With the hottest year on record now behind us, and facing the possibility of 2024 being just as hot, preparing for extreme cold conditions may be the last thing on businessowners’ minds. However, even though the world is getting warmer on average, winter storms and associated freezing temperatures can still cause catastrophic damage. What actions should businessowners take to prevent their organizations from this exposure?
In this article — first in a two-part series — we discuss the major risks associated with winter storms and how to mitigate them.
In recent years, we have seen some typically warmer areas hit hard by winter storms, which have caused billions of dollars in losses. For example, in February of 2021, the US experienced its costliest winter storm event on record, costing over US$26 billion. At its peak, nearly 10 million people were without electricity.
While businesses located in colder climes may assume they are already well prepared for plummeting temperatures, winter storms can still catch businesses by surprise and potentially cause significant damage and lengthy disruptions.
What are the major risks associated with winter storms?
Even companies that suffer minimal to no property damage from a major winter storm that has hit their area may still experience correlated financial losses, reputational damage, and business interruption challenges in recovering from its impact. While not a definitive list, below we have outlined some of the most pervasive exposures businessowners face.
- Grid stress:
Winter storms can produce strong winds, freezing rain, heavy snowfall, and freezing temperatures over a wide area which can damage critical infrastructure, such as power lines. However, extreme cold alone can be enough to overload the power grid. Electricity generation may experience significant strains during winter storms which slows down supply during a time of increasing demand. Additionally, frigid temperatures will likely cause more people to rely on electricity for warmth, further stressing the grid.
Businesses in these scenarios will likely experience disruptions in operations, leading to losses of revenue, along with the potential for property damage. Even mostly remote-based operations could be hindered by blackouts impeding their communication systems.
- Transportation challenges:
Winter storms can disrupt transportation and logistics, especially in typically warmer regions where local government entities may be ill-equipped to deal with snow and ice removal. This can give rise to the following issue
- Supply chain disruptions. Businesses may face delays in transporting goods and materials, impacting production and services.
- Inability to meet customer demands. Reduced production capacity and customer foot traffic due to harsh winter conditions can result in a loss of business.
- Employee absenteeism. Severe winter weather can lead to transportation challenges for employees, resulting in absenteeism. Additionally, due to school and childcare closures, even employees with work from home capabilities may experience lower productivity.
- Structure and content damage:
Perhaps the best-known risk from frigid temperatures is frozen pipes. When temperatures plummet, the water inside pipes can freeze and expand, which may cause them to burst. In addition to damaging the pipes themselves, this can lead to water and moisture damage to the building and its contents while also causing lengthy business interruption. Frozen pipes can also cause essential fire protection equipment such as sprinkler systems to be out of service, leaving buildings vulnerable to the risk of a fire.
Accumulation of snow and ice on roofs can pose a risk of structural damage or collapse, especially in areas where roofs are not designed to take the load of excessive snowfall or ice accumulation. This risk is particularly concerning for businesses with roofs of differing elevations or near large roof-mounted equipment.
- Equipment malfunctions:
Cold temperatures can greatly affect the performance of machinery. Equipment operating outdoors are more prone to component failure and are subject to additional wear and tear. Moreover, certain fuels and oils used in equipment perform poorly in the cold and might become inoperable. Batteries also experience significant drops in efficiency and capacity in the cold. For example, lead-acid batteries could experience a 50% reduction in capacity at -15°C (5°F).
How can businessowners better protect their organizations?
No matter where they are located, businesses should take precautions to ensure they are prepared for winter storms. Even minor storms and freeze-ups can be expensive and interrupt operations. As the frequency and severity of winter storms can vary drastically from region to region, as well as the capacity and capability of local government to effectively handle it, organizations should first conduct a risk assessment to quantify the potential impacts of winter storms on their physical assets, supply chain, and networks.
From there, businesses can design a risk management program to help ensure employee safety, maintain essential functions, and limit damages and losses caused by winter storms. It should outline specific actions to prepare the business for colder temperatures. Among other items, your risk management plan should include taking the following measures:
- Facility maintenance:
Inspect the property, including roofs, gutters, and windows, to identify and address vulnerabilities that could be susceptible to damage during winter storms.
Insulate or apply heat tracing to pipes, particularly those located in exposed or outdoor areas, to prevent freezing.
Check heating equipment to make sure all internal building areas can maintain a minimum temperature of 4°C (40°F) to prevent pipes from freezing.
- Backup power sources:
Install backup power sources, such as generators, to help ensure essential operations can continue during power outages caused by winter storms.
- Supply chain resilience:
Diversify suppliers and assess the resilience of the supply chain to potential disruptions caused by winter storms. Have contingency plans for alternative suppliers or transportation methods.
In addition to the above actions, below are human element measures you can take to reduce the impact of winter storms on your employees and customers:
- Snow and ice removal plans:
Develop a plan for snow and ice removal, especially for walkways, parking lots, and other essential areas. Have contracts in place with snow removal services if necessary.
- Communication plans:
Establish communication plans to keep employees, customers, and suppliers informed about any changes in business operations due to winter storms. Utilize multiple communication channels for redundancy.
- Employee training:
Train employees on winter safety procedures, including how to navigate icy surfaces, use snow removal equipment, and respond to emergencies related to cold weather.
- Vehicle and equipment winterization:
Ensure that company vehicles and equipment are winterized and equipped to handle colder temperatures. This includes checking antifreeze levels, tire conditions, and battery health.
- Remote work policies:
Consider implementing remote work policies during severe winter weather to ensure the safety of employees and maintain business continuity.
- Community engagement:
Establish relationships with local emergency services, weather agencies, and neighboring businesses. Collaborate with the community to share resources and information during weather-related challenges.
Be sure to periodically review and update the winterization plan to account for changes in the business, infrastructure, or climate conditions.
Ensuring your business is prepared for winter storms may seem labour intensive, but it can be well worth it. For more information on how you can protect your assets from freezing up, check out this article, or contact your Marsh representative.
In our next article, we will focus on how the risk of winter storms will likely change in the next 30 years, as well as how businesses can increase their resilience.