Category Archives: Natural Catastrophes

Storm Risk Reaches Well Beyond Tornado Alley

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We’ve heard it over and over again: 2011 was the costliest year on record for natural disasters. From triple-digit heat waves and devastating drought to overflowing rivers and deadly tornadoes, the U.S. rang up natural disaster costs in the billions and much time and effort of rebuilding.

But what wasn’t talked about so much was the fact that much of the tornado risk was located outside of the traditionally storm prone tornado alley, according to a new report by CoreLogic. “The apparent increase in the number of incidents and shift in geographic distribution of losses that occurred last year in the U.S. called the long-held notion of risk concentration in Tornado Alley into question, and is leading to changes in risk management policy and procedure,” said Dr. Howard Botts, vice president and director of database development for CoreLogic Spatial Solutions.

CoreLogic’s “Tornado and Hail Risk Beyond Tornado Alley” report analyzes hazard risk at the state-level across the U.S using the company’s wind and hail data layers. Key findings include:

  • Tornado risk actually extends across most of the eastern half of the U.S. rather than being confined to the Midwest
  • According to data from the National Oceanic and Atmospheric Association (NOAA), of the top ten states with the highest number of tornado touchdowns between 1980 and 2009, only three actually fell within Tornado Alley
  •  At least 26 states have some area facing extreme tornado risk
  • At least 11 states have significant areas facing extreme hail risk, and almost every state east of the Rocky Mountains has some area facing a moderate or higher level of hail risk
  • The area of highest hail risk extends outward from the central Great Plains to include states as far east as Georgia and the Carolinas

These findings have obvious insurance implications, but it goes beyond that to disaster preparation and natural catastrophe risk management in areas not historically prone to such events. CoreLogic released the maps below, indicating tornado peril in non-tornado alley states.

Insurers and residents alike should be aware of the high risk of tornadoes, wind and hail in these areas. For the complete report, including and in-depth descprition of how CoreLogic created the above maps, click here.

Climate Change Causes Some Extreme Weather Events: United Nations

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Climate change and the risk it poses to businesses and communities has been in the headlines this week, including one article by Reuters analyst Gerard Wynn that claims “rising temperatures are driving more frequent bouts of extreme weather,” some of which we saw this year. While Wynn and others (such as myself) are in agreement that climate change is behind some extreme weather events, others continue to staunchly deny such links.

In his article, Wynn references the fact that global carbon emissions rose by a record amount last year (6%), making it the biggest one-year jump in history and proving that even though the world economy may be in tatters, ozone-depleting gasses continue to be emitted at an alarming rate. And, according to statements issued today by the Intergovernmental Panel on Climate Change (IPCC), “It is virtually certain that increases in the frequency and magnitude of warm daily temperature extremes and decreases in cold extremes will occur in the 21st century on the global scale. It is likely that the frequency of heavy precipitation or the proportion of total rainfall from heavy falls will increase in the 21st century over many areas of the globe.”

The report, which the IPCC said was a scientific foundation for sound decisions on infrastructure, urban development, public health and insurance, also states that there are many options for decreasing risk, with the best options providing solutions across a wide range of possible levels of climate change.

But this is just the most recent of string of reports suggesting that human-induced climate change is linked to some severe weather events. For business to continue to prosper within the world economy, adopting a greener way of business is the only way to decrease the risk of future extreme weather events affecting organizations and society in general.

Though the Kyoto Protocol has striven to be a catalayst of global change, the United States (the world’s number two carbon emitter) is still in stubborn denial of the need to adopt such carbon-cutting measures. To that end, China, the world’s biggest carbon emitter, plans to nudge the U.S. towards more action at a South African summit later this month. Expectations, however, are low.

As the Associated Press reported today:

Top international climate scientists and disaster experts meeting in Africa had a sharp message Friday for the world’s political leaders: Get ready for more dangerous and “unprecedented extreme weather” caused by global warming.

Making preparations, they say, will save lives and money.

These experts fear that without preparedness, crazy weather extremes may overwhelm some locations, making some places unlivable.

As a climate deal is unlikely soon and emissions continue to grow, the future is grim.

 

Thailand Flood Disrupts Global Supply Chain

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Thailand is underwater. The current flood is the worst the nation has faced in 50 years and hundreds have died. It’s a tragic disaster affecting millions, but it is also one that is having profound affects on the global supply chain.

For example, according to the global supplier database provider Panjiva (which had this interesting profile written about it last year), the United States imports more than one third of all its incoming hard drives from Thailand. And the reliance on these sales goes both ways: “By dollar value, hard drives are Thailand’s biggest export category to the United States — about $1.5 billion to-date,” says Panjiva.

They don’t provide precise numbers on the effect the flood has had so far — it is likely just too soon to know. But the disruption will be significant. Panjiva notes that the overall second quarter exports to the United States from Japan, which was hit by the most economically devastating disaster in history in March, fell 7% compared to the same period in 2010. Thailand’s economy is only 4% that of Japan’s, and the scale of disaster is hard to compare to the epic quake and tsunami that devastated an island nation whose $5.5 trillion 2010 GDP was the world’s third highest, but the effects will certainly be felt in parts of the tech world.

The number gurus at Panjiva have also detailed a few more of the economic products likely to be most affected: coconuts, shrimp, rice, pineapples and furniture. See the graphic below for a breakdown of how much each of these major commodities will affected by the floods.

 

The 5 Companies Hit Hardest by the Thailand Floods

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Thailand’s worst flooding in five decades has affected companies in every industry, from automotive to technology to pharmaceuticals and beyond. As we saw with the earthquake in Japan, it’s a company’s supply chain that is affected most when natural disasters strike.

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Thailand is a midsize country of 67 million people and its outsized importance in global supply chains is now becoming clear. Here are 5 companies most affected by the historical floods:

  1. Toyota — It seems as though any natural disaster affects this automotive manufacturer. Toyota announced today that it will suspend production at its plants in North American on Saturday, citing an interruption in the supply chain of some Thai-made components. Toyota plants in Indiana, Kentucky and Ontario, Canada, will be shut down until the situation in Thailand improves. As of last Friday, the floods had resulted in an output loss of 37,500 vehicles in the Southeast Asian country since Toyota idled three plants there October 10th. That number could potentially climb to 250,000 by mid-November. If that happens, it is estimated that operating profit could be reduced by $1.6 billion.
  2. Ford — On a conference call yesterday, Ford Chief Financial Officer Lewis Booth stated that the carmaker may lose production of 30,000 vehicles. Though Ford’s assembly plant is not affected, their supply chain is. The company said the Thai floods have cut fourth-quarter production so far by 17,000 vehicles due to supplier issues. That number could climb to 30,000. Ford said it is “working closely with its affected suppliers to return to production as quickly as possible and to minimize any potential impact in other regions.”
  3. Lenovo — The Chinese computer maker said yesterday that it expects its supply of hard disk drives to tighten “through the first quarter of next year.” Thailand supplies approximately 40% of the global output of hard disk data storage devices, meaning Lenovo is not the only company within the industry experiencing interruption issues. Western Digital and Seagate Technology have both said they expect to face a shortage of parts soon.
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    Because of this, Apple announced they expect a shortage in the coming months of disk drives for their products, specifically the company’s Mac lines, according to Apple CEO Tim Cook .

  4. Canon — The Tokyo-based company has recently revised its full-year financial outlook based on concerns about the impact of flooding in Thailand. The company said the Thai flooding will lower its sales and operating profit by Y50 billion ($660,000) and Y20 billion ($264,000), respectively, in the fourth quarter.
  5. Sharp — Having recently announced that the company is almost fully recovered from the business interruption it experienced after the Japan earthquake in March, Japan’s number one liquid-crystal display maker is now stating that the Thai floods may affect revenue.

    Although Sharp’s manufacturing facilities in Thailand weren’t damaged, the company’s inability to secure certain parts from suppliers hit by the flooding may result in tens of billions of yen in lost revenue, said Sharp Executive Vice President Toshio Adachi at a press conference.

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As companies scramble to obtain parts from other regions of the world, we are reminded that supply chain risk management is an often-overlooked segment of the discipline…until disaster strikes.