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How businesses can financially prepare for future natural disasters

Dan Kaniewski, managing director for public innovation at Marsh & McLennan and former FEMA deputy administrator for Resilience, joins Yahoo Finance to discuss the Texas winter crisis and how businesses can better prepare for future natural disasters.

Video Transcript

MYLES UDLAND: All right, welcome back to Yahoo Finance Live on this Monday morning. Myles Udland here in New York. We continue to see the fallout from last week's storms and the resulting loss of power for millions of residents down in the state of Texas. And really, just in the beginning phases of figuring out what we've learned and really where we go from here, if anywhere, figuring out how to create resilience within the national grid. Should we have independent grids, like we have all learned a lot about, down in the state of Texas?

Joining us now to discuss all of this is Dan Kaniewski. He's a Managing Director for Public Innovation at Marsh & McClellan. He's a former FEMA Deputy Administrator for Resilience. So Dan, I'd love to just start with, from your seat and based on what we know, what we have seen happen down in Texas, what your highest-level takeaway is on how we got here and how we can prevent ever ending up here again.

I mean, I know it's a once-in-a-decade storm. There was a belief that these kinds of storms would create similar types of problems, which have previously been manageable. But how are you seeing this kind of crisis play out?

DAN KANIEWSKI: Well, thanks for having me. And I think it's important to note all the heroic actions that have happened at the individual, at the community level, and all levels of government really coming together to help those in need. But you're right. It's time fairly soon to look forward and say, what can we do to prevent this from happening again in the future?

And it's not a question that's unique to Texas. It's not one that's unique to the power grid. Frankly, every state has vulnerabilities, and every type of infrastructure has vulnerabilities. What we really need to do is invest in infrastructure. And we need to make sure that we're taking appropriate preparedness actions before a disaster strikes.

JULIE HYMAN: And Dan, you work at an insurance company. I know that you focus on this resiliency question. But so how optimistic are you? I mean, how are you putting the probability here that states and municipalities-- and the federal government, for that matter-- are going to be more proactive?

Because yes, sure, it's been great, the response that we have seen to this Texas crisis. But it's a crisis that, ideally, should have been and could have been avoided. So are we going to see other crises avoided?

DAN KANIEWSKI: That's absolutely right. We need to focus on resilience. We need to do that before a disaster strikes, not after. After a disaster, it's a lot of finger-pointing, inevitably. Before a disaster, we can take a thoughtful approach to making these investments.

Now, just to give you an example of what kind of return on investment we can get from these infrastructure upgrades, in general $1 spent now will save $6 when a disaster strikes. You'd be hard-pressed to find that kind of return on investment anywhere in the market right now. But the reality of the situation is that investment doesn't just save money. It saves lives.

For example, take us back to 2001, Tropical Storm Allison struck a very similar area. The flooding from that disaster caused the Texas Medical Center to shut down. It wasn't able to accept new patients during that disaster. After the disaster happened-- this is the world's largest hospital complex, by the way-- they sat down and said, let's put the contingency plans in place. Let's make those infrastructure upgrades so that this doesn't happen again. Fast forward 16 years later, the catastrophic Hurricane Harvey struck. The Texas Medical Center was able to stay open and operating, supporting those in their time of greatest need.

That shows that mitigation doesn't just save lives. It saves money. It saves businesses. And it saves communities from the impacts that you're seeing right now.

JULIE HYMAN: You know, mitigation sounds great in when you put it like that, right? And yet, it's so hard to get it done somehow in so many instances. Where do you think is the most urgent need at this point? And what do you think is the most urgent coming risk when you look at the United States in particular, and infrastructure and climate risk or whatever or other risk that places are not adequately preparing for?

DAN KANIEWSKI: Yeah, what we saw in Texas was a low-probability, high-consequence event. And frankly, those are the hardest to prepare for, because there's not a lot of salience, right? It's not on our minds every day, saying how do we prepare for this risk? Because we don't see it very often.

In fact, the confluence of events that we're seeing in Texas-- it hasn't been 10 years. It's been about 100 years since you've seen the low temperatures and extreme snowfall that you saw just recently. So for example, we could look at other low-probability, high-consequence events, like an earthquake. There are many areas in the United States that are prone to earthquakes that haven't had one in 100 years or 200 years.

For example, the New Madrid seismic zone in the Central US. They haven't had an event in over 200 years. But it doesn't mean that it couldn't happen tomorrow. And you need to be prepared as an individual, as a company, and as a society for something that may happen at any time.

MYLES UDLAND: All right. Dan Kaniewski, Managing Director at Marsh & McClellan. Dan, appreciate your time this morning. Thanks for spending some time with us.

DAN KANIEWSKI: My pleasure.