Stronger Retail Banking: 3 Survival Lessons from Banks Hit By Natural Disasters

11/05/2019 - Blog

At least ten wildfires are burning in California right now while the rest of the country grapples with lives lost and over $1 billion in damages; all the result of extreme weather events.

One industry strengthening its resilience against natural disasters is retail banking.

As we continue exploring the risks and effects of climate change on commercial real estate, we look at how retail banks utilize the calm before the storm to employ a higher due diligence standard, and how this helps them avert the negative effects natural disasters have on bank stability.


How The Urgency for Banks to Restore Service Helps Drive The Shift

Retail banks are hit two ways when natural disasters strike: first, they must check in on the safety and availability of their employees and remedy damage to their own buildings and systems. Second, banks are under added pressure to get up and running in order to assist customers who need their banks now more than ever.

Banks that lack a clear, well-thought out and tested emergency response plan can jeopardize borrowers' financial solvency and decrease their bank stability, despite receiving backup from potential insurance payments and public aid programs.

A recent study shows significantly lower bank z-scores, higher probabilities of default, higher non-performing assets ratios, higher foreclosure ratios, lower return on assets, and lower equity ratios in the two years following a natural disaster are all common following the devastating impact of extreme weather events.

For this reason, the retail banking industry is taking the initiative to prepare, test, and deploy comprehensive Emergency Response and Disaster Preparedness plans that go above and beyond standard business continuity plans.


Taking Action in The Calm Before the Storm

Florida bankers know the value of preparedness firsthand.

“Unfortunately, living in South Florida doesn’t allow us the luxury of becoming complacent,” says Rick Kuci, president and CEO of Miami's Grove Bank & Trust. “We’re struck by a tropical storm or hurricane almost each and every year in some fashion. It is part of our landscape, our history, and our future.”

Banks in regions prone to extreme weather, like South Florida, are thinking about disaster response readiness far in advance, by addressing worst case scenarios during their own property acquisition process.

An increasing number of retail banks are taking property acquisition due diligence to higher standards by investing in:

These assessments empower banks with information on potential issues and costs that may weaken their stability should a disaster strike. As a bonus, they can also serve as the ultimate negotiation tool as banks acquire new property to expand consumer banking operations.

Understand how EBI's comprehensive property assessments impact your bottom-line with our popular white paper, Advantages of a Higher Due Diligence Standard.

Efforts specific to disaster readiness are also on the rise. Retail banks experience faster and more cost-effective response to extreme weather events when they invest in comprehensive Emergency Response and Disaster Preparedness Plans.

Additionally, disaster response consultants can also be brought in to assess the sustainability of a bank's existing preparedness and business continuity plans, as well as to help employee teams run through, test, and fill in gaps in their disaster response plans.

Need an experienced team of disaster response consultants to customize or assess your business continuity and emergency readiness plans? EBI Consulting's team of scientists, engineers, safety professionals, and specialists can work with you to create the customized solutions you need.


The Days and Weeks After: What Effective Emergency Response Looks Like

Consumers who have a strong relationship with their local banks can react quicker to disaster scenarios and be better equipped to initiate their personal recovery efforts.

Similarly, retail banks with existing relationships to construction monitoring consultants as well as environmental health & safety consultants are best positioned to not only get their own business operations up to speed, but to contribute significantly to charitable support efforts that strengthen their local communities.

A capable construction monitoring consulting team should understand a bank's operational needs and act quickly to aid in property rehabilitation, fire and storm damage repairs, structural evaluations, and so on. This is precisely what reduces delays in disaster response otherwise caused by vetting and contracting service providers after a storm hits.


Key Takeaways:

  • The negative effects of extreme weather events on retail banks extend far beyond immediate remediation costs and can continue to affect a bank's stability for years after the event occurs.
  • The smartest way for banks to ensure a fast and effective disaster response and their readiness to lead in community rehabilitation is for banks to lean on capable consultants who already understand their operational goals and needs.

EBI Consulting is prepared to help position you for success in the face of adversity. Send us a message today to start the conversation on emergency response readiness and remediation efforts.


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