Are you ready for the next big one?

Zurich Earthquake Risk Management Action Plan

Protecting your employees, property and bottom line

Tom Evangelisti is a Senior

Strategic Risk Consultant
working in Enterprise Risk
Management and Business
Resilience focusing on
global risks. His expertise
include natural hazards,
supply chain risks, and risk
profiling methodologies to
help businesses manage
their total cost of risk. Tom
has over 20 years of global
consulting experience with a
broad sector of industries
and has a BA in Biological
Sciences, MPA in Public
Administration-Health
Services, and Graduate
certificates in Safety and
Risk Management. Tom has
also been a frequent
instructor, author and
lecturer regarding global
and natural hazard risks.

The question of whether earthquakes are increasing in frequency and

intensity along the Pacific Ring of Fire is something no scientist or expert
can precisely answer. But based on a long-term historic analysis of seismic
activity along the Cascadian Subduction Zone from Northern California to
Southern British Columbia (see image 1), the chance of a magnitude-9.0 or
stronger earthquake is likely to occur sooner rather than later in this region.
Cities located along the Pacific coast have the potential to experience less
magnitude earthquakes that could cause significant physical and financial
losses because of their dense populations and aging infrastructure.
An earthquake hitting a major metropolitan area in
this region, similar in strength to the recent seismic
event in Sendai, Japan, would also send ripple
effects throughout the North American and global
economies. Trade between the U.S., Canada and
Mexico (NAFTA) is USD $11.4 trillion a year,
making it the worlds largest trading bloc.1 A
Sendai-sized earthquake, impacting major shipping
ports such as Vancouver, Seattle, Portland and
Long Beach, Calif. could cripple the supply chain
within North America, as well as between critical
trading partners like China and South Korea.

Cascadian Subduction Zone

The Cascadian
Subduction Zone
spans from Northern
California to
Southern British
Columbia and the
chance of a
magnitude-9.0 or
stronger earthquake
is likely to occur
sooner rather than
later in this region.

Contact information:
tom.evangelisti@zurichna.com
U.S.: 512-318-1127
International: +1-512-318-1127

Source: U.S. Geological Survey

http://www.usgs.gov/

This Zurich Earthquake Risk Management Action

Plan is designed to guide corporate risk managers
and brokers in specific action steps to protect
employees and mitigate the property losses and
business interruption that would come with a
magnitude-9.0 earthquake. The plan will also be
of interest to Treasurers, CFO and other C-Suite
and Board members who recognize the need to
protect their enterprise reputation, supply chain
and bottom line from the potentially catastrophic
impacts of an earthquake.

Wake-up call from the other side

The recent earthquakes in New Zealand and Japan have served as a wake-up call to
every business located on the North American side of the Pacific Ring of Fire.
While some companies may have memories of the last major earthquakes in a
metropolitan area 1989 in San Francisco (magnitude-6.9), 1994 in Northridge,
California (magnitude-6.7) and 2001 in Seattle (magnitude-6.8) many have never
experienced the effects of major earthquake on North American soil. With decades
or even centuries between major earthquakes in North America, complacency
can overtake many businesses and risk managers when it comes to planning for
these seismic events.
The severity of earthquake damage in Christchurch, New Zealand, took the entire
citizenship by surprise, despite the citys location on two major fault lines. This
magnitude-6.1 earthquake was not as strong as Japans, but the damage was
extensive because of its shallow depth (3.1 miles), location right under the city of
Christchurch, and occurrence during the citys busy lunchtime. The earthquake
proved to be the countrys worst natural disaster in 80 years, resulting in more than
172 deaths, widespread power outages, waterline disruption, hundreds of crumbled
buildings and tons of ice sheared off from the countrys biggest glacier. Losses are
estimated at somewhere between USD $6 billion and USD $12 billion.
The magnitude-9.0 Tohoku earthquake that struck 80 miles (130 km) off Sendai,
Japan in March 2011, along with the resulting tsunami and nuclear power plant
disaster, have wrought almost unspeakable devastation on that country. This
earthquake was the fourth largest in the world since 1900, and Japans largest since
modern measurements began 130 years ago.
The Japanese government has estimated that losses could exceed USD $309 billion,
not including supply chain disruption and other business interruption, and that it
could take years to rebuild structures and business operations. As of April 2011,
there are at least 13,705 deaths, 4,916 injuries, 14,175 missing, more than 500,000
displaced and 200,000 plus buildings partially or totally destroyed. The global
interruption to the supply chain is still being felt continents away (see sidebar).
The Ring of Fire in North America is inclusive of the Cascade Volcanic Arc, which
stretches 700 miles (1,110 km) from southwestern British Columbia to northern
California. The Cascade volcanoes are some of the most potentially dangerous in
North America due to their eruption history and proximity to major population
centers. In spring of 2010, the Icelandic volcano Eyjafjallajkull disrupted air traffic
and supply chains throughout Europe, another reminder of the risks natural events
pose to business operations.

Ripple effect of Japan

earthquake on world economy
The April 13, 2011 report by the U.S.
Federal Reserve Board detailed the
supply chain disruptions resulting from
the Tohoku earthquake in Japan,
noting that:
Electronic components from Japan
are expected to continue to be in
short supply
Some companies in Southern Japan
are experiencing rolling brown-outs
which impact production and supply,
despite having suffered no physical
damage
Auto suppliers are experiencing
shortages of electronics and tires
Auto production is being shutdown
or severely curtailed
41 percent of manufacturers
surveyed by the Minneapolis Fed
said their operations were
negatively impacted
Some companies expect shipments
from Japan to not return to normal
until at least September 2011
Boston, Philadelphia, Richmond,
Atlanta, Chicago, Minneapolis and
Dallas all noted actual or expected
disruptions to sales and production
Hawaii is experiencing a decline in
tourism from Japan

Recent earthquakes and earthquakes occurring in major metropolitan

areas in North America with noted intensity level
San Francisco - 1989
(magnitude-6.9)
Northridge, Calif. - 1994
(magnitude-6.7)
Seattle - 2001 (magnitude-6.8)
Christchurch, New Zealand 2011 (magnitude-6.1)

Metro areas with concentrated population

totals along Pacific Ring of Fire region
Major international port cities with critical
links in global supply chain noted

Sitting On Large and Complex Risks:

North Americas Ring of Fire
The 1,500-mile (2,114 km) stretch of the North American continent from Vancouver,
British Columbia, to San Diego, California, includes some of the most beautiful
coastline in the world. It is home to hundreds of global companies, including
industry leaders in banking, finance, aerospace, technology, entertainment,
consumer goods and more. Cities like Vancouver, Seattle, Portland and Long Beach
are also major international ports, and critical links in the global supply chain. While
the city populations of Christchurch (345,000) and Sendai (1 million) classify them as
major population centers, the concentrated populations along the Pacific coast of
North America are some of the largest metro areas in the world: Los Angeles (17.7
million), San Francisco (7.4 million), San Diego/Tijuana(5.1 million), Seattle-Tacoma
(3.4 million) and Vancouver, B.C. (2.1 million).
Businesses and people in these metro areas are literally working and living in one of
the largest seismically active regions in the world. Fault lines in this region snake
through and around all the major metro areas along the Pacific Northwest. The San
Andreas Fault in California alone runs beneath three huge urban centers and most
of the states economic engine.
The last really big one (magnitude-9.0 or greater) to strike the Pacific coast
occurred on January 27, 1700, affecting the entire coast from northern California to
southern British Columbia, and sending a tsunami all the way to Japan._ Scientists
put the likelihood of another major seismic event occurring in this region within the
next 50 years at one-in-three, based on the accumulating stresses in the areas. In
southwest British Columbia alone, there is an average of one earthquake daily, with
many too small to be noticed on the surface. But if another magnitude-7.3
earthquake hit Vancouver Island today, like the one that hit in 1946, damage would
be in the billions of Canadian dollars because of the increased population and
structural density. Each year, southern California has 10,000 earthquakes according
to the U.S. Geological Survey. It estimates that over the next 30 years, the
probability of a major earthquake of magnitude-8.0 or greater occurring in
California is 99 percent.

Los Angeles, CA USA Metro

(17.7 million) major international port
San Francisco Bay Area, CA USA Metro
(7.4 million) major international port
San Diego, CA USA / Tijuana,
BC Mexico Metro (5.1 million)
major international port
Seattle/Tacoma, WA USA Metro
(3.4 million) major international port
Portland, OR USA Metro (2.2 million)
major international port
Vancouver, BC Canada Metro
(2.1 million) major international port

Like many other cities in North America, those in the Pacific region are struggling to
maintain aging buildings and infrastructure, as well as fragile energy and water
supplies. Seattles Alaskan Way Viaduct, the citys double-decked elevated highway,
was built in the 1950s and narrowly survived the 2001 magnitude-6.8 quake. This
viaduct is scheduled for replacement within a few years, and hopefully before the
next big one. California receives most of its water through extensive supply lines
that cross or are located near active fault zones. If a strong seismic event damaged
this system, businesses and residences could be without water, making any
earthquake-sparked fires difficult to contain. Similar water supply issues exist for
Vancouver, B.C., due to soft soils that could liquefy during a large earthquake.
The combination of this seismically active area, dense population centers, and aging
or fragile infrastructure has the potential to create a massive catastrophe for
businesses located along the Pacific Ring of Fire region. Loss of life and property
damage are the first and foremost concerns for businesses, but the ripple effects of
a major seismic event, including business interruption and supply chain disruption,
could take months or even years of recovery.

Magnitude-9.0 Earthquake Risks

Infrastructure

Property

Geological
Tsunamis
Landslides
Avalanches
Flash Floods

Operations
Gas line break, leakage
and explosion
Fire and domestic water
line break, leakage, lack
of supply
Domestic water supply
contamination
Reservoir, levee and
dam damage
Sewage treatment plant
shutdown and damage

Structural damage
Nonstructural damage
Fire and Explosion
Pipe rupture-fire sprinkler,
gas, waste water, water
supply
Water damage
Power loss

Loss of building or
facility use
Fire/Explosion Flooding
Fatalities and injuries
of employees
Complete shut down
of production
Site not accessible
Loss of utilities including
water and power

Sewage lines damaged

Environmental
contamination

Damaged highways,
bridges, harbors, airport,
rail lines

Key employees not

available or leave area

Power plant damage and

contamination (nuclear)

Inventory and key

equipment damaged or
non functional

Power grid and

substation damage

Business Interruption

Telecommunication
system damage
Refinery and petroleum
pipe damage

Supply chain disruption

Telecommunications
Major suppliers or
customers severely
impacted
Site and facility
security risks

Protection for
employees
traveling in
earthquake zones
Even if a magnitude-9.0
earthquake doesnt
strike near a companys
office or facilities, its
employees could be
travelling in an
earthquake-prone
region when a seismic
event occurs. Thats
why many companies
opt for global travel
assistance coverage for
their employees. This
coverage provides
emergency services all
around the world such
as medical evacuation
and security alerts. For
example, Zurich offers
Nomadz, which
connects employees to
a global emergency
travel center through
mobile devices. The
center then assists the
employee in locating a
hospital, ground and air
transport, or other
health and security
needs during an
emergency like an
earthquake.

First Priority: Protection of People

People are any companys most valuable assets. An organization will depend on its employees intellectual
capital to get operations up and running again after a major seismic event.
The first priority in creating an earthquake risk mitigation plan is keeping employees safe during and after
an earthquake. Training employees on safety procedures and practicing for an earthquake emergency and
evacuation should also be a key part of your plan. Earthquake-preparation events like the Great Shakeout
(www.shakeout.org) are designed to provide awareness and training for businesses in earthquake-prone
regions through onsite drills with employees.
Some steps a business can take to protect employees include:
Secure large pieces of equipment such as
boilers, tanks, and machines for stability
during an earthquake
Heavy furniture such as bookshelves and file
cabinets should be strapped or attached to
the wall
Keep doors, exits, and aisle ways clear at all
times for quick access evacuations
Areas under desks and tables should be
uncluttered to make room to take cover in
an earthquake
Fire extinguishers should be charged and
inspected monthly so they are always ready
to use
Periodically test fire alarms, sprinklers, and
emergency lighting

Keep flashlights, a radio, extra batteries, and

a first aid kit on hand at all times
Consider stockpiling food, water, blankets,
and sanitary supplies such as toilet paper and
portable toilets
Keep enough supplies for the number of
workers that may need to shelter or work at
your facility after an earthquake
Create an emergency evacuation plan that
details how employees will evacuate from the
building, where they will meet, how to
account for everyone, and how to get further
instructions to act
Current emergency contact phone numbers
for all employees and management are
critical in an emergency

Please see the appendix for a more detailed list of employee protection steps before, during and after
an earthquake.

Employees should commit these three words to memory, and shout them out to coworkers when the first
shaking is felt:

Duck or drop down on the floor.

Cover yourself under a sturdy desk

Hold onto the desk or table so

or table

that you can move with it during

the shaking.

Risk Mitigation Techniques for Property

When it comes to protecting a companys physical structures from an earthquake,
there is a wide range of risk mitigation techniques to consider and adopt. An
experienced structural and soils engineer, working in conjunction with the architect,
can assess your building to determine the level of property and related building
earthquake risk. A risk engineer can work with these professionals to develop an
overall risk mitigation plan. Some common risk mitigation considerations include an
automatic seismic shut-off valve for gas lines. These seismic gas valves can reduce
your risk of a fire and explosion after an earthquake. To reduce the risk of water
damage from fire sprinkler systems, a fire protection engineer may recommend
additional bracing for the fire sprinkler system.. This bracing reduces the risk of the
sprinkler system rupturing during an earthquake. Strengthening older buildings that
may not meet current building codes or risk tolerance is another common practice,
which may be required by municipalities or by proactive risk managers. Remember
that building codes are minimal standards for design and updated on a regular basis.

Beyond the Epicenter: Business Interruption

and Supply Chain Risks
The effects of a magnitude-9.0 earthquake along the North American Ring of Fire
are likely to stretch well beyond property damage, disrupting business operations
and supply chains for weeks or even months. The aftermath of such an event, as
witnessed in the recent Japan earthquake, could include long-term power outages,
diminished or nonexistent water supply, crumbled highways, uprooted rail tracks,
tsunami destruction of ports, and more.

A Companys Supply Chain

Dependencies and Level of Risk
Is your supply chain and business operation
at risk from a magnitude-9.0 or greater
earthquake or other disruption? Compare
your companys sourcing and manufacturing
strategy using the chart below. A Supply
Chain Health Check assessment can also be
found in the appendix.

High-risk supply chain

and operations
Sources key parts from one supplier
Manufactures in one factory
Locations in one geographic region
Uses proprietary, customized parts
Tight manufacturing capacity
Factories produce single product
Just in time manufacturing
Single IT system and data center
One transportation mode

Normal business operations throughout North America could be severely

diminished as the manufacturing and transportation of vital supplies and parts
come to a halt. The economic damage could be enormous, as USD $9 billion of
goods and services cross the Canada-U.S. border every day, the largest trading
relationship in the world. Both Canada and Mexico send more than 80 percent of
their exports within North America, and depend on their NAFTA partners for a large
majority of their imports.4 Delivery of critical parts and supplies between North
America and China could also be affected if ports cities like Vancouver, Oakland,
and Long Beach are heavily damaged.

Supplier contributes to more than one

product line

The recent Tokohu earthquake in Japan and its devastating impact on people and
property and has changed the normal expectations about earthquake damage.
This seismic event also exposed the vulnerability of companies to the approach of
just-in-time manufacturing and single-source supply for supplies and parts.

Sources key parts from multiple suppliers

Business continuity plans now need to be redesigned with an eye toward long-term
business interruption and supply chain disruption.

Products flow through a distribution

center which is a pinch-point
Supplier does not have an updated
business continuity plan

Lower-risk supply chain

and operations
Manufactures in multiple factories
Locations in multiple and geographicallyseparated regions
Uses standard components
Keeps excess manufacturing capacity in
their factories
Maintains excess inventory
Factories with multiple product production
capability
Redundant IT systems and data center
Multiple modes of transportation
Developed a joint business continuity plan
with supplier

Planning Pays Off: Business

Continuity In Action
The 1989 San Francisco earthquake gave a
large national brokerage firm the opportunity
to assess how well its business continuity
planning held up during an actual
emergency. Prior to the earthquake, the firm
devoted five full-time staff to developing a
plan that focused on both employee safety
and customer service as top priorities. A key
feature of the plan allowed senior
management the freedom to decide on how
to meet those priorities based on the existing
conditions after the event. Because of this
extensive operational and personnel
planning, this firm was the only brokerage
company to be in operation the day after the
quake. Highlights of the business continuity
plan included:
Running quarterly tests with IT systems
staff and vendors to practice managing
through power outages, limited or no
access to buildings, and sporadic
communication lines
Providing senior management with a
concise, but detailed information on
operational requirements and strategies,
resources, telecommunications, and
emergency financial arrangements
A daily briefing format for media and
public relations needs
A checklist of how to handle customer
service issues, including keeping records
during an emergency
Organizing assistance to employees who
lost their homes

Creating A Comprehensive Business Continuity Plan

An earthquake of 9.0 magnitude or greater can result in multiple and wide-ranging
damages to tangible assets of your organization such as people, property, and
environment, as well as intangible assets, such as data security, knowledge
management and brand reputation.
Business continuity is a proactive strategy that improves a companys ability to react
proactively to disruptive events like earthquakes. It is also a critical enterprise risk
management tool to help prevent or minimize negative impacts to stakeholder
value. Companies without a business continuity plan typically suffer the effects of a
crisis 2.5 times longer than businesses that have one. In fact, 40 percent of
companies who suffer extended disruptions will eventually go out of business.
Creation of a business continuity plan typically starts with an audit of existing crisis
recovery plans to provide the basis for improvement. The audit benchmarks current
business continuity management against standards and best practice, and
summarizes the key performance gaps in an organizations current approach. Once
the audit it is completed, development of the plan consists of three phases:
Phase 1: Identify vulnerabilities
A holistic, 360-degree understanding of the range and depth of a companys
vulnerabilities is critical to understanding the potential threats to the balance
sheet and even the survival of the business. With the extensive
interdependencies that exist in todays global business structure, earthquake
exposures are much more serious than in the past.

Phase 2: Gap analysis

The next phase is to list the potential disaster scenarios to the enterprise, and
conduct a gap analysis to determine the level of risk they pose. Risks should be
evaluated based on a range of competitive and tactical contexts. This
determines the action needed for risk prevention and mitigation.

Phase 3: Develop tactical plans

This phase is putting pen to paper, and developing tactical plans designed for
the specific risks of the organization, and assigning resources as needed. Best
practices in developing tactical plans include keeping them simple to execute
for managers, making them flexible to adapt to changing conditions, and
designing mechanisms for ongoing testing and improvement.
Not all companies require the same level of robust assessments to develop a
business continuity plan. But generally, the process of creating one should include
such assessments as risk profiling, supply chain risk assessment, business impact
modeling, and business impact analysis. This comprehensive approach will ensure
that the business is being protected from all potential loss scenarios, and provide
guidance on the development of the tactical plans. See the appendix for a full list of
best practices in business continuity planning.

FEMA 389 Flow Chart for Earthquakes

Determine Risk
Identify and Quantify
Potential Losses

Identify Strategies

First Cost /
Design Strategies

Operating Cost /
Business Strategies

Event Response
Strategies

Reduce
hazards

Reduce
visibility

Diversify operations

Maintain procedures
and materials

Relocate to
better soil

Reduce
response

Purchase insurance

Train inspectors

Relocate
to lower
seismic zone

Increase
capacity

Utilize securitization
instruments

Set up retainer
agreements

Engineer
soil material

Mirror operations

Emergency
operations centers

Evaluate and Select Optimal

Combination of Strategies

Implement Strategies

Are You Covered? Coverage Questions for Your Broker

Surprisingly, many businesses located near the Ring of Fire do not carry earthquake
or supply chain insurance. Part of the reason may be that earthquake insurance
typically has limited coverage for property, contents and equipment and comes with
a high deductible. Beyond coverage for property risks, companies also have the
option to purchase business interruption insurance and supply chain insurance, two
products that can help prevent and protect an organization from financial effects of
diminished business operations in the days or weeks following an earthquake.
Its important to discuss all risk management approaches and risk transfer solutions
with your broker:
1. Does my broker and/or insurer have an idea of what my earthquake exposures
are and my potential loss estimates? What are my potential loss scenarios? Do
they align with the Risk Managers assessments? Do they align with the board of
directors expectations?
2. What local and regional exposures to my locations would present a significant
impact on my operations even if I dont have a direct loss?
3. Does my broker and/or client have the ability to help me review my business
continuity plan and offer suggestions? Can they help with a business continuity
plan? What have other companies done?
4. Part of my business continuity plan is supply chain. What resources does my
carrier have to help me identify my supply chain exposures? How about
resources/ideas to mitigate those exposures?
5. What parts of my insurance program will respond to an earthquake loss and
what parts am I self insured? What exactly is my earthquake deductible if it says
its a percentage of value and/or time limit? How exactly is that calculated so it
can be funded?
6. What resources can you provide to reduce our overall risk from an earthquake?
7. What ideas do you have for funding my deductibles and other self insured parts
of an earthquake loss? What have your other clients done?
8. How and who do we work with should we have a claim, anything special to
look for? How have they responded in other mega disasters and were they
there quickly?
9. How has my insurer accounted for its exposure in catastrophic areas? Is my
insurer able to meet its financial responsibilities? What is my insurers financial
strength rating?
10. How strong will my insurers claim paying response be after a mega
earthquake? How able is my insurer to meet its financial claims playing
obligations after a mega earthquake? Could I actually get stuck paying for
things my insurer should pay?

10

Appendix: Earthquake Risk Management Toolkit

EMPLOYEE PROTECTION CHECKLIST
Pre-Earthquake Planning
Review emergency procedures with co-workers

Practice utility shutoffs. Show several co-workers where

and how utilities are to be shut off

Conduct an employee survey of special skills and

capabilities (such as ham radio and Twitter)

Conduct an earthquake vulnerability study to determine

potential damage to your building, and un-reinforced
masonry or concrete structures

Develop personnel records that include family contacts,

schools, doctors, and medical needs
Pre-designate floor-wardens and/or disaster buddies for
persons with physical disabilities
Practice drop cover and hold as if an earthquake were
taking place, encouraging people to find the safest place
in their immediate environment
Practice evacuating the work place. Walk through the
evacuation routes and periodically inspect those routes
to make certain they are not cluttered and or can be
blocked by falling debris

Review and practice first aid and CPR skills

Check and refresh emergency supply kits
Develop a mitigation plan that addresses emergency
needs, including loss of utilities, and potential business
loss and recovery
Map out your value chain and assess the potential
impact and extra recovery expenses of a disruption in
your supplies
Work with your key suppliers to determine back-up plans
and alternatives

During the Earthquake

Command co-workers to DROP COVER HOLD ON and stay in that position until the ground stops moving

Post Earthquake
Once the shaking stops, have everyone check themselves
and the people surrounding them for injuries

Determine whether employees will re-enter facility or

can go home to check on family (if roads are accessible)

Remind co-workers of evacuation plans. Have floor

warden check the evacuation routes while others grab
their personal things (coats and keys)

If facility can be re-entered, have clean up team go in

first to clear debris, clean up spills and check for other
possible hazards

Evacuate

Remind co-workers of possible after-shocks and to once

again follow procedures if they occur

Assist co-workers with evacuation to pre-designated

assembly point
Account for all employees
Give first aid where appropriate
Call 911 for life threatening emergencies
Conduct building survey and check utilities
Listen to portable radio for information regarding
the incident

Assist co-workers back into the facility conduct an

employee meeting to talk about fears and emotions
Provide ongoing employee assistance to those who
need it
Contact key supplies to resume production and delivery,
or to activate the back-up alternate plans you have
developed in advance

11

Appendix: Earthquake Risk Management Toolkit

KNOW YOUR PROPERTY RISKS
Questions to ask to understand the risks to your operations if they are located in a seismic zone
Property/site
Is there an active fault on or adjacent to site?
Does the site ground composition consist of fill which could increase shaking?
Is the ground stable or subject to liquefaction ground failure?
Are adjacent upslope or down slope soils stable?
Are post earthquake aggress and egress secure?
Are transportation, communication and utility life lines vulnerable to disruption?
Are there adjacent land uses that could be hazardous after an earthquake?
Are hazardous materials stored or used in close proximity?
Are building setbacks adequate to prevent pounding from adjacent buildings during an earthquake?
Is the site subject to inundation from a tsunami, seiche,* dam or reservoir failure or flooding?
Are there areas of new site construction that should be left underdeveloped to reduce earthquake risk from landslide
potential, inundation potential, high liquefaction, surface faulting, intensive shaking or separation from other buildings?
Is there adequate space on the site for safe and defensible acres of refuge from hazards for building occupants?
Does the site have the potential for earthquake induced landslides, by cutting unstable slopes, increasing the surface run-off,
or increasing the soil water content?
Building
Are you aware of earthquake design weakness that may cause your building to be heavily damaged in an earthquake?
Are you in an older building which may not have used adequate building codes for life safety and current earthquake risks?
What is the structural condition of your building?
Does your building have any construction quality issues that may make it vulnerable to earthquake damage?
Is your building adequately retrofitted for an earthquake?
Could your building survive the largest credible earthquake for your area and be functional afterwards?
Can you distinguish between nonstructural, structural and settlement damage?
What are your risks for fire following an Earthquake?
Has your fire sprinkler system been designed to handle an earthquake?
What are your response and protection plans for fire fighting, building damage and security after an earthquake?
What contingency plans do you have in case of fire sprinkler leakage after an earthquake?
Are your utility feeds into the building designed to handle an earthquake?
Have you considered using seismic gas valves for utilities, and monitoring systems for critical operations?

12

Appendix: Earthquake Risk Management Toolkit

KNOW YOUR PROPERTY RISKS (continued)
Operations
Preparedness
Is your business earthquake resilient by having an adequate business continuity plan that works?
Have you considered nonstructural hazards such as file cabinets, rack storage units, book shelves, light fixtures, HVAC
equipment and ducts, and your facilitys additional operating equipment?
Once you have identified the nonstructural hazards, what plans to you have to mitigate the risks?
Have steps been taken to protect your computer operations and equipment including vital records?
Have procedures been developed for immediately stopping processes after an earthquake, which could endanger employees
or the general public?
Have hazardous materials been identified and secured including liquids and gases?
How would you deal with a spill or leak of hazardous materials?
Have agreements been made with vendors and suppliers to assure continuity of business regarding your supply chains?
Have inventories been developed and maintained to critical supplies, equipment and employee skills?
Have supplier and product flows been mapped out, and alternate supply arrangements drafted?
Are there company policies to inform the public about the continued delivery of services and goods after an earthquake?
Has your company trained in businesses resiliency and business continuity management?
Response
Are there plans for conducting initial damage assessments and identifying hazardous conditions?
Are there plans to provide continuous communications with employees and other building occupants?
Is emergency power available to supply critical operations, processes and emergency equipment?
Have evacuation plans been developed and tested?
Have you considered having First Responder training in First Aid and CPR?
Have you worked with your local Police and Fire department regarding community response plans and services?
Have plans been established to provide for emergency housing, food and medical care of employees for the first 72 hours
after the earthquake?
Who has been assigned to liaison with the media after an earthquake to make sure accurate information is given?
Recovery
Have plans been established to conduct a damage survey of your facilities to determine the need for temporary relocation or
timing of reoccupancy?
Are there plans for the clean up of company properties including securing of contractors support to supplement crews in the
repair of damaged facilities?
Are there plans for business restoration including essential facilities and or establishing temporary facilities for key personnel,
alternate headquarters, damaged utility systems to minimal operating levels and security?
Have you identified alternate sources of essential supplies and replacement parts if your normal vendors are unable to function
after an earthquake?
Have long term plans been developed to provide for re-establishing the function of the company?
*A seiche is the sloshing of a closed body of water from shaking. Swimming pools often have seiches during earthquakes.

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Appendix: Earthquake Risk Management Toolkit

BUSINESS CONTINUITY BEST PRACTICES
Communication
Develop relationships with governmental and private recovery groups prior to needing them and include these on the
contact list
Create multiple methods to access business continuity plan (online, hard copy, etc.)
Articulate responsibility, authority, and expectations plan to enhance implementation efficiency
Establish redundant communication methods with employees, critical suppliers, governmental agencies, etc., with special
attention to cross-border communication requirements
Create inside and outside the organization communication templates/checklists by groups.
Contact List
Include individuals with essential specialized knowledge on the contact list
Create contact lists that, in addition to standard contact information, contain essential business continuity plan information on
succession, responsibilities, and extent of specialized knowledge
Update contact lists at least every three months.
Planning
Establish more than one back up for important data and services (especially important during an extended crisis)
Update HR policies to reflect business and employee needs during a crisis
Align communication and decision strategy with the official definition of alerts, ratings, etc. (e.g., WHO pandemic level 5
defined as spread and not severity)
Prioritize supplies/materials that you will need based on operations and competition for these supplies by other entities
Make provisions to provide the basics for crisis and recovery personnel this includes childcare
Include instructions and resources needed to set up temporary facilities including inspections, jurisdiction information, permits,
safety checklists, etc.
Consider infrastructure risks when developing the business continuity plan. It may be prudent to locate alternative sites within
another electrical grid or transportation region
Develop several recovery time and output volume scenarios with their resource requirements to facilitate matching crisis
response to situational realities
Establish an early alert process to monitor critical vendors and the regions where they are located through resources such as
news feeds
Testing
Emphasize internal departmental, customer, vendor, and recovery interface processes during plan testing to uncover
unknown dependencies
Stress the testing of plans by incorporating unexpected scenario obstacles (e.g., material short-ages, inadequate staffing,
conflicting guidance, etc.).

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Appendix: Earthquake Risk Management Toolkit

SUPPLY CHAIN HEALTH CHECK
Will your supply chain stand up to a magnitude-9.0 earthquake or greater? Take this assessment to find out:
1. Do you know who your critical suppliers are, and how much their failure would impact your companys profits?
2. Have you fully mapped your critical supply chains upstream to the raw material level and downstream to the customer level?
3. Have you integrated risk management processes into your supply chain management approaches?
4. Do you have routine, timely systems for measuring the financial stability of critical suppliers?
5. Do you understand your tier 1 production facilities and logistic hub exposures to natural catastrophes?
6. Is supply chain risk management integrated into your enterprise risk management approach?
7. Do you record the details of supply chain incidents and the actions you have put in place to avoid future incidents?
8. Do your tier 1 suppliers have business continuity plans that have been tested in terms of their viability?
9. Have you provided risk training to your supply chain management team?
10. Is risk on the agenda at performance meetings with your strategic suppliers?
How many Yes answers did you score?
8 10: You probably have a good understanding and control over the risks you face.
5 7: You may have a number of key gaps which could impact your brand or profitability
3 4: There may be some major risk exposures within your supply chain which should be addressed
0 2: Proactive supply chain risk assessment and management is needed immediately

Learn more
Zurich wants to help risk managers have the tools to prepare for and cope with the consequences of natural catastrophes. To
learn more about the services available to help risk managers manage risks from catastrophes, check out the following Zurich
resources:
To find out additional information about how to prepare for a natural disaster, go to http://www.zurich.com/naturaldisasters/
home/
Follow @ZurichAlert on Twitter to receive up-to-date notifications about catastrophes taking place around the world.
To learn more about how Zurich Risk Engineering can work with you to improve your business performance through effective
risk management, go to http://www.zurich.com/riskengineering.
To learn more about the insurance products and services that Zurich offers to help businesses mitigate earthquake risks,
contact a Regional Executive in your area. Find a complete listing of Regional Executives at http://www.zurichna.com/zna/
aboutzurich/regionalexecutives/regionalexecutives.htm
To learn about how Zurichs Enterprise Risk Management (ERM) solutions can provide assistance in achieving a broad view of
the entire risk portfolio, go to http://www.ZurichERM.com.
To learn about Zurichs Supply Chain Risk Assessment and Insurance, go to http://www.zurichna.com/zna/corporatebusiness/
supplychain.
To learn more about World Travel Protection, go to http://www.wtp.ca.
To learn more about Nomadz, go to http://www.getnomadz.com.

15

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The information in this publication was compiled by Zurich Services Corporation from sources believed to be
reliable. We do not guarantee the accuracy of this information or any results and further assume no liability in
connection with this publication, including any information, methods or safety suggestions contained herein.
Moreover, Zurich Services Corporation reminds you that this publication cannot be assumed to contain every
acceptable safety and compliance procedure or that additional procedures might not be appropriate under the
circumstances. The subject matter of this publication is not tied to any specific insurance product nor will adopting
these procedures insure coverage under any insurance policy.
1

NAFTA @10: Preliminary Report, Foreign Affairs and National Trade Canada http://www.international.
gc.ca/economist-economiste/analysis-analyse/research-recherche/10_pre.aspx?lang=eng#part

Natural Resources Canada http://geoscape.nrcan.gc.ca/vancouver/earth_e.php

Federal Reserve Board, The Beige Book, April 13, 2011 http://www.federalreserve.gov/fomc/
beigebook/2011/20110413/FullReport.htm

NAFTA @10: Preliminary Report, Foreign Affairs and National Trade Canada http://www.international.gc.ca/
economist-economiste/analysis-analyse/research-recherche/10_pre.aspx?lang=eng#part

Business Continuity Planning: Lessons Learned from a Decade of Mega-Disasters

Victor Gordon, The John Liner Review, Fall 2010

2011 Zurich Services Corporation