International property insurer FM Global says directors must mitigate the risks associated with idle properties due to COVID-19, such as theft, vandalism and water damage. An up-to-date response plan could soften the blow of potential damages.
Insurer FM Global is warning that managers and directors need to mitigate the risks of vandalism, theft, fire and water damage while their facilities are lying idle.
Properties such as retail, airports, hotels and entertainment venues as well as offices are lying idle around Australia thanks to coronavirus shutdowns. And with fewer people on site to notice problems, risk increase, says Lynette Schultheis, Operations Senior Vice President, Regional Manager — Australian Operations at FM Global.
“Perhaps you could have a water main break. Because you have no-one on site, they don’t recognise it has broken and now you have water damage to your facility,” says Schultheis, by way of example.
“That could go unseen or unknown for quite some time and cause much more substantial damage than if you had someone on site.”
Cyclones are a common risk that get forgotten when businesses in Northern Australia shut down facilities. “You may not have anyone there to prepare to shut the windows, to close the doors — whatever you would normally do at the facility when you knew a cyclone was approaching.”
Schultheis notes that these sorts of incidents in facilities have consequences that go far beyond repair costs. Such crises — and how well the company mitigates and manages them — are closely scrutinised by investors. And their perceptions are reflected in the share price.
You can’t afford to have a misstep, especially during this time... you can’t afford to lose your market share once you’re able to get back up and running at full capacity.
The first step in mitigating the risks is for a company to ensure that its security and maintenance personnel are considered essential workers. This means they can keep attending the premises regardless of COVID lockdown rules. “Investors don’t just see it as bad luck when a mishap occurs, they see it as bad management,” says Schultheis.
Companies need to have an emergency response plan and it needs to be kept current.
“What we see many times is that the plan does not get practised or updated,” she says. “Or for instance, you have a situation where you don’t have all of your staff on site, you’re operating with a split staff. That one person with the authority to make the decisions is not there.”
FM Global has consultant engineers who can advise policyholders on how to mitigate risks.
Along with risks, idling of facilities also brings the opportunity to catch up with essential maintenance and ensure the facility is ready to run at full capacity once restrictions have come to an end — so the company doesn’t lose market share to better-prepared competitors.
“You can’t afford to have a misstep, especially during this pandemic time,” says Schultheis. “Because you can’t afford to lose your market share once you’re able to get back up and running at full capacity.”
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