Historic Flash Floods in Europe Prove the Urgency of Supply Chain Risk Awareness

The Resilient Enterprise

Natural disasters represent an elementary threat to the supply chain. Unfortunately, they can hardly be predicted with great accuracy. Therefore, organizations only can be better prepared for severe weather events with real-time information.

Table of Contents

1. Extreme weather increasingly unpredictable

flutkatastrophe-in-monreal

Terrible weather and disasters have struck regions around the world with increasing force in recent years. These include tsunamis in Southeast Asia, and hurricanes and tornados in the United States. Many of these locations are braced for the seasonal recurrence of such events. However, many companies and communities are underprepared for the weather’s severity and resulting destruction.

The rising incidence of natural disruptions in areas that are not accustomed to them puts a new light on the importance of understanding risk. For our riskmethods colleagues based in Munich, the intensity and scale of the recent flooding in Germany, Belgium, and the Netherlands hits closer to home. In this blog, we look at factors that contributed to the devastation in Europe, and how companies can prepare for and anticipate natural hazards, so as to prevent the worst damage.

2. Lack of preparedness for risk events

In mid-July, rain dropped as much as 15 centimeters (nearly six inches) of rain in 24 hours in parts of Germany. People and businesses were put into harm’s way with an unprecedented a sense of incredibility, bewilderment or unbelievability. For those facing the aftermath today, nearly two hundred lives have been lost. Hundreds more have lost their homes and livelihoods. Criticism that communities were not prepared, and reacted too slowly, has become louder.

3. Inability to anticipate threats

flutkatastrophe-ahr-fluss

Similar to the rare cold snap in Texas, not understanding what can be predicted only increases the impetus to have better tools. These can bring clarity when the weather, or other threats, evolve so unpredictably and quickly. Until scientists improve the accuracy of predicting such unforeseen events, businesses and societies will have to rely on data available today. Data demonstrates the pervasiveness of these events, and makes it that much easier to measure the impact.

4. Need for prevention and risk mitigation

The cost of disaster only makes prevention that much more important. For instance, Reuters reports that German insurers expect up to €5.5 billion ($6.5 billion) in storm claims alone. By 2100, flood damage on the wider continent could cost as much as €48 billion per year—up from €7.8 billion now— ($56 billion /$9.2 billion) if nothing more is done to prepare. The number of people affected could more than double, to some 350,000, according to the European Commission’s Joint Research Centre.

Yet there are ways that companies can anticipate, manage, and prevent the inevitable damage from unpredictable weather events. With The riskmethods SolutionTM businesses, and in turn local communities, can improve their insights into unforeseeable events.

5. Flash floods and their consequences

The recent devastating European floods demonstrate a confluence of factors. Global warming and its impact on human life and business at large are increasingly felt. And effects are potentially even larger in areas not accustomed to disruptions due to natural events.

By looking deeper at the disaster in Germany, we can see some of the major consequences that natural disasters can have on supply chains:

  • Around 600 kilometers (400 miles) of train rails are affected, and some 50 bridges
  • Essential transport roads are blocked
  • Companies start declaring force majeure, for example, steel producer Thyssen Krupp Stahl

6. How to prepare, anticipate, and prevent

In this regard, specific to the floods in Germany, The riskmethods Solution created 32 flash flood alerts for different regions within three days. Our customers received warnings based on geographical locations of their supply chains. This included their suppliers, but also logistics hubs, enterprises’ own locations, and customer sites. During this time, The riskmethods Solution enabled customers in other ways as well:

complex_supply_chains__1_

  • Be risk aware As the flash flood covered different parts of Germany, our interactive world map was able to show exactly the regions facing operational limitations. The riskmethods Solution also covers risk events on a regional level, which reveals diverse intensity of risk events.
  • React faster The riskmethods Solution creates real-time warnings for a precisely defined area, and then identifies all risk locations in that area. This is exactly how we could precisely inform our customers about their specific risk situation during the flash flood. And risk identification and assessment include all risk objects in the defined area. Suppliers, but also logistics hubs such as ports (sea and air), companies’ own manufacturing sites, customer sites, and supply paths are monitored. This means that many more individual risk locations were affected than regional flash flood alerts created.
  • Be proactive: By continuously monitoring the risk situation, The riskmethods Solution can warn of subsequent threats. For example, the increase of suppliers in this area that declared force majeure, disasters at business partner sites, or negative revenue and growth outlook alerts.

Finally, long after the disruption is over, a cumulation of other risk events can be used as predictive pattern. These can indicate financial risks such as bankruptcy. Or other severe limitations can pose reputational risks in keeping the business in common operational and ethical performance.

7. Conclusion

Extreme weather events are becoming more unpredictable, both in their force and location. Tragically, the floods in Europe were followed by record rainfall and a floodwater crisis in China. According to data we’ve collected at riskmethods, about 10% of all risk events in the supply chain are attributed to natural hazards.

When faced with disaster, danger, and potentially huge damage, supply chain risk management is critical. With The riskmethods Solution, you identify natural hazard risks, among other threats, and have clear disruption assessments and mitigation plans in place for addressing them.

riskmethods Risk Report 2021

Did you know that flash floods were among the top ten risks in 2019 and 2020? Download our report to read about risk trends.
Back to top