BT EXCLUSIVE

With more floods, call for better business continuity umbrellas

Singapore

AS climate change causes more flash floods in Singapore, companies need to come up with better business continuity plans so they can, among other things, continue operating offsite and protect their assets.

In addition, experts say businesses should also look into measures to prevent floods.

Business Continuity Management Institute president Goh Moh Heng said that as Singapore's landscape becomes more built up and the country faces more intense weather conditions, companies should ready themselves for more flood events.

"Company operations located in flooded areas could be severely impacted as access to these areas would be cut off from employees, suppliers and customers," he said.

Louis Gritzo, vice-president of research at FM Global, one of the world's largest commercial property insurers, said flash floods are "the single biggest threat" to Singapore businesses from climate change.

"When it rains hard, it can overwhelm drainage systems...That water can significantly damage property and cause business interruptions," he told The Business Times in an interview. "It can make it more difficult for employees to come to work because they're at home taking care of their own problems or sometimes just the water itself can be difficult to get through."

Singapore is expecting rains to become more intense and for these to occur more frequently as the world gets warmer. The annual maximum hourly rainfall has risen from about 80mm in 1980 and 90mm in 2016.

The number of days that Singapore experienced flash floods each year has gone from a low of six in 2015 to 10 in 2016, and 14 last year, according to data from national water agency PUB.

Already, the government has spent $1.2 billion on drainage improvement works since 2011. It is pumping another $500 million into a massive upgrade of the country's drainage network, but has also said these drains cannot be expanded to cater to extreme events due to land constraints and cost considerations.

Besides widening and deepening drains, it has since 2014 required property developers of large sites to control the water run-off from their development into the public drainage system. In 2011, the minimum platform and crest level requirements for new developments were also raised to provide additional flood protection.

But the private sector itself appears to have done little to deal with the problem, said observers.

Flood prevention work can be extensive, running the gamut from rain-proofing properties to reviewing the supply chain.

The former includes ensuring that the building's roof can hold large volumes of water, that windows are well sealed, and that there are adequate water drainage systems in underground structures, said Dr Gritzo. In some cases, pumps may be required to remove water from these places such as carparks.

"It's very important for property owners to make sure there's a site specific risk assessment for their properties."

Businesses should also start thinking about raising valuable equipment, such as data centre servers or computers, out of basements and low-lying areas, he added.

The very least they should do is to have a flood emergency response plan so that operations can continue as normal when floods occur.

Dr Goh suggested that companies should also look into alternative operational processes to support their employees, suppliers and customers.

His company, which specialises in business continuity management consulting, was almost a victim of the floods in January, he shared. "But because we have a plan that allows our employees to work from home, customers to call our office and redirected to our phones, the incident didn't affect our daily activities."

Besides protecting properties from damage, companies would do well to prepare for the impact of extreme weather events on their supply chain.

This is especially so if the business relies on trade, said Wilson Ang, executive director of Global Compact Network Singapore (GCNS), the local chapter of the United Nations Global Compact.

"The logistical impact will be there, which results in increased costs. This may also result in higher insurance premium needed to cover the increased frequency of the impacts of climate change," he said.

A few forward-looking companies - including an insurance company, import and export enterprises, and retailers - have approached GCNS to review their business model, he told BT.

In the longer term, Singapore businesses, especially those sited in coastal areas, will face risks in rising sea levels. By the last few decades of this century, sea levels in Singapore are projected to rise between 0.25-0.76 metres and daily average temperatures by 1.4-4.6 deg C, compared to the period of 1980-2009.

Dr Gritzo noted that sea level increases vary in different climate forecasting models, making it a challenge for policymakers and businesses like ports and those with coastal properties to plan.

"Does Singapore want to protect from the most extreme case? The downside to that is it comes at a big cost," he said. "(It) is going to be a financial and economic burden to protect against something that you're not sure is going to happen, or it may not happen that way at all."

He recommends instead to keep an eye on the rate that sea levels are rising for now, and to start taking "very, very serious" actions when sea levels start changing quickly.

There are also other climate change-related risks for companies, including regulations and a change in social behaviour.

Mr Ang noted that Singapore will be implementing a carbon tax from next year. With the Paris Accord in place, more will follow suit, he said.

At the same time, there is growing awareness among consumers about the role they play in helping the society to be more sustainable.

"These changes in behaviour could soon translate into smaller profits for irresponsible businesses," he said. Manufacturing companies that refuse to pursue carbon footprint-reducing strategies, for instance, could cause investors to lose money, he added.

Deloitte sustainability leader in Southeast Asia Mohit Grover said Singapore companies are starting to improve their process in managing sustainability risks, especially after the Singapore Exchange made sustainability reporting mandatory.

"However, similar to the trends seen globally, they are overconfident in their abilities effectively manage such risks at an operational level."

READ MORE: No rise in claims for flood damage, say car insurers

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