The United States has a flood problem. It is now the most common natural disaster in the country, with at least one flood occurring nearly 300 days per year, on average, since 2000, according to an analysis by The Pew Charitable Trusts.
It affects more areas too, as floods are no longer confined to coastal locations. According to data from the Federal Emergency Management Agency (FEMA), 99% of U.S. counties are impacted by flooding. Based on the National Oceanic and Atmospheric Administration (NOAA) database, all 50 states and the District of Columbia experienced a flood in 2021. While the inundation is typically attributed to hurricanes, The Pew Charitable Trusts found that ice melt, rapid snow, heavy rains, and other events can cause flooding as well.
Floods can cause damage to homes and infrastructure that people use daily, including roads and public buildings. They can cut off communities and leave people trapped there in mental anguish and emotional distress. Then there’s the issue of financial losses not only for families and local communities but businesses as well.
For example, should a commercial building suffer a flood by a storm or broken pipe, they need to begin cleanup right away before mold starts to grow and so that they can get back to work.
Translated to dollars, floods cost billions! In 2023 alone, the NOAA National Centers for Environmental Information (NCEI) U.S. Billion-Dollar Weather and Climate Disasters (2024) states that floods due to river basin overflow or urban flooding from heavy rain caused $9.2 billion in damages and economic losses, representing about 10% of the total $92.9 billion for all disasters. This doesn’t include inland flooding due to tropical cyclones, which caused nearly $200 billion from 1980 to 2023.
Backtrack several years, the government has spent more than $850 billion on floods since 2000, according to the non-profit Flood Defenders. This figure represents two-thirds of the cost from all natural disasters.
Effects of Flooding on Businesses
Inundations not only cut off entire communities but also impair local economies, causing people to lose their livelihoods. For businesses, in particular, floods are bad news. Not only will they have to deal with property damage but business interruption and other losses as well.
Damage to assets and property
Aside from the inability to operate in a commercial building during or after a flood, inundations can also cause damage to the building or facility. With around 730,000 commercial buildings facing the risk of flood damage in the country, it is no wonder that nonprofit First Street Foundation and global commercial engineering firm Arup projected structural damage from floods to cost $13.5 billion in 2022 up to more than $16.9 billion in 2052.
In particular, if your business keeps inventory, a flood can ruin them easily. Your machinery, equipment, and vehicles can also e damaged or destroyed by the floodwaters too. If they can’t be restored or repaired, business assets will have to be replaced, which means more money going out instead of going in.
Loss of data
Floods can also cause possible loss of important data, thanks to water ruining computers and servers. If you have no backup in another facility that wasn’t affected by the deluge or in the cloud, it might be next to impossible to retrieve those lost data.
Disruption in operations
When your business is affected by a flood, there’s the issue of putting a stop or pause to operations, as your facilities and assets can’t be used for days, weeks, or longer. This leads to downtime and lost output. According to Statista, downtime caused $23 billion in 2022, which is equivalent to several hundred thousand days of a halt in business operations. Downtime can result in a loss of output leading to lost revenue. According to Statista, floods caused nearly $27 billion in terms of lost output in 2022, which is only expected to increase come 2052 to nearly $30 billion.
Business disruptions might also cause certain contracts or agreements to be cancelled. If this happens to be a big client, then it would be a huge loss. In addition to lost revenue, what’s worse is if this failure to fulfill orders or meet customer demands lead to a drop in your reputation which you’ve built for a long time. Once damaged, reputation is hard to restore.
Not only will your business be unable to produce or earn anything for days, weeks, or longer, you’ll also have to think about cleanup, restoration, and repair. Prolonged water exposure can wreak havoc on your building, equipment, and other assets. All of these will make you dig deeper in your pocket. Expenses pile up but business operation is at a standstill, which means your bottom line is sure to get a hit.
In addition, if your business operates in flood-prone areas, then you might have a hard time getting affordable insurance premiums, if you can find any at all. Insurance companies have been known to flee from risky locations, as what has happened in Florida which has an “insurance crisis,” with several insurance companies leaving the state. Those that are left behind either increase their premiums or lessen their coverage. In any case, this is clearly disadvantageous for your business.
Possibility of closure
With all of the above combined, it’s easy to see why FEMA says that only 25% of businesses that open after a disaster fail within a year. What’s worse, studies show that 40% don’t open at all, i.e., close permanently, after a disaster like floods. Closing shop is clearly a big possibility for business that get hit with flooding.
Protect Your Business from Floods
With all of the possible negative effects of a flood on your business, it might be tempting to just close up shop. But, if you play it right, your business can survive floods and even thrive. By developing a business continuity strategy, you’ll be able to adequately plan and prepare for the worst. In the case of floods, being prepared is key to your business’ survival.
How Floods Affect Businesses
In addition, if you operate in a flood-prone location, monitoring forecasts is an easy but highly informative plan of action. You’ll be watching out for how incoming weather can affect your business and, coupled with your business continuity plan, act accordingly.