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A large number of U.S. companies with operations in three states affected by the 2017 hurricanes were inadequately prepared to deal with the impact of these catastrophes and have vowed to improve their risk management strategies in response, according to a new study commissioned by FM Global.
In a survey of executives at companies with more than $1 billion in revenue with operations in Texas, Florida or Puerto Rico, 64% said 2017’s hurricane season had an adverse impact on their operations, according to the study published Wednesday by the Johnston, Rhode Island-based insurer. Meanwhile, 62% of those affected admitted they were “not completely prepared” to deal with the effects of the hurricanes, according to the study.
In addition, 68% of all respondents said they will make changes to their risk management strategies going forward. For example, 57% said they will put in place or enhance their business continuity or disaster recovery plans as a result of hurricanes Harvey, Irma and Maria. Meanwhile, 40% will invest more in risk management, property loss prevention and/or reassess their supply chain risk management strategy, and 25% will reassess their insurance coverages or their insurers, according to the study.
“These candid admissions drive home a fundamental truth about catastrophe,” Louis Gritzo, vice president and manager of research at FM Global, said in a statement. “People routinely fail to understand or acknowledge the magnitude of risk until they’ve experienced a fateful event.”
Factors driving insufficient preparation are imprecise terminology about flood risk, an overreliance on insurance and denial of risk, he said.
FM Global commissioned the study through Princeton, New Jersey-based market research firm ORC International, which surveyed 101 senior financial executives at Fortune 1000 organizations in October through November 2017.
If the oceans continue to warm at a predicted rate, financial losses caused by hurricanes could increase more than 70% by 2100, according to a recent study.