LOUIS GRITZO, VP and manager of research for FM Global, believes that the increase in the production of loss-prevention products is a sign that businesses are looking to reduce their risk based on the assumption that climate change is affecting their operations today and will do so in the future.
Louis Gritzo is vice president and manager of research for Johnston-based FM Global, one of the world’s largest industrial and commercial property insurers and Rhode Island’s largest private company. He oversees the company’s team of 115 scientists, engineers and technologists who conduct risk assessments and loss prevention research. He joined FM Global in 2006 and has more than 20 years of research experience. Gritzo has a Ph.D. in mechanical engineering, with a minor in applied mathematics, from Texas Tech University.
PBN: Rhode Island leaders are intensifying their focus on climate change. You were a speaker at a state legislative briefing on the topic in February, offering your expertise on “Protecting Investments by Preparing for Natural Disasters.” What have you found is the overall perspective of the large businesses FM Global works with, as far as investing in preparations for climate change and natural disasters?
GRITZO: The level of awareness when it comes to flood hazards has recently increased, starting with the 2011 floods in Thailand – which sent shockwaves through the global supply chain, and more recently with Superstorm Sandy. FM Global is working with our clients to overcome a disconnect in understanding the actual risk. There is a mistaken notion that a 100-year flood only happens once every 100 years. The reality is a 100-year flood zone has a one-in-one hundred, or 1 percent, chance of flooding every year. If you consider the average life of a commercial building is about 40 years, there is a one-in-three chance throughout its lifetime that it will flood, if it is located in a 100-year flood zone. As you can see, changing the mindset is the first hurdle in getting businesses to prepare, especially since this past hurricane season was a quiet one. Complacency sets in quickly.
PBN: What are FM Global’s risk-assessment guidelines based on what many scientists consider the increasing pace of climate change?
GRITZO: FM Global works with clients to protect their business to the 0.2 percent, commonly called the 500-year, flood level. As climate science continues to evolve, our recommendations will keep pace. To date, our loss prevention engineering and certification standards continue to demonstrate their effectiveness in protecting our clients’ property, in turn making them more resilient to property loss and business interruption.
PBN: In working with FM Global clients around the world, do you see businesses in any particular country or region investing more in modifying their facilities, rebuilding or even relocating to meet the expected impacts of extreme weather, flooding and other natural disasters considered to be impacts of climate change?
GRITZO: More often than not, businesses are moving into harm’s way – rather than out of it. Globalization is driving our clients to emerging economies to seize new opportunities. This growth is expanding urban areas and changing the natural landscape. The result is more value at risk, often in areas where the hazards are not well-known. To address this issue, FM Global has a global flood mapping initiative in progress to develop maps at varying levels of detail for areas of the world where data are inconsistent or incomplete. This resource will be invaluable to our engineers and clients, since designing for resilience to natural hazard risk is best done when locating a building or expanding a facility. While retrofitting is an option as well, it’s typically much harder and more expensive.
PBN: How do you see the pace of investment among Rhode Island businesses in preparation for natural disasters? Has it picked up at all in the past year or two?
GRITZO: One effective way to gauge investment is to look to the sector of manufacturers producing loss-prevention products. There’s been a noted uptick in new, innovative solutions for flood protection since Superstorm Sandy. This is a valuable leading indicator of businesses’ growing appetite for risk reduction. We’ve seen it too. In the past year, our team has tested and certified more than two dozen new products that effectively protect against flood hazards.
PBN: What are the three priority investments you would advise for businesses, particularly in Rhode Island, to minimize as much as possible the impacts of climate change?
GRITZO: The first one requires no capital investment – every business should have an emergency response plan which outlines the actions for employees and operations to respond to, and bounce back quickly, from a perspective storm. This plan should be part of the overall enterprise risk management goals. Secondly, valuables – relocate key equipment that is susceptible to damage to greater than 0.2 percent, or 500-year, flood elevations. Consider putting this action into your maintenance or capital improvement schedule so it can be done cost effectively. Thirdly, if you still have significant flood exposure, block your openings using perimeter or entry barriers and include their implementation in your emergency response plan. These investments are important. FM Global has found that average natural hazard losses are 28 times lower for companies with strong risk management practices. Resilience is your return on investment.