Major U.S. Firms Unprepared for 2017 Hurricanes

For senior financial executives at large U.S.-based companies with operations in Texas, Florida or Puerto Rico, last year’s hurricane season brought not only catastrophe to their communities, but a risk management wake-up call for 2018 and beyond.

A survey of executives at companies with more than $1 billion in revenue, commissioned by FM Global, a global commercial and industrial property insurer, found:

“These candid admissions drive home a fundamental truth about catastrophe,” said Dr. Louis Gritzo, vice president, manager of research at FM Global. “People routinely fail to understand or acknowledge the magnitude of risk until they’ve experienced a fateful event.”

As a result of hurricanes Harvey, Irma and Maria:

Reasons for insufficient preparation

One reason for insufficient natural-hazard preparation is imprecise terminology, according to Dr. Gritzo. For example, being in a “100-year flood” zone does not mean you have 99 years to plan. Rather, there’s a 1 percent chance of such a flood every year. Another reason for insufficient preparation is over-reliance on insurance, which cannot restore market share, brand equity and shareholder value lost to competitors. A third reason is denial of risk.

FM Global commissioned market research firm ORC International to conduct the study. ORC surveyed 101 senior financial executives at Fortune 1000 size organizations by phone in October through November 2017.

Source: FM Global