Resilience and Competitive Economic Advantage

Flooded Honda factory in Bangkok, 2011 -- what you might call a serious business continuity issue.

Flooded Honda factory in Bangkok, 2011 — what you might call a serious business continuity issue.

by James A. Bacon

If you were a manufacturing company contemplating an expansion to Hampton Roads, you would take into account traditional criteria such as proximity to customers and suppliers, access to a skilled workforce, transportation connections, prevailing wage levels, taxes and so on. But as corporations become increasingly sensitive to the issue of business continuity in the face of disruption or disaster, you also might consider the region’s vulnerability to flooding.

Outside of New Orleans, Hampton Roads is the lowest-lying metropolitan area in the country. It is notoriously prone to flooding now, and the region’s vulnerability will only get worse as the sea level rises. You may or may not believe the McAuliffe administration’s predictions that the sea level will be 1 1/2 feet higher by 2050, but the risk that the forecast might prove accurate would have to factor into your calculations. Logical questions would arise: Would flooding disrupt rail and highway access to your facility? Would it hamper the ability of employees to get to work?

Perhaps the most important question is this: Do state and local governments have a plan to cope with recurrent flooding that will likely only get worse in time? How resilient is the region — not just one particular jurisdiction but, given the connectedness of transportation arteries and commuter flows — the entire region?

The resiliency movement is gaining momentum around the country, driven mainly by worries about climate change. Whatever your views on that polarizing issue, however, there are sound reasons to engage in planning on how to make your community less vulnerable to natural or man-made catastrophes (see “The Non Global Warmist’s Case for Resiliency Planning.”) The fragility of Hampton Roads is obvious for all to see. But every community has vulnerabilities of some kind. The integrity of the electric grid and water supply, for instance, are things everyone should worry about.

Every community should know its risk profile. In Hampton Roads the big concern is flooding. Western towns and cities worry about forest fires. Plains localities lose sleep over tornadoes, while others fear blizzards or terrorist attacks.

The insurance industry pays close attention to some of those risks, which are reflected in insurance rates (unless government policy distorts the price signals by subsidizing rates, as it does with flood insurance.) But, as Cooper Martin, program director for the Sustainable Cities Institute, observed at the Resilient Virginia launch yesterday, insurance covers less than half of total losses. States and localities don’t have insurance for washed out roads and bridges, for instance. There’s no insurance policy that covers the aftermath of a forest fire when rain washes ash into the water supply. “Who pays for uninsured losses?” he asks.

Perhaps the most unappreciated risk of catastrophe is to is a region’s brand, Martin said. Increasingly, a willingness of communities to identify systemic risks, develop plans to deal with them and maintain the financial commitment to carry out the plans will be a big differentiating factor. Corporations that place a premium on business continuity will pay close attention.

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One response to “Resilience and Competitive Economic Advantage

  1. re: ” insurance covers less than half of total losses. ”

    well.. if you own a home and you find yourself on a flood map – and you do have subsidized flood insurance, then you have one bite at the apple. You’ve covered one time then you better move inland.

    others, not so lucky – lose their place to live and if they have no other resources, it can get pretty grim.

    Even if they have resources – they’re going to draw down their assets.

    I’m amazed that we’re talking about all this money – what has to be billions, trillions of dollars – but it’s cheaper than “resilience” for mitigating climate change.

    It’s like – we’re denying the concept of climate change – but we’re preparing for the financial consequences of it.

    or perhaps I’m looking at it cockeyed…

    why are we talking about resilience as if it’s the only pre-ordained alternative?

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