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The True Impact of Flooding on Businesses

If you watch the news about flooding disasters caused by storms, you often hear about the human toll the devastation caused. And while the economic toll is frequently mentioned, we don’t always get a clear picture of the financial ruin in the business sector.

In this post, we look at flooring’s true impact on businesses and what you can do to mitigate the financial and physical damage.

Flooding Impact on Business & The Community

Regardless of what you think about climate change, the fact is that climate disasters and extreme weather episodes are increasing. Whether it’s man-made or a cycle of nature, flooding is becoming a concern even in areas previously designated as low-risk.

The U.S. has sustained 332 weather and climate disasters since 1980, where overall damages/costs reached or exceeded $1 billion (including CPI adjustment to 2022. The total cost of these 332 events exceeds $2.275 trillion.

Furthermore, research published by the First Street Foundation shows there are approximately 729,999 retail, office, and multi-unit residential properties at risk of annual flood damage in the contiguous United States, and the number of buildings that could be affected will increase by approximately 8% by 2025.

When one thinks of flood damage, one typically thinks of structural damage. Currently, it’s estimated that the risk associated with structural damage caused by flooding is over $13.5 billion per year and will grow to approximately 16.9 billion by 2025.

However, besides the cost of structural damage, one must consider the economic devastation caused by flooding. Because retail and offices comprise a large chunk of our economy, one can see how slowing or stopping commerce due to a natural disaster can significantly impact communities and beyond.

Matthew Eby, the founder of First Street Foundation, which published an examination of commercial properties throughout the United States and analyzed their flood risk, said,

When we think about flooding in this country, we think about FEMA, and we think about the National Flood Insurance Program because that’s what’s reported out a lot. But really, a hidden risk that lies within flooding is around these commercial buildings because they represent so much more from an economic standpoint for the local community.

Business downtime caused by flooding directly and indirectly impacts the communities in which they operate. For example, when a business is forced to close due to flooding, they aren’t buying products or supplying goods or services. Furthermore, employees may be out of a job for several months or more, which means less money going into the local economy. When commerce shuts down, the effects ripple throughout the community and can be long-lasting, depending on the severity of the damage.

The problem with the economic impact on business resulting from flooding is twofold: Natural disasters and their destruction are difficult to predict, and many communities lack the infrastructure to effectively deal with these extreme weather episodes. While some companies choose to relocate their base of operations out of high-risk flood areas, others don’t have the option.

Homeowners can add layers of flood protection to mitigate flooding, such as gutters and flood vents, but municipal flood mitigation requires commitment, money, and a collective that agrees on what, if any, measures must be taken.

Additional Business Losses

Besides structural damage, U.S. businesses stand to lose billions as a result from flooding beyond repairing damaged buildings, including inventory, data loss, employee loss, and lost income. And, even if a business isn’t affected directly by water, they can still be impacted by storms from extended power outages or power surges that destroy electronics and electrical systems.

One must also consider how long it might take for a business to bounce back to regular output after a flood or natural disaster. In some cases, it can take months or years before a business returns to pre-flood capacity, which can mean millions more in lost revenue.

And, in extreme cases, some business never reopen after a devastating flood. According to the Federal Emergency Management Agency, nearly 40% of small businesses never reopen after a flood disaster, and up to 90% fail within two years after.

And, It’s Getting Worse

Before you think this is a case of Chicken Little screaming that the sky is falling, let’s take a breath and look at what the data says because it’s not pretty.

While many people look to climate change as the primary catalyst for the rise in extreme weather and flooding, there are many factors at play, including the aforementioned lack of infrastructure, dam and waterway management, and more homes being constructed on floodplains.

According to the EPA,

Flooding is becoming more frequent along the U.S. coastline. Every site measured has experienced an increase in total flooding since the 1950s. Since 2011, Boston, Massachusetts, has exceeded the flood threshold most often — an average of 13 days per year — followed by Bar Harbor, Maine, and Sandy Hook, New Jersey.

Regarding the impact to businesses, the Potsdam Institute for Climate Impact Research published a study detailing how extreme weather episodes have a ripple effect on global economies and that,

If they [weather extremes] happen simultaneously or in quick succession, even at different places on the planet, their economic repercussions can become much bigger than previously thought.

As you can see, increasing extreme weather episodes throughout the country and the world have the potential to significantly damage local and global economies. It’s crucial that people become active at the local level to push leaders to take the necessary steps to mitigate the effects of flooding and other natural disasters as much as possible to protect life, property, and commerce.


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