15 May 2022
By Chris LeBoeuf
From raging wildfires in Australia at the start of 2020, to the devastating flash flooding across much of Europe in July 2021, recent years have been scattered with natural hazard events that have destroyed property and infrastructure, devastated businesses and taken lives.
In the US, Hurricane Ida brought back painful memories to the people of New Orleans, a city which is still rebuilding after Hurricane Katrina caused 1,800 deaths and $125 Billion of damage back in 2005.
Unfortunately, natural disaster events such as hurricanes, cyclones, storms, floods, and wildfires are occurring more often and with greater severity. This can be viewed in terms of economic cost increasing over time.
The Asia Pacific region tells a similar story. Here, average annual disaster event-induced economic losses between 2000 and 2009, stood at $56.7 billion – and from 2010 to 2019, that figure more than doubled to $117.9 billion. The Tohoku Earthquake that struck Japan in 2011 is largely responsible for this, but even omitting 2011 from that time period, the nine remaining years average out at $89.1 billion in annual natural disaster damage.
In the US, meanwhile, the ten-year average annual cost of natural disaster events exceeding $1 billion has increased more than fourfold between the 1980s ($18.4 billion) and the 2010s ($84.5 billion).
Such has been the impact of growing and more severe weather events that the magnitude of the 100-year and 500-year flood has undergone revision in Houston, a significant development that experts are keeping a close eye on.
Counting the cost
These concerning figures translate into a multitude of damages encountered by organizations that operate across a variety of industries, which notably include petrochemical, energy, chemicals, technology, and other industrial sectors with large and highly valuable infrastructure bases.
Unplanned outages and economic losses from production downtime are major consequences of the disruption caused by extreme weather. Beyond this, there are many secondary and tertiary social and environmental impacts that stem from the primary damage done to these businesses.
Why are power and chemical plants particularly prone to natural disaster events?
Geography plays a critical role. For instance, many petrochemical facilities are strategically located close to coastal and inland waterways to enable easy transportation of goods.
This makes them especially susceptible to hurricane and flood risks. In the US, many plants and industrial sites are located near the Gulf Coast, Atlantic Coast, and Mississippi River. Earthquakes are another risk factor, primarily in the western states and other regions near fault lines. Key risk areas in Europe include sites along rivers and coasts, including those in regions which are at or only slightly above sea level.
COP26 demonstrates a greater sense of urgency among key political decision-makers, enterprises, and wider society. But enterprises should not wait for more comprehensive legislation and regulation to prompt them into action.
In many regions around the world, there are little or no regulatory drivers aimed at industrial facilities that require them to withstand extreme weather events. The onus currently is on organizations to determine any natural hazard risk management strategy.
How to approach natural hazard risk management
The extent and nature of such action is largely dependent on individual appetite for risk – the extent to which your business is prepared to deal with disruptions caused by storms, hurricanes, wildfires, floods, and other extreme events.
Direct concerns may include the reliability and resilience of equipment, facilities to provide worker safety, and reduced unplanned outages.
However, it is also important to bear in mind that physical damage to buildings and equipment represents only the initial source of financial loss. Depending on the severity of the natural hazard, resultant business disruption and market displacement can also hit revenue figures hard, including storing materials and disruption to feedstock supply, transportation availability and access, and cost and availability of energy.
To help quantify some of these risks, organizations should consider a range of factors.
What amount of revenue will be lost if you have to shut down your facility for an extended period of time? Can additional understanding of the risks help your company to manage operations? Will improvements to preparedness and response reduce direct damage and limit revenue loss following an extreme weather event?
Answering these questions can prompt a series of potential mitigation measures.
Facility hardening, enhanced preparedness and response planning, and organizational measures to limit the impact of any single extreme event are among the risk mitigating steps companies can take, along with acquiring insurance policies.
Another option is to leverage the engineering and risk management expertise of third parties.
Independent risk assessments and audits can serve as vital tools in quantifying actual risks; engineering-based studies that address rigorous site-specific technical assessments will help facilities to measure their exposure to numerous natural hazards. These studies often carry advantages over advice and subsequent cover offered by insurance firms, which may not offer this level of rigorous evaluation and technical understanding.
Regardless of what approach is taken, companies should build risk into their cost of business, planning for a certain degree of extreme weather disruption every year.
Providing a helping hand
Some organizations may lack the in-house technical and engineering expertise to properly plan and execute an entire natural hazard risk management strategy.
Expertise in the field of process safety (including accidental hazards such as fires, explosions, and toxic spillages) and structural engineering is critical for companies to get the support from the cradle-to-grave process.
Specific services include:
- risk assessments and independent audits
- equipment elevation audits (flood risk)
- natural hazard audits (from backup power systems to data protection)
- flood and storm surge risk analyses
- reviews of emergency response plans
- Natural Hazard Risk Management Toolkits that offer insights and resources to assist industrial facilities in reducing their exposure to natural and man-made hazards.
Knowledge sharing is crucial for organizations to futureproof themselves effectively.
In the UK, the Hazards31 conference in November 2021, focused on issues around process safety. Flooding is the most frequent and damaging natural hazard, the risk of which is growing due to climate change and increasing regularity of extreme weather events. To help organizations understand and prepare for these risks, these types of conference papers look at vital lessons learned through the years and how to navigate the UK’s Control of Major Accident Hazards (COMAH) regulations.
With more industrial businesses in the UK, wider Europe, and other regions around the world being impacted from natural hazards, there is a clear message: Risk from natural hazards is growing. As climate change continues to produce extreme and more frequent weather events, the time to act is now.
Chris LeBoeuf is a Senior Director at ABS Group, where he leads a team of over 50 engineers and scientists across the US and UK in managing risks to structures and equipment related to extreme loading events, including wind, flood, seismic and blast. With over 20 years of professional experience as a structural engineering consultant and a principal area of expertise in blast analysis and design of buildings, Chris has helped several organizations with the dynamic analysis and design of protective structures and equipment to resist extreme loading events. Chris holds a Bachelor of Science in Civil Engineering from The University of Texas at San Antonio and is a registered Professional Engineer in 12 states.
ABS Group | www.abs-group.com
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