How to build resilience through property construction (part 2)

The most successful businesses know that insurance is only half the answer when it comes to property damage: careful planning at the outset can reduce losses and improve business continuity. In the second of a two-part feature, Russell Kirby of FM Global, gives practical advice to achieving resilience through best-practice property planning.

Once a business understands the importance of appropriate planning and has identified their key areas of exposure (see part 1), they must think about the practical steps that need to be taken to incorporate resilience within the stages of specification, design and construction in both new projects and regenerated buildings.

The following three questions need to be answered:

1.     Where is the building located and what are the risks associated with it?

In the UK, for example, one of the most prevalent natural hazard risks is flooding. Facilities located in a published flood zone are five to seven times more likely to experience flood causing damages of £50,000 or more, than to suffer a fire or explosion of a similar magnitude. Our research shows that if you are unprepared, a flood could cost your business an average of £2.1m in property damage. It is critical to be aware of how much warning time you may have, how deep the floodwater is likely to get, what the impact of fast moving floodwater may be and how long it will take to recede.

2.     What is the building made of?

If you know the building material of your commercial property, or alternatively, what is going in it, then you can develop criteria for protecting and mitigating various risks. For example, fire is the leading cause of loss in commercial property facilities. Taking some simple steps can make a huge difference to business continuity. For instance consider the following:

• Ensure suitable construction: when a building contains highly hazardous processes or is several stories high, fire-resistant material, such as reinforced concrete or a protected steel frame should be used. Approved and tested materials should also be chosen for insulating wall panels and Heating Ventilation and Air Conditioning (HVAC) systems. The possibility of property loss can also be reduced by subdividing large areas of a building with firewalls.
• Install fixed protection where needed: appropriate automatic sprinklers should be installed wherever there is combustible construction, material or processes related to the type of occupancy. Additionally, sprinkler systems should be properly inspected and maintained, initiate and transmit to an alarm-monitoring system, and have an adequate water supply. Some companies may think that retrofitting their facility with sprinkler systems will require a big capital investment, but this is not always the case.
• Ensure special hazards protection: well-protected facilities isolate ignitable liquid operations by distance or construction, often in a detached location, or at least in a carefully located and designated cut-off area within a main building.
• Implement ongoing fire prevention programmes: regular, recorded inspections of fire protection equipment should be ensured, including physically testing locked or sealed sprinkler valves. Inspections could include housekeeping, ignitable liquid handling and control of smoking. During inspections, the condition of extinguishers, fire hoses, hydrants, sprinkler alarms, fire pumps, water supply tanks and fire doors should be checked regularly.

3.     What is the purpose of the building?

Loss prevention plans should be different depending on whether the building will be used for office or manufacturing purposes. In both cases, however, it’s important to implement relevant good housekeeping programmes, which involve all employees and include frequent cleaning, prompt waste disposal and proper material-handling practices – especially in large storage areas.

Every building, whether an office or a manufacturing facility, should have an emergency response team (ERT) to address emergencies that are specific to the building – whether that would be fire, explosion, hazardous material spillage or a nuclear accident, or natural hazards such as hurricane, freeze, earthquake and flood. Businesses should think about appointing a person in charge of the ERT to develop and maintain a written plan; be familiar with all facilities and any inherent special hazards; know the care and operation of all protection systems; and ensure appropriate employee training.

No company can afford the loss of property and productivity. Equipment damaged in minutes can take months to repair or replace. If there is business interruption, revenue, share price and shareholder confidence all take a major hit. Market position may be lost. Inflation and material shortage may make rebuilding difficult and costly.

Therefore, the best property risk management programmes begin with loss prevention. Taking loss prevention into account during the early stages of specification, design and construction in both new projects and regenerated buildings, is what makes a business resilient. And it is our responsibility as insurers to help protect the value created by our clients’ businesses by assessing and engineering risk to prevent and mitigate loss across their property portfolio. 

Russell Kirby is group manager account engineering at FM Global. Read part 1 of the article here.