Flood Risk Preparation: Consider Your Supply Chain and Revisit Insurance Coverage
Recent flooding in Louisiana and West Virginia serves as a reminder of the property damage such events can cause. But for retailers, food and beverage companies, and others, the risks go beyond destruction of property. Flooding can also interrupt supply chains and damage goods, including some that have yet to make it to your location.
Manage Your Supply Chain
Flooding is the number one natural disaster in the US, so completely avoiding exposure is virtually impossible. But understanding your supply chain can help minimize the impact on your operations. Steps you can take include:
- Fully map your supply chain. You may know the address of a company you work with, but do you know where the goods are actually shipped from? Knowing the specific locations of suppliers — and their suppliers — can help safeguard your supply chain by, for example, finding alternate suppliers in an emergency.
- Prioritize the goods and services needed to remain operational and those that will be in high demand from customers. Depending on your business and the nature of an event, some things may be more useful than others in the immediate aftermath, including non-perishable food, water, and clothing, or debris removal and building supply services.
- Consider human capital. Even if your supplies continue to be delivered in a timely manner, will you have enough manpower to keep the business running if your people are affected by a disaster?
Review Your Insurance Coverage
In addition to property “all-risk” and flood insurance policies, some businesses — for example retailers and food and beverage companies — should consider purchasing marine cargo insurance. While property and flood insurance generally protect stores, warehouses, and other locations, they may not always cover the goods that you sell — including those in transit.
A stock throughput program (STP) under a cargo policy can provide broad coverage for goods in transit as well as for stock and inventory already at your locations. Such a policy often includes a “control of damaged goods” clause that can keep products from being resold on a secondary market. Through an STP program, businesses may gain access to a cargo claim advocacy group or other assistance to salvage goods and determine if products are still salable.
In general, an STP will have a much lower flat-dollar deductible for catastrophic loss compared to a property policy that uses a percentage. Another way to think of it is that STP is laser-focused on inventory, and property takes a more comprehensive view.
Start Preparing Today
Remember flooding and other disasters can happen to any business at any time of year. Preparation is the key to mitigating your risk.