Hurricane Ian made landfall in Florida last week as a Category 4 storm with 150 mph winds, just shy of classifying as a Category 5. Insured losses are estimated at anywhere from $30 to $70 billion, but it is still too soon to know the exact economic damage. Florida's tourism and hospitality sectors, citrus production and phosphate mining businesses are likely to face lengthy disruptions.
"In the current macroeconomy, things like home values and construction pricing are really in flux," Chuck Watson, founder of Enki Research, which uses computer modeling to calculate the impact of natural disasters, told CBS MoneyWatch. "When trying to figure out the cost of recovery, that's forward-looking. So, you have to take into account interest rates for reconstruction loans and other variables."
The rebuilding process following Hurricane Ian is expected to be slower and more expensive than usual, as labor shortages and inflation continue to wreak havoc in the construction industry. "… already strained supply chains may make obtaining critical repair and rebuilding supplies or raw materials difficult and more expensive, hindering your ability to conduct normal business operations and serve your customers," reads a report from Marsh. "And even companies that did not experience physical damage could have their post-storm operations disrupted due to supply chain issues. Your critical suppliers, or their suppliers, could have experienced damage or have their operations interrupted."
Jay Tenney, managing director of Trade Risk Group (Irving, TX), explained economic strain on customers will not be seen immediately. "History is a good way to look at this, like Katrina," he said. "Some companies will go under, and we will need to be prepared. If you have customers in that area, I would communicate with them as soon as possible—it comes down to communication."
As a credit professional, it is crucial to stay vigilant when a natural disaster strikes. Kurt Sorensen, CCE, CEW, CICP, credit and collections manager at Entergy (New Orleans) recommended the following tips in a previous eNews article:
- Call your customers and employees immediately to make sure they are safe.
- Stick with your established customers.
- Avoid the temptation of working with new customers that are looking to profit off the disaster.
- Check with your insurer to see if you can capture bad-debt write-offs that are storm related.
- Make sure all your liens are filed properly.
- Have regular conversations about risk management.
- Create a detailed crisis management plan.
- Keep all employees and customers informed with constant communication.
- If your business is affected, create a plan on how to resume business post-disaster.
"On the back end, natural disasters can promote more construction," Sorensen said. "But on the front end as a material supplier, your customer's clients may be wiped out and no longer exist. You're about to be bombarded with opportunities, but the risk profile will be elevated."
-Kendall Payton, editorial associate