The Secrets to Making Catastrophic Loss Disaster Restoration Work for You

With each natural disaster, major crisis, and even global pandemic, the disaster restoration community mounts an unbelievable effort to mitigate catastrophic loss by preserving, stabilizing, and ultimately restoring billions of dollars of infrastructure and property. The calling is heard by a unique subset of restoration providers—seasoned, veteran contractors that have become accustomed to uprooting their lives on a moment’s notice, literally leaving their families and homes in the rear-view mirror for weeks and months on end. They abandon their normal daily regimen and dive headfirst into a world of slightly organized chaos, where expectations, demand, production, and exposure are escalated by several orders of magnitude.

Understanding natural disasters

Although each type of disaster presents unique challenges, responding to the aftermath of a major hurricane can present the greatest challenge. Unlike most major events, hurricanes can impact critical infrastructure over an extremely broad geography. They pack the potential for both substantial wind and flooding. According to Statista, tropical storms (which include hurricanes) caused more than $560 billion in damages in the United States from 1987 through 2017 (see Figure 1). This figure is more than five times greater than the damages caused by flooding, and more than 14 times greater than damages caused by winter storms.

Figure 1

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Compiled using data from the National Centers for Environmental Information and it shows how tropical cyclones have proven the worst US natural disasters over the past 30 years. Between 1987 and 2017, they caused just over 3,000 deaths and more than half a trillion dollars of damage. Severe storms have also had a devastating impact, causing nearly $200 billion of damage as well as 1,400 deaths. Data Source: Statista, 2021.

Hurricane intensity is also likely to increase over the coming decade. According to the United States NOAA NHC (National Oceanic and Atmospheric Administration National Hurricane Center), hurricane intensity closely mirrors sea surface temperatures. Significantly above-normal tropical storm activity from 2000 through 2010 (see Figure 2) coincides with a trending increase in sea surface temperatures (see Figure 3). Temperatures in the Atlantic Basin, and the Gulf of Mexico specifically, have been steadily increasing over the entire duration since monitoring data was recorded in the early 20th century (see Figure 4).

Figure 2

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This figure shows total annual Accumulated Cyclone Energy (ACE) index values, which account for cyclone strength, duration, and frequency from 1950 through 2015. The National Oceanic and Atmospheric Administration has defined near normal, above normal, and below normal ranges based on the distribution of ACE index values over the 30 years from 1981 to 2010. Data source: NOAA, 2016.

Figure 3

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This figure presents annual values of the Power Dissipation Index (PDI), which accounts for cyclone strength, duration, and frequency. Tropical North Atlantic sea surface temperature trends are provided for reference. Note that sea surface temperature is measured in different units, but the values have been plotted alongside the PDI to show how they compare. The lines have been smoothed using a five-year weighted average, plotted at the middle year. The most recent average (2011–2015) is plotted at 2013. Data source: Emanuel, 2016.

Figure 4

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Data source: NOAA, 2021.

Forecasts for the upcoming 2021 Atlantic hurricane season reflect the increasing sea surface temperature trend, among other factors. The tropical storm risk (TSR) 2021 Atlantic forecast, for example, predicts an overall number of 16 tropical storms in 2021, four above the 71-year normal of 12 (see Figure 5). The same forecast also predicts an accumulated cyclone energy (ACE) index of 127, a 17% increase in overall tropical cyclone energy from the normal of 105. In simple terms, this means that not only is the quantity of storms forecast to be above normal, but so are the potential storm durations and intensities.

Figure 5

The hurricane season officially begins June 1 and ends on November 30. Historically, the intensity and quantity of tropical storm activity peaks in September (see Figure 6).

Figure 6

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The Atlantic basin shows a very peaked season from August through October, with 78% of the tropical storm days, 87% of the minor hurricane days, and 96% of the major hurricane days occurring then (Landsea (NHC) 1993). Maximum activity occurs in early- to mid-September. Data Source: NOAA, 2021. 

Preparing to respond to a catastrophic loss event

Many in the water damage restoration industry have considered scaling up and mounting a response in the aftermath of a catastrophic (CAT) event as the sheer volume of potential work is an enticing proposition. Walking in blind, however, has been the death of many restoration firms. Roughly half of the contractors who participated in CAT events say they wish they never had.

That’s because there are numerous complications associated with CAT response, many of which simply do not occur when working typical projects. These can include establishing and managing a base of operations, financial burdens from over-extension and the logistics of remote mobilization. Identifying and maintaining adequate infrastructure and resources in the wake of a catastrophe is an art in and of itself.

Secret #1 – Resource management

Likely one of the greatest complexities, however, is managing people resources to do the work. Is your staff ready to leave their homes and families behind for weeks or months on end? How will you manage morale, housing, food, and the other basic needs to keep your team safe, healthy, and engaged? Take the great North Texas Freeze of 1990 as an example: The call came in just before Christmas that year, requiring those that responded to trade the holiday for several weeks away from home instead. These events aren’t planned, and it will be upsetting to many that are asked to mobilize. Anniversaries, birthdays, holidays—significant events in personal lives will oftentimes be missed.

Secret #2 – Financial risk

These challenges make performing in a CAT environment difficult. Many also create risk to the financial health of the contractor’s business. Especially when you consider that pulling significant resources from the home market can leave the base business vulnerable and may cause regular clients to use competitive businesses. They may find good service with your competition and you have lost them as a client.

So, how do those that deal in this space do so successfully? First and foremost, planning is key. Each and every CAT event is unique and will require specific preparation. Hurricanes, major freezes, earthquakes, regional fires, tornadoes, heavy rain, rising water, and flooding—some will impact area infrastructure and eliminate basic services like restaurants, hotels, etc. Some will not. Decide which types of events you will respond to and which ones you will not based on their unique requirements.

Investment must be made into the necessary infrastructure ahead of time, and relationships with suppliers of temporary labor, equipment, and other resources must be vetted and locked down. Consider utilizing those resources at some interval within the normal business; this will allow you to maintain the relationship and manage through the logistics and ensure the process will flow properly when it’s “go time.”

Secret #3 – Workflow and documentation

The list of resources to plan for is extensive. Take any given project in your local market and think through each step of the workflow. What is required to complete each task? How many people, what skill level, what equipment, and how much power? Document each asset needed to complete the step and then solve for how you would supply that asset away from your home market.

Resources to plan for start with people. Who is ready and willing? Will you compensate or bonus them differently for their work? How will you supplement your staff to meet the capacity? Equipment: Where will you source it? How will you power it? You won’t have house power in most cases and fuel will be a challenge—where will you source it?

Secret #4 – Legal risks

Lastly, look to the legal risks to your business. Licensing requirements, mold regulations, contract structure requirements, and other legal obligations should be reviewed by a business attorney familiar with the disaster area. Decide where you’ll respond, then secure the legal instruments and licensing necessary for that area.

Then, work to presell contracts whenever possible in your target markets. Consider responding only if you can secure an anchor project—a secured contract where you know you have the work when you arrive. This may require a dedicated resource to presell contracts in the off season, or to send as initial boots on the ground in the onset of the event. In either case, having an anchor project with a secure contract will alleviate much of the potential financial risk. Once you secure an anchor project, you can do “missionary” projects in the area for additional work. Your initial mobilization costs will be your highest ones.

Secret #5 – Little red flags, big impacts

But just because the work is there doesn’t mean you want to take it. Look for the red flags and be willing to turn down work. Look for customer issues such as difficult or impossible expectations or unrealistically demanding timelines. Look for financial flags. Building issues are also a warning sign. Do an inspection before entering a contractual obligation. Does the building have signs of chronic water, contamination, or other environmental issues that can lead to significant complications and risk? How responsive is the customer to their financial obligations within your contract, and what limitations are they suggesting or imposing?

Cashflow becomes a giant monster to manage in CAT response, and is one of the leading reasons that many who make an attempt end up failing as a business. At the end of the day, you must fund your response, and you must have a plan to manage an extended balance on accounts receivable. Ensure your credit lines and cash reserves are healthy, and that your systems to secure responsibility for payment are properly structured. Many go into an event with a residential mentality wherein the insurer is the customer. If you’re taking on commercial work in a CAT event, you must be very clear about who the customer is and get a contract. Consider running a credit report on the customer, especially for larger projects, and require stage payments to manage cash and exposure.

Then, when you do respond, be prepared to learn from the experience. It will be critical to be honest with your self-assessment. A CAT ‘postmortem’ at the end of a CAT season is crucial—what did you do well, what did you not do so well, and how does that translate to preparing for next season?

This blog post was adapted from a previous article by the authors.

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About the Authors

Throughout a 25-year career in the restoration industry, Brandon Burton has worked to support rapidly developing technology and industry best practices, with a passion for promoting the restoration industry’s continued growth in professionalism. Burton is the ANSI/IICRC Standards chairman, an approved IICRC instructor, and has provided training and consultation to more than 10,000 water damage restoration professionals. He is also a published author in the field. Burton is the Vice President of Technical Application for Next Gear Solutions, LLC, and formerly held the position of Technical Director for Legend Brands, managing the largest and most experienced training team in the restoration industry. He is also a past member of the RIA (ASCR) Restoration Council.

A highly regarded writer, speaker, and instructor, Mickey Lee has more than 40 years of experience in the restoration industry in fields as diverse as operations, management, training, consulting, and writing where he specializes in property damage restoration, psychometrics, drying science, temporary climate control, commercial construction, and structural drying services. He has extensive experience serving on and leading multiple committees and task forces: he helped develop and now serves as the committee chair for the IICRC’s Commercial Drying Specialist certification; and also currently serves on the consensus body for the IICRC’s S500 and S550 standards. Past committee work includes the S500 Standard for Professional Water Damage Restoration, the advisory committee of RIA’s Water Loss Institute, and the task force for the development of the Body of Knowledge for the Water Loss Specialist (WLS) certification program.

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