For any sensible entrepreneur, the proximity of a Category 5 hurricane would mean preparing for something bad; however, add to that same natural event, a spill of more than 5 million gallons of crude oil in the middle of the ocean. Now, prepare for the worst: Are you ready yet?
Last April 20, was one of those sunny spring days in the bowels of the Gulf of Mexico. Activities inside the Deep Water Horizon oil extraction platform, located off the coast of Louisiana, were carried out with the punctuality with which they routinely did so; however, an instant made the difference: A huge detonation shook every corner of the gigantic mass of iron located in the immensity of the sea; while smoke began to cover the blue sky with darkness, while an oil slick began its deadly advance over the waters of the gulf.
It didn't take longer than the oil slicks to spread far to the ends of the planet. It was later revealed that the explosion destroyed the platform where 11 workers at the energy complex lost their lives, while efforts to try to seal the leak would be in vain for several weeks after the tragedy occurred.
Until then the accident took on Dantesque dimensions, and when it seemed that nothing could go worse, the National Hurricane Center of Florida began to make clear its most recent cyclone prospects once the season arrived.
So, what is different this year is that beyond the atypical season in these natural phenomena -where it is said that it will be the rainiest year in historical records-, there are more than fifty million gallons of oil and crude oil in the vicinity of the Gulf of Mexico, so companies located in the vicinity of it should begin to consider the possibility of hypothetical scenarios that eventually they would lead to this tragedy, to be much worse than initially expected.
WARN
With the intention that companies anticipate as best as possible disasters such as the one we reviewed above, the international risk analysis consultancy Aon, explained through a recently issued press release, that in order to reduce losses and financial impact due to the hurricane, the realization of a scheme of "measured pre-losses" should be considered. this with the intention of reducing the financial impact in the face of disaster scenarios, while at the same time strategies must be created to generate a smooth and rapid transition to the resumption of operations.
However, the process described should begin before the disaster starts, as this ensures that your organization is prepared to respond to the losses of a potentially devastating catastrophe.
Therefore, the first recommendation presented by Aon is the review of security policies, since based on this, it will be possible to evaluate more precisely and determine the specific terms, provisions, conditions and exclusions that could potentially refer to a loss of assets, product of the hurricane or the oil spill; so that once the providences are covered, you can respond first-hand to any potential event.
AVOID THE PARALYSIS OF YOUR COMPANY IN THE FACE OF DISASTERS
• Generate a permanent culture of disaster prevention.
• Design a differentiated loss measurement scheme.
• Produce a natural disaster risk analysis.
• Make a "mitigation" plan for business continuity.
• Establish business alliances for ongoing training in the face of tragedies.
• Locate and establish alliances and contracts with companies dedicated to risk assessment and mitigation.
• Quickly establish a system for assessing physical, economic and human losses if applicable.
• Investing to prevent is not an expense: Maintaining the operations of your company is worth, without skimping, every peso invested.
REVIEW YOUR DISASTER PLAN
Achieving the objective of minimizing the operational and financial effect of a significant loss of equity, or business interruption, must generate a mitigation plan that will have to be present before any fatal event.
In this sense, companies that are at risk of being affected by a hurricane in the Gulf, should evaluate physical assets on a location basis and study how a wave of cyclones or storms could disrupt the operations of the company. This assessment must be very thorough and will have to have a centralized leadership structure.
EXPAND YOUR NETWORK OF DISASTER EXPERTS
Most security teams within companies do not have the resources to deal with disasters of these characteristics, but neither (in many cases) is it their mission to specialize in disaster assessment, mitigation and recovery of resources on a daily basis.
On the other hand, it is not in the security leaders of the companies, an adequate risk approach, in addition to the fact that these teams do not have the first-hand experience when it comes to managing a real disaster. In short, unless the company's preparedness and response provide direct planning and comprehensively address the occurrence and consequence of unprecedented events, the risk plan should be considered incomplete; as a well-conceived loss mitigation plan identifies resources and partners that can be counted on in advance and foresees a potential disaster event.
Plans should include "prior" coordination of external resources that would be needed to aid a rapid response, which would include an emergency restoration company with significant experience and vast geographic footprint, as well as robust resources that can be quickly deployed to any location found in the loss, in order to activate the recovery process as soon as possible.
In this case, the proverb "one ounce of prevention equals one pound of healing," actually applies.
Following Hurricane Katrina in 2005 and Hurricane Ike in 2008, many Gulf Coast organizations were unable to stop their losses in part due to a lack of available labor and skilled professionals. Companies that had secured prior agreements with prestigious and experienced consultants, restoration contractors and other suppliers were first in line and consequently among the first to restore operations, limit their losses of business interruption and reputational damage to the customer and to local assets.
BE AGILE WHEN ASSESSING DAMAGE
The appearance of a disaster could involve the loss of a large amount of resources of all kinds, a situation that must eventually be evaluated in order to activate the liability of insurers, a situation that will also be subject to a general audit.
Therefore, it is essential to quickly establish a system to capture all costs related to the loss, which will form the basis of the eventual claim filing.
For tracking purposes, it is prudent to set a separate account number or upload the code to the cost accounting system, under which all expenses related to the loss will be captured.
DO THE MATH
• Account for all invoices, contracts, etc.
• For contract of work related to the loss, with detailed descriptions of the repair and / or replacement, as well as the costs of the work performed.
• Account for all internal costs: (Accompany with detailed descriptions) comprising internal labor costs (separated by person and accompanied by your labor cost); parts inputs and materials used, expenses incurred, partial reports and total expenses.
CONCLUSION
Specifically, no one can predict the effects of an oil-laden hurricane across the Gulf of Mexico. As we have witnessed with recent storms in the Gulf, a major hurricane can cause catastrophic damage. A significant storm in an oil-laden gulf could cause unprecedented damage to property and business operations.
A fluid and thoughtful disaster response plan, along with the rational application of some basic procedures, can help companies resume operations more quickly and at the same time, establish an event documentation process, in a way that limits losses, business interruption timeline, and overall impact.
HURRICANE FORECAST 2010
The Tropical Storm Risk (TSR), is an advanced weather forecasting system that provides real-time mapping of tropical cyclone wind fields around the world. This study is co-sponsored by Aon Benfield, and then puts his forecast for the 2010 Atlantic hurricane season in his hands.
Currently, every leading indicator suggests that hurricane activity will be above the norm during 2010. In fact, the TSR predicts that the Atlantic basin – including the North Atlantic, the Caribbean Sea and the Gulf of Mexico – will have a hurricane activity that by this year in American territory, will be 55% above the historical norm measured since 1950.
On the other hand, this level is expected to be even higher if the meteorological phenomenon called "La Niña" leads to a surface temperature lower than that of the sea in the Tropical Pacific. In fact, there is a high probability that hurricane activity in the United States during the current year will be up to a third higher than the historical record.
For the Atlantic basin, preseason forecasts indicate a 77% chance of having an above-normal Atlantic hurricane season; an 18% chance of a near-normal season and only a 5% chance of a season below normal rates.
In this context, 16 tropical storms are expected including eight hurricanes and four intense meteors. As for the activity forecasts, the arrival of a hurricane to "American" coasts claims a forecast of 74% probability, this is 19% above normal, and only 7% probability of a season below normal.
Likewise, the arrival of at least five major meteorological events to the "American" coasts is expected, of which at least two would ascend to the category of hurricanes. In turn, the preseason forecast also predicts two tropical storm strikes in the smaller Caribbean Antilles, one of which is expected to be a hurricane.
The forecast published by the TSR predicts that the 2010 Atlantic hurricane season will have a higher average of this type of event, with 93%, throughout the season and cites several reasons for this expectation.
Two of those reasons are that winds in the upper levels of the atmosphere are expected to "relax" during the August and September period, which would improve the atmosphere's ability to generate tropical low pressure areas and a continued increase in average sea surface temperature in the main Atlantic development region.
The table below shows the TSR forecasts and the range of uncertainty surrounding the forecast, including the probabilities of making landfall (in the continental United States).
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