Changing natural catastrophic landscape in India – Key considerations for businesses

Physical climate risks like heatwaves, floods, droughts, and storms increasingly threaten the bottom line, whilst regulator, investor and consumer pressure, demand greater action to understand, report and manage natural catastrophic risks. The recent floods across parts of India are the consequence of a wide range of factors, including excessive untimely and prolonged rainfall that occurred, coastal storm surge, water main breaks, dam failures, and more. Flooding results in instant devastation. Floods have the potential to cause significant business disruptions, food shortages, and product shortages.

Companies in India have begun acknowledging such natural catastrophic risks to their business; however, concrete efforts are still nascent. Initiatives tend to focus on driving stewardship rather than addressing material risks to operations and value chains. Moreover, very few companies are quantifying their current and future climate risks in financial terms.

Floods have caused the most devastation of any of these disasters, notably hitting the states of Himachal Pradesh and Uttarakhand. According to reports, the floods have significantly damaged the area and resulted in an estimated economic loss of between Rs 10,000 and Rs 15,000 crore. The severe damage caused by these floods and previous incidents like the 'Biparjoy' cyclone has raised serious concerns. It emphasises how India is vulnerable to several natural hazards due to its geographic and geographic location.

These figures highlight how important catastrophe preparedness is for companies doing business in India. As the country experiences a high frequency of natural disasters, it becomes crucial for businesses to proactively address potential risks and adopt resilient strategies to protect their operations and assets. The effects of natural catastrophes on business operations can be reduced by putting into place comprehensive disaster management plans that include risk assessments, emergency response procedures, and continuity measures. Companies should consider conducting comprehensive risk assessments to identify vulnerabilities and develop contingency plans specific to their locations and industry sectors. This will enable them to better understand the potential risks they face and formulate tailored strategies for disaster preparedness and response.

With the increasing frequency and severity of floods in our region, it is essential to prioritise disaster recovery planning to protect the business establishment. Floods can have a devastating impact on businesses, causing damage to infrastructure, disrupting operations, and leading to financial losses. By taking proactive measures, we can mitigate risks and enhance resilience.

Here is a checklist that outlines some key considerations for businesses:

1. Risk assessment: Determines the frequency and severity of natural, man-made and political perils that can affect the organisation and its facilities. By identifying and quantifying these exposures, controls can be implemented to mitigate them as well as provide a cost/ benefit analysis to justify investment in these controls.
2. Insurance coverage: Review your insurance policies, particularly your property and business interruption coverage, to ensure they include adequate protection against flood-related damages. Engage with your insurance provider to understand the extent of coverage and any additional options available for flood insurance.
3. Emergency response plan: Develop a comprehensive emergency response plan specific to flooding scenarios. Clearly outline roles and responsibilities for your staff during a flood event, establish evacuation procedures, and designate assembly points or safe areas. Regularly review and update this plan as necessary.
4. Data backup and recovery: Implement a robust data backup and recovery system to protect your business's critical information. Store backups offsite or in the cloud to ensure accessibility even if your primary systems are compromised during a flood. Test the restoration process periodically to verify its effectiveness.
5. Physical protection measures: Take physical measures to safeguard your establishment from flood damage. This may include installing flood barriers or shields, sealing openings vulnerable to water ingress, elevating electrical systems and valuable equipment, and relocating critical utilities to higher levels.
6. Communication and notification: Establish reliable communication channels to quickly disseminate information to employees, customers, and suppliers during a flood event. Develop a communication plan that includes alternative means of contact if traditional channels are disrupted. Keep stakeholders informed about any changes in operations or disruptions to services.
7. Inventory and asset protection: Regularly maintain an updated inventory of your business assets, including equipment, stock, and supplies. Implement measures to protect inventory from flood damage, such as elevating storage or using waterproof containers. Develop a plan for relocating inventory in case of an impending flood.
8. Business continuity plan: Create a business continuity plan that outlines steps to resume operations after a flood. This includes identifying alternative locations or temporary workspaces, establishing communication channels with key stakeholders, and prioritising critical activities to minimise downtime.
9. Employee safety and support: Prioritise the safety and wellbeing of employees. Educate them about flood risks and safety protocols, provide training on evacuation procedures, and ensure access to necessary resources, such as emergency supplies and medical assistance. Offer support and resources for employees affected by floods, demonstrating your commitment to their welfare.
10. Coordination with external agencies: Coordinate response, continuity and restoration activities with local, regional and national authorities, and with compliance to statutes and regulations. Share best practices, and collectively address challenges.

By implementing measures from the checklist, businesses can significantly reduce the impact of natural catastrophic (NatCat) perils and expedite the recovery process. Adaptation and preparedness are key to maintaining continuity, safeguarding assets, and protecting your employees and customers.

We can help

WTW’s Strategic Risk Consulting experts can help mitigate clients total cost of risk (TCOR). They complement their deep understanding of specific client needs with a holistic analysis that adds value through a portfolio risk strategy; and remarkable innovation that automates risk quantification to deliver a financial approach to clients. The objective is to help reduce the likelihood of claims and reduce the cost of NatCat perils when they occur through a smart, technical approach to risk.

For more information about our solutions and how WTW can help with taking informed decisions regarding your risk portfolio, speak to a WTW expert.