For businesses, the human tragedy in the loss of homes and lives offers a powerful incentive to look past the uncontrollable risk of a natural catastrophe and focus on the steps that can be taken to maximise resilience in the face of nature’s fury

Buildings levelled in the Sichuan earthquake, Dujiangyan, Sichuan, China, May 18 2008

Preparedness is key when it comes to building an effective crisis management plan and there are a number of lessons that can be learned from previous responses to natural catastrophes to build resilience.

One such example is the Queensland floods of 2010/2011. Almost five years ago the Australian state experienced one of its most devastating natural disasters in history.

A series of floods, which began in December 2010, and continued into 2011, killed 35 people. More than 200,000 people were affected and damages skyrocketed into the billions.

The flood was said to cover three-quarters of the state at one point.

Graeme Newton was the director general of Queensland’s infrastructure department when the floods struck. In January of 2011 he was asked to lead a new statutory authority to deal with the response, recovery and rebuild. Only days after being installed as chief executive, cyclone Yasi struck the north of the state, causing severe damage to the already sodden area.

“There were multiple events over a few months,” Newton says. “The scale and incessant nature of it was unprecedented. And the geographic size of the impact was huge. Often you’ll have a one-off event, but this was one after the other, after the other. It was a continual pounding. We started with a $7.5bn task. It ended up being about a $14bn rebuild,” says Newton.

The geographic range of the area also presented a major challenge.

“We had to mobilise the largest reconstruction effort ever in Australia. We had to harness the resources of the state and federal governments as well as the construction sector.

“We were spending about AUD$10m a day on reconstruction work. And there were about 10,000 reconstruction sites across the state at any one time. Anything from a small causeway, to a school, to a main highway to a ferry terminal,” says Newton.

He also describes the diversity of the communities as another major challenge.

“We had everything from remote indigenous communities to the Brisbane City Council. We adopted the approach: ‘your success is our success’. We didn’t want to be in a situation like New Orleans, where five years later the work still wasn’t done. It was one in, all in,” Newton says.

Improving resilience

Newton’s job wasn’t only to help Queensland recover from previous disasters, but also take steps to make sure the state was better equipped for natural dis- asters in the future. That meant building disaster resilience.

It is this experience Newton is leveraging now across the region in his new role as lead partner in crisis management at Deloitte Australia for the Southeast Asia region.

“Our clients are telling us that the traditional box ticking and piecemeal approaches to preparing for business disruption and crisis readiness are not serving their needs. By taking an integrated approach from strategy through to crisis management, sustained resilience is achieved. Most organisations can anticipate disruptions, but it’s getting blindsided by a value-killing crisis that will really test whether you have truly built a sustained resilient capability,” says Newton.

Newton lists the key elements of Sustained Resilience as:

● An integrated approach to strategy, risk and resilience

● A leadership team and culture that’s ready to respond

● A commitment to build and maintain readiness maturity

● Reguarly rehearse, test, refine through realistic simulation

● Have an integrated go-to team of experienced advisors including cyber, forensic, fraud, facilities, workforce, legal and media

The value of digital technology

One of the major lessons learnt from the Queensland recovery effort, was the value of technology in a natural catastrophe.

Geo tags (geographical identification metadata attached to pictures and other media) assisted the recovery team to identify areas in need of assistance and then track the rebuild progress in that location.

“Social media, Instagram, Twitter and Facebook; most of those photos have a geo tag attached to them. They provided more real-time situational awareness. Rather than relying on verbal descriptions from the field, you have imagery too. If people are using hashtags, you can pick up all sorts of information that gives you insight. We then retained a record of that. You can look at what worked and what didn’t work,” says Newton.

But Benedict Burke, head of global markets at Crawford & Company, says from a loss adjuster’s perspective ‘gadgets’ have had relatively little impact on catastrophe claims management. That could change, however, he says.

“Drones are being piloted by a number of major insurers in the US, and with the right checks and balances, these can provide considerable access benefits when sites are restricted,” says Burke.

High-resolution aerial imagery is growing as an affordable option, particularly for events like floods, where loss adjusters can use the images to determine the pre- and post-loss condition of remote assets.

“We will use this tooling going forward to align our resource application to our clients own event models, which more and more gives them early sight predictability around their exposures,” Burke says.

Developing a crisis management team

Aon Risk Solutions principal consultant, crisis management and trade credit Dan Bould says a company’s first priority when it comes to managing natural disasters should be developing an effective response team.

“It should include heads of departments. The chairman should be involved, so should the head of HR, finance and any other core business heads. Underneath those people, you need implementation teams,” he says.

“Where people go wrong is they make their team too large. When you have a large crisis management team, politics can come into it, and it can slow down the decision-making process.

“It’s incredibly hard to get all heads of department together for half a day of training and testing. But if you want to be resilient, you need to practice and rehearse. It’s not enough just to have the names and responsibilities written down. People need to be comfortable in that role.”

InterContinental Hotels Group director of risk management Asia Australasia Shuh Lin Tan agrees.

She says: “While we are focused on physical build aspects of the hotels, our main priority, in managing natural catastrophic risk, is also to drill everyone on proactive crisis management process embedded within the organisation on preparedness, response and recovery.”

Business continuity

While the focus on natural catastrophes tends to be on the immediate aftermath, an entity’s ability to function in the days, weeks and months after an event is also an important consideration.

Lockton’s Jackson says there are a number of things to consider.

First, he says there needs to be an assessment of the concentration of risks. For example, do you have a lot of assets in a particular location prone to disasters, and do you need to physically diversify or create back up locations away from risk areas?

“One of our clients with back office functions in the Philippines has deliberately built two locations rather than one, at different ends of the country to minimise the impact of typhoons on their operations there,” Jackson says.

“Another client in China has surplus facilities away from its main operations in Beijing to mitigate earthquake risk.”

But it’s not just about a firm’s own business continuity plans.

“You need to ask suppliers the same questions you’re asking yourself. Treat critical suppliers as an extension of your own business,” says Jackson.