Clinton County Economic Alliance

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Risk Management: Avoiding Natural Disasters

Natural Disasters: Site Selection Risk Management

 As the maps and data below illustrate, Michigan is by far the safest of all the Lower 48 states when considering the risk of weather, climate, and most importantly natural disasters—the perfect site to locate or relocate a business.

2013 Hurricane-ike-2008-noaa

Risk management is a structured approach to managing threats to your business and your company’s operations using key management tools including: risk identification, threat assessment, impact analysis, strategy development, business continuity planning, disaster recovery, and risk mitigation.  The best risk management tool is risk avoidance – avoiding geographic areas with inherent weather conditions and climate liabilities.  You cannot purchase a futures contract or a hedge against a natural disaster. These are the areas most affected by natural disasters from low probability states like Michigan to areas highly at risk like Texas and the Gulf Coast.

  
Source: NOAA 

Weather and climate patterns in regions under consideration for expansion that could negatively affect your facility’s operations or getting your goods or services to market are important, yet subtle concerns that all businesses need to address when making site location decisions.  Risks in areas of the country most susceptible to natural disasters such as earthquakes, hurricanes, floods, tornadoes, and wildfires must be included in your decision and risk management matrix because when they occur—they can cost you  money, customers, and sometimes much more.

According to a report published in November 2007, weather-related natural disasters have quadrupled over the last two decades from an average of 120 a year in the early 1980s to 500 now.  The report attributed this rise to unpredictable weather conditions cause by global warming.  A natural disaster or catastrophe can not only affect a company’s bottom line, but also wreak havoc with the well-being of your employees and their families.

Your due diligence in site selection research must include any increased risk in locating in areas of the country prone to weather disruptions and other natural disasters.  As the National Weather Service maps on this page illustrate, Michigan has a very low risk profile for natural disasters and adverse weather conditions.

 While your risk management advisors can quantify the financial costs of an operating disruption, the best way to eliminate the possibility is to locate in a region with very low exposure and risk from weather disturbances and other natural disasters.  The best emergency preparedness is still threat avoidance and Michigan is located in a part of the country insulated, for the most part, from business disruptions resulting from adverse weather conditions. 

 

Floods are the most common natural disaster and can result from such things as excessive snow melt, heavy rainfall, and even new building construction.

Flood-Prone States
States with the most flood insurance claims filed ended September 2006

 State Number of Claims
Florida 17,698
New York 6,693
Pennsylvania 4,275
Texas 2,889
New Jersey 2,593
California 2,535
Massachusetts 2,085
Virginia 1,600
North Carolina 1,225
Connecticut 889 Source: National Flood Insurance Program

 

 

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HurricaneTornados

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 Source: Natural Disasters 2005; National Weather Service: USA Today research

 

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10 States Most at Risk for Major Disasters

 By Doug Whiteman, Bankrate.com

May 28, 2013

Some states find themselves in the crosshairs of disaster far more than others. Presidents have declared nearly 2,000 major disasters in the 50 states and the District of Columbia over the past 60 years as of April 2013, but a mere 10 states have been responsible for a third of that total. See if you live in one of these disaster-prone states — and if you do, you may want to review your insurance policies.

10. Missouri

The Show-Me State has been shown disastrous weather in every month of the year: severe snow and ice storms in winter, tornadoes during the spring, summer and fall, and flooding at virtually any time.

Major disaster declarations since 1953: 53

 

 

 9. Arkansas

Arkansas has been walloped by heavy rain, snow, ice, tornadoes and flooding over the years and has even taken poundings from tropical storm systems, though it’s not a coastal state. In 2008, storms and tornadoes associated with Hurricane Gustav littered streets with debris, damaged buildings, roads and bridges, and knocked out electric cooperatives.

Major disaster declarations since 1953: 54

 

8. Kentucky

The disaster roster in Kentucky has included landslides, mudslides and rockslides, along with flooding and tornadoes. The state was ripped up in 2008 by the remnants of Hurricane Ike. Another major disaster declaration involved a record snowfall in late 2004, and yet another stemmed from a 1981 series of chemical explosions in the Louisville sewers.

Major disaster declarations since 1953: 56

 

7. Alabama

This Gulf Coast state has been battered by hurricanes, including Isaac in 2012, Gustav in 2008, Katrina and Dennis in 2005, and Ivan in 2004. But tornadoes in April 2011 rivaled the hurricanes for destructive power, lashing the state with winds that exceeded 210 mph and leaving about 250 people dead and an estimated $1.5 billion in damage.

Major disaster declarations since 1953: 57

 

6. Louisiana

It has taken Louisiana years to recover from Hurricane Katrina, the now-legendary 2005 storm that government officials say killed nearly 1,000 residents and caused tens of billions of dollars in damage. The Gulf state has been visited by numerous hurricanes including 1969′s Camille, a Category 5 storm that came ashore with 190 mph winds. By comparison, Katrina was “only” a Category 3 on the wind scale.

Major disaster declarations since 1953: 60

 

5. Florida

The Sunshine State has been pummeled by dozens of tropical storm systems since the 1950s — none worse than Hurricane Andrew in 1992. The Category 5 hurricane with gusts of more than 200 mph held the title as the most expensive natural disaster in U.S. history until Hurricane Katrina in 2005. Severe freezes have been disastrous for Florida farming on multiple occasions.

Major disaster declarations since 1953: 65

 

4. New York

Across its empire that stretches from the Great Lakes to the Atlantic coast, New York has been lashed by everything from blizzards to tropical storms. In 2012, Superstorm Sandy killed nearly 50 in the state and caused more than $40 billion in damage. New York also received disaster declarations for the Sept. 11, 2001, terrorist attacks that destroyed the World Trade Center and an earlier bombing in the complex’s garage.

Major disaster declarations since 1953: 67

 

3. Oklahoma

The recent monster tornado that blasted through the Oklahoma City suburbs is only the latest devastating storm to hit a state that recorded an average of 55 twisters per year since 1950. The worst tornado in recent history struck near Oklahoma City in May 1999 with unprecedented winds in excess of 300 mph that killed 36 people. Oklahoma also has endured severe winter storms, wildfires, floods and the 1995 terrorist bombing that killed 168 people at the Oklahoma City federal building.

Major disaster declarations since 1953: 73

 

 2. California

The nation’s most populous state also is one of the most disaster-prone thanks to wildfires, landslides, flooding, winter storms, severe freeze and even tsunami waves. But earthquakes are the disaster perhaps most closely associated with California. The worst in recent years have included a magnitude-6.9 quake near San Francisco in 1989 that killed 63 and a magnitude 6.7 quake in Southern California in 1994 that killed 61.

Major disaster declarations since 1953: 78

 

 1. Texas

Within Texas’ nearly 267,000 square miles (second only to Alaska in size), at least one major disaster is declared nearly every calendar year. The Lone Star State has dealt with tornadoes, floods, wildfires and fairly frequent coastal hurricanes. One of the deadliest and costliest in recent decades was Hurricane Celia, which tore up Corpus Christi in 1970. The storm left 13 dead and destroyed millions of dollars’ worth of property.

Major disaster declarations since 1953: 86

 

Source: Federal Emergency Management Agency.

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