the Nikola Tesla thermal power plant, the largest power plant in Serbia, that provides nearly 50 per cent electricity to the country. Fortunately, careful management kept the power plant safe and online. Kostolac, which provides 11 per cent of Serbia’s electricity, was threatened by the overflow of the River Mlave. Sand bag fortifications were broken, but the water did not break through the last line of defense.

The flood wave on the River Sava near the town of Sabac reached a height of of 6.6 meters, the highest level of the river in the city since recordkeeping began. By the 16th of May, 7,618 people were evacuated, 20 people were injured and three people had died.  In total, over 24,000 people in Serbia were evacuated as a result of several days of heavy rains. Serbian Prime Minister Aleksandar Vucic described the flooding as “the worst natural disaster that has ever befallen Serbia”. The damage to the country caused by the floods exceeded 1.7 billion Euros. Water damaged all public facilities. Physical damage to the private sector exceeded that of the public sector by 500 million Euros, including the destruction of  3,500 cars and 7,000 houses. The agricultural sector was impacted, as 1,000 hectares of arable land with crops that had already been sown were completely flooded.

After the disaster, a number of dignitaries visited Obrenovac to assess the damage and begin the process of relief, including local representatives of the European Union, other non-EU countries, the United States, Russia, and representatives of international businesses. The European Union was the largest direct donor to the relief effort, followed by generous contributions from Serbian athletes, principally  the foundations of Dejan Stankovic, Ana and Vlade Divac, Novak Djokovic. Immediately after winning his tournament in Rome, Novak Djokovic donated his prize winnings of more  than 500,000 Euros donated to help flood victims. He also called upon the international media to continue news coverage of the Balkan floods to ensure that the victims received attention and support.


New York Times Small Business Case Study Highlights Disaster Risk

Wednesday, December 7th, 2011

After the flood

Check out the New York Timesweekly small business case study which presents the story of Pulling Down the Moon, a Chicago business affected by disaster. Three experts were asked to advise the business owners with respect to their future leasing plans. Our comments were heavily edited for space considerations. Here is the complete comment I submitted:

“The co-founders and owners of Pulling Down the Moon are to be commended for doing so many things right: developing an operations manual to provide for systematic processes to scale the business, storing critical data offsite and securing business interruption insurance to replace their lost revenues. Sadly, few business owners take these essential steps, resulting in losses that could be avoided.

But now the business faces a dilemma: should they stay or should they find new space? The answer to that question is to be found in the mission of the business, providing stress-reducing yoga to aid fertility. Disruptions are stressful.  We are all on autopilot to a certain extent, relying on repetitive familiar routines to get through the day. Even trivial changes, such as a new commute on an unfamiliar route, cause stress. Should Pulling Down the Moon impose upon its clients the stress associated with its current sub-leasing arrangements? Better to find space that is less vulnerable to water damage to ensure future continuity for the business and its clients, who need a consistent, soothing space in their lives.

But the founders of Pulling Down the Moon should be under no illusions that they will move from the back seat to the driver’s seat by moving from a sub-lease to a primary lease.  A commercial tenant’s disaster response is always dependent on the efforts of its landlord. That is why businesses should consult with their landlords to determine in advance what facilities and services will be in place after a disruption and establish roles and responsibilities for such cases. This avoids disputes that can arise later. Pulling Down the Moon is fortunate that it avoided what could have been a costly misunderstanding by having a relatively cooperative landlord. As it enters into lease negotiations with a new landlord, it should document explicit arrangements for procedures in the event of a disruption so both landlord and tenant can each benefit from greater predictability.”

Donna Childs is the founder of Prisere LLC and the author of Prepare for the Worst, Plan for the Best: Disaster Preparedness and Recovery for Small Businesses (Wiley, second edition paperback, 2009).”

Thanks to the New York Times and to author John Grossman for a great case study that we hope will raise awareness about the importance of preparedness.

Small Businesses for Vermont

Tuesday, November 8th, 2011

Hurricane Irene caused the worst flooding to strike Vermont in 83 years, leaving the state under 15 inches of rain in a single weekend. National Weather Service hydrologist Greg Hanson described it as “one of the top weather-related disasters in Vermont’s history.” A little over two months later, residents and businesses are struggling to recover. USA Today reports that Vermont residents are learning that while FEMA, the U.S. Federal Emergency Management Agency, provides assistance to individuals, the only alternative for small businesses is to apply for federal disaster loans. And, predictably, most businesses didn’t have flood insurance for not being located in a flood plain and for the fact that the insurance premiums are very expensive. Predictably, Vermont’s representatives, notably Senator Sanders, are protesting that disaster relief is caught up in Washington politics. Senator Sanders also protested the slow pace of approval of SBA disaster loans, particularly in comparison with local assistance from the Vermont Economic Development Authority. Vermont’s economy is dependent of its small business sector and local businesses are doing what they can to help one another. Independent Vermont Clothing, an online retailer, raised $26,005 for the disaster relief fund of Vermont’s Red Cross by selling T-Shirts with a “Support Vermont” theme. I already bought mine, shown here on a dress form, because there is no one around today to snap a photo of me wearing it! Whether it is donating to the relief efforts, volunteering to help or patronizing Vermont businesses, either in person or online, we should all show our support.

Small Businesses Recovering From Hurricane Irene

Monday, August 29th, 2011

Hurricane Irene struck in an unexpected way, causing greater damage to mountainous areas removed from the coast than to direct coastal exposures. Irene brought Vermont the worst flooding in over 100 years. The following are tips modified from an earlier blog posting for Nashville residents coping with epic, 1-in-500-year floods, but they are relevant to the affected small businesses today:

1.    Rapid response is critical. Many small business owners will be in a state of shock and disbelief as a consequence of the disaster.  However difficult it may be, they must manage their emotions and work to restore operations as soon as possible. The choice is not whether to recover quickly or whether to recover at a more measured pace.  The choice is whether to recover quickly or not to recover at all.  A study of small businesses affected by the 1993 World Trade Center bombing found that of those businesses that could not restore operations within five business days, 90% of them were out of business within one year. Prioritize your business needs according to relative urgency and delegate where necessary.

2.    Mitigate your losses. To establish a valid property insurance claim, you must demonstrate to your insurer that you acted in good faith to mitigate your insured losses.  Consider a hypothetical example.  Let’s imagine that you have returned to your property and you see broken glass about the site. You must take reasonable steps to insure that the broken glass will not injure people.  Insurance companies are not very tolerant of passive policyholders who fail to act in their interests to limit losses. Limit subsequent losses to your business by taking prudent steps, such as restoring fire sprinklers or other equipment that may have been damaged by the storm.

3.    Identify your implicated policies. You should invest the time and effort required to examine all insurance policies implicated in the disaster, rather than foreclose options for coverage by limiting the scope of your review. Begin with insurance policies for first-party property losses that cover direct property damage, including collateral damage and indirect property damage, such as business interruption losses and loss-related expenses.  Next review all-risk policies, named peril policies, business owner’s policies, policies covering particular endorsements, valuable papers and records policies.

4.    Provide timely notice. Your business owner’s policy likely requires you to provide timely notice to your insurance company of covered losses.  Do not forfeit indemnification for a covered loss by failing to give timely notice. If you are in doubt as to whether an item is covered by your policy, err on the side of caution and include it in your claim.

5.    Report the facts, don’t diagnose the cause. Think of the words of Sergeant Joe Friday, “Just the facts, ma’am”.  Here is an example of why you should not be a diagnostician.  A sole proprietor worked from her home near the World Trade Center on 9-11 and experienced a systems crash.  She concluded that the crash was most likely due to the loss of electrical power that was the result of the terrorist attack and so notified her insurer.  Because her policy did not include an endorsement for interruption of electrical supply, that portion of her claim was denied.  In fact, the damage to her computer was the result of soot and ash clogging the fan of her computer, a peril that was covered by her policy.  The denial of coverage and dispute that followed could have been avoided had she sent a description of the problem without the diagnosis.  Had the insurance adjuster inspected the damaged computer, he would have seen the soot and ash in the machine and likely authorized payment on the claim.  Her hasty diagnosis resulted in a denial and delay of her claims payment.

6.    Inspect your IT and other electronic assets at least twice to ensure that you have not overlooked anything. I began hearing unpleasant grinding noises emanating from my PC when I returned to my office following the 9-11 disaster.  I suspect I had not heard them earlier because of the background noise outside my office as work was being done to restore electricity and other essential services. Upon closer examination, I learned that the noise signaled an imminent hardware failure. By inspecting each IT asset twice, I avoided the error of submitting an incomplete claims report.

7.    Document your loss mitigation and other loss-related expenses; your business owner’s policy likely covers them.  Such expenses might include overtime wages paid to employees who work to restore the business, lease payments for alternate office facilities when your primary space has been rendered unusable by the flood, costs of purchasing assets for temporary business use and so forth.

8.    Get help if you need it. You are likely to experience a range of emotions following a disaster, from disorientation to shock and disbelief to grief. This is not uncommon and may continue for some time after the disaster.  You won’t be able to look after your employees and family if you are run down.  Get the support you need.

9.    Assess your performance. Review your business contingency plan and, in particular, your employee training to identify areas for improvement so you will be better prepared for the future.  You can and will learn from this difficult experience.

10.    Exercise care when negotiating continued insurance coverage. Premium increases following a major disaster are not uncommon, but there are steps you can take to protect yourself.  In particular, be aware of the “paying more/getting less” phenomenon in which increases in insurance premiums can be dampened by excluding risks that had previously been covered. Also, be prepared to demonstrate to your underwriter the features of your business protection plan that make your business a better risk.

Penny Wise, Pound Foolish

Wednesday, October 20th, 2010

In connection with austerity measures, the UK government reduced spending for flood and coastal defenses, a move that elicited sharp criticism from insurance industry trade groups.  Nick Starling, the Association on British Insurers director of general insurance and health said: “The Government is right to recognize the importance of continued investment in flood defenses. But we are disappointed that this will not be maintained at current levels, given the scale of the problem and the wider economic benefits provided by flood defenses to our communities and businesses.” The UK, like the U.S., China and other major economies, has experienced severe flooding this past year. Fortifications against flood risk makes insurance affordable in vulnerable communities. It also reduces the disaster relief burden the government would shoulder should severe floods occur. The fiscal pressures on governments result in aggressive public risk taking: if the gamble pays off, the taxpayer saves money. If it doesn’t, the losses are greater than they would have been with an investment in systems for risk mitigation. It is no different than in the U.S., where many state governments are foregoing reinsurance coverage altogether.

Rhode Island Looks Forward

Friday, October 8th, 2010

Six months after Rhode Island experienced the worst floods in over 200 years, the state is considering different proposals to protect against future damage, including aid to small businesses for relocation. The problem, of course, is that the cities and the state are broke. And the small businesses certainly cannot afford to relocate themselves at this point in the economic cycle. The Providence Journal reported the scope of the flood clean-up. The town of West Warwick removed from its roads and sidewalks:

  • 2,000 tons of silt and sludge
  • 427 tons of construction debris and furniture
  • 11.8 tons of ruined electronics, such as microwaves and air conditioners
  • 7 tons of water-soaked mattresses and box springs
  • 2.5 tons of tires

During the boom cycle, we should have been investing in our infrastructure and in our security, investments that would prove critical in leaner time. Now we have critical needs for our communities, but we lack the means to pay for them.