The Impact of Hurricane Sandy on Business
By paulag01 on October 31, 2012
BlogHer Original Post
This week the East Coast saw a storm like no other and her name was Sandy. From Florida to Maine to parts of the Midwest she left a wake of destruction and disruption in her path. It was not a matter of "if" you were affected by the storm, only "how much".
Living in Pennsylvania an hour outside of Philadelphia, we got hit with quite a storm. Heavy rain (though not as much as originally predicted thankfully) and incredible, scary winds. I am grateful we personally did not have any major damage and were one of the few who didn't experience loss of power (a huge happy dance for THAT!). All around us, though, the streets are littered with tangled power lines, downed trees, and closed roads. Finding somewhere open to fuel your car is a major project. Grocery stores are minimally stocked (if they are even open). Looking at our neighbors in New Jersey and New York puts it all into perspective.
So what will be the impact of Sandy on businesses? Scary, just like the incredible wind gusts that shook my house on Monday.
Some events like the historic closing of the New York Stock Exchange for two days will have little, if any residual impact on businesses (though some people say the closing will shake the NYSE image). When did human safety become less important than perception?
Sandy’s economic, trading and investing impact from MarketWatch
There’s an old economic theorem about the “Broken Window” and it essentially explains how breaking your own house’s windows doesn’t actually create any economic benefit even though you’re going to be buying a new window, which creates demand for glass, metal, wood, installation services, and what not. Because when all is said and done, without some repeatable demand from new housing, you’re back where you started and those guys have to hope you’re willing to break your own window again to keep their businesses going.
Hurricane Sandy is not a “Broken Window” phenomenon...
This expert forsees a net positive impact over the short and mid-terms and a net negative impact over the long-term when the effects of increased deficit spending and rising interest rates will be felt.
Time magazine estimates: Hurricane Sandy Estimated to Cost $60 Billion
Superstorm Sandy will end up causing about $20 billion in property damages and $10 billion to $30 billion more in lost business, according to IHS Global Insight, a forecasting firm.
Most experts say that on a macro level any losses felt now will be a wash once the effects of gains to finance rebuilding are felt.
Time also goes on to explain the insurance impact of the storm:
Insured losses from the superstorm will likely total $5 billion to $10 billion, the forecasting firm Eqecat estimates. Insurance losses are typically a fraction of the overall cost.
Chubb, Allstate and Travelers are the insurers most likely to suffer losses, said Greg Locraft, an analyst at Morgan Stanley. Those companies claim a major share of the affected areas.
But “as an insurance event, Sandy is going to be a blip on the balance sheet,” said Duncan Ellis, U.S. property practice leader at Marsh, the insurance broker. “2012 has been a relatively catastrophe-free year.”
Boggling for me to think of $10 billion dollars as a "blip". So that other $50 billion? That comes from a combination of federal aid and individual out-of-pocket expenses. For small businesses the storm could be catastrophic in cases where the funds to rebuild just aren't there.
In the NY Times "Awaiting the Storm’s Price Tag" the irony of how economic impacts are calculated is summed up well:
“It’s a problematic aspect of how we account for economic output,” said Mr. Carroll. “Of course, it’s terrible when something is destroyed. That doesn’t show up in the calculation of gross domestic product. However, the rebuilt house does.”
Many small businesses will receive a rude awakening to the fact that unless their building received actual physical damage from the storm, business interruption insurance will not kick in. For many businesses forced to close due to safety or lack of power this could be costly.
In the flurry of reporting and statistics about big business, what about the smaller businesses and solo entrepreneurs? Not much impact is measured or reported unfortunately. Over time, hopefully these voices will be heard more via blogs and other articles. In the meanwhile, here are some good tips for the small business owner on how to recover from the hurricane:
- "How a Small Business Can Recover from Hurricane Sandy and Other Natural Disasters"
- After Sandy, How Small Businesses Can Pick Up the Pieces
- Small Business Slammed By Sandy? Here’s Where To Find Help
How was your business affected by Hurricane Sandy? What will you do to recover?
Paula Gregorowicz plucks women off the hamster wheel of overwhelm, struggle, and self-doubt and guides them to a purposeful path of building authentic and successful businesses.
Download the Free Report: Your Own Uniqueness: The Path to Purpose, Prosperity, and Playfulness at http://www.thepaulagcompany.com.