Industrial Resiliency to Mitigate Disaster Loss

If past disasters are any indication, it will take years for the LA region’s economic and industrial complex to fully recover from the recent wildfires.

• Immediate efforts are aimed at remediating hazardous waste from burned-out buildings so that each site can be cleared and prepared for reconstruction.
• Ancillary activities include enhancing local services and supplies (retail and services businesses) to compensate for the loss to the flames of impacted resources.
• Agency activities include assessing how the disaster has impacted – and will continue to impact – the regional economy. They need to understand how to best distribute existing resources while also strategizing regional ‘best’ next steps.

While the final tally of losses is still unknown, area experts have compiled initial statistics that suggest:

• Property and capital losses will be somewhere in the neighborhood of $76 to $131 billion.
• The regional GDP for the year will contract by ~$4.6 billion (.48%).
• Workers will lose $297 million over the course of the year.

Those are direct impact losses stemming specifically from the destruction of real and corporate properties.

In addition to those depletions, other losses will be felt in ancillary categories:

• Insurance premiums will continue to rise as insurers incorporate higher risks of fire and related disasters emerging from these conflagrations.
• Rental costs are also increasing as displaced homeowners find temporary housing while their property is rebuilt. That extra population puts additional pressure on an already fraught rental housing market, making it even more unaffordable.
• Health issues are also rising due to smoke and particulate matter released by the flames.

In light of the far-reaching concerns presented by the fires and their aftermath, disaster management professionals are suggesting that more resilience measures should be included as the region rebuilds. In addition to making real property development more fire-resistant, these experts are now discussing the significance of ‘industry resilience.’ Industry resilience embeds into corporate sites and cultures practices that help to mitigate damages and losses from predictable threats such as wildfires, storms, floods, and the like. As climate change advances and environmental disruptions become more likely and more destructive, the resilient business will be prepared to withstand those pressures and recover more quickly and succinctly afterward.

Industry Resilience as a Concept

This emerging consideration – industrial resilience – is defined by the World Bank as “the ability of firms, industrial parks, and manufacturing sectors to increase competitiveness by minimizing losses and damages and by achieving continuity and growth in the face of more frequent and intensifying disasters.” It embraces the reality that businesses and industrial sectors face the same escalating risks of loss due to climate and other social changes just as surely as their human resources do. The COVID-19 pandemic, hurricane and tropical storm flooding, fires, and even political upheavals that recharacterize whole countries have all had an immeasurable impact on how the world functions. Those businesses that survive these shake-ups are the ones that have intentionally built into their practices strategies that will maintain (as much as possible) their security and continuity through difficult times. Their preparations take into account disaster-borne situations that cause supply lines to falter, regulations to fail, and critical corporate initiatives to fall by the wayside. The resilient business prioritizes avoiding unnecessary damages or delays during a disaster so it can recover quickly and completely from the mayhem.

From this perspective, many organizations might consider how a disaster of any kind not only poses risks but also generates opportunities for growth and evolution. And, once they recognize the business value of being better prepared ‘next time,’ they can begin exploring where their vulnerabilities lie and how they can reduce those risk exposures while they have the time and resources to do so. Further, not only would a resiliency upgrade ward off at least a percentage of future losses caused by destructive forces, but some analysts believe it also offers enhanced competitiveness before, during, and after disaster strikes.

Industry Resilience as a Competitive Measure

Enhancing organizational resiliency requires both insight and investment:

• Insight to understand where risks lie and what needs doing to mitigate them and
• Investment of time, financial, and human capital so that business continuity planning (BCP) includes responding to and recovering from disaster-created damages.

Insights:

The World Bank report offers (on page 31) ‘co-benefits’ as a correlate to disaster damages. Co-benefits emerge during both the resiliency planning/development/building stages and the post-disaster recovery phase as each element of each step is thoroughly vetted for its impact on the enterprise. Co-benefits can include social, economic, and environmental aspects that come into existence either as adjuncts to a protective factor or as happy coincidences as activities demonstrate the success of the resiliency measures.

For example, resilient industrial buildings not only protect businesses and people in non-disaster times, but they can also protect communities. When designed with resilience in mind, revamped business sites can offer several benefits to their neighbors, including shelters from climate challenges, barriers to environmental catastrophes (preventing mudflows, i.e., that caused additional damage after LA’s fires receded), and revenue streams by allowing the company to remain operational.

Investments:

Investments in industrial resiliency span all aspects of ‘doing business.’

• Infrastructure – The corporate ‘infrastructure’ isn’t just its physical plant; infrastructure also includes its technology and human resources, supply chains, business partners, and community relations.
• Policy – Investments in both civic and corporate policies are also necessary to sustain competitiveness before, during, and after a disaster. Industrial resilience policies can streamline processes such as permitting, licensing, etc., as well as raise awareness of mitigation practices that can affect the whole community.
• Finance – Disaster risk financing tools add buffers and padding to current accounts to avoid cost overruns and ensure access to funding when catastrophes occur. Policies explicitly dedicated to disaster management reduce reliance on operations funding and fuel a faster recovery when disaster strikes.

Analysis of decades of disasters – floods, hurricanes, fires, and even earthquakes – teaches how to sustain resiliency and recovery options in good times to protect from unnecessary damages in bad. Climate change is driving ever more violent storms, wildfires, and floods. Companies that implement resiliency and recovery strategies well before calamity hits are better poised to survive the crisis, reduce the opportunity for unnecessary losses, and speed their recovery time. Industrial resiliency is the new strategy for any business located anywhere near a potential disaster zone, which, these days, is anywhere on Earth.