Disaster Readiness in the AI of the Storm
Last year, wildfires, winter storms, hurricanes, drought, earthquakes, and flooding cost $182.7 billion.1 The effects of a natural disaster linger long after the storm passes, and the cost of being unprepared is a high price to pay.
The True Costs of Being Unprepared for Natural Disasters
- Downtime Disaster
Shutting your doors or going offline due to a natural disaster is, well, a disaster.
Each minute of downtime could cost your institution $9,000.2 Since nearly every
business will experience downtime at some point, it's not a matter of if – but when. - Rising Delinquencies and Defaults
During an evacuation or cleanup loan payments aren’t top of mind for accountholders and many don’t realize that accounts have gone into collection – until they are in late stage delinquency.
The hidden costs of defaults go beyond principal and interest. Lost dollars from non performing loans (NPLs) are compounded by diverted operational functions, higher capital requirements and loss reserves, and legal fees. These aren’t marginal – they eat directly into profit margins. - Americans’ Worsening Credit Condition
Overall credit health is declining – and natural disasters only add to the strain.
● 15% of Americans anticipate missing at least one loan payment this year.3
● 37% of Americans could not cover an unexpected expense of $400.4
For financial institutions, this means more charge-offs, more delinquencies, and more operational friction. - Claims, Claims, and More Claims
From property and collateral to branches, claim volumes spike after natural disasters. This becomes especially costly as more regions - partially coastal ones - become uninsurable.
The cost of risk has to go somewhere and it will eventually land in your bond, P&C, and reinsurance. These rates can surge months or years after the impact. - Fraud and Scams
Disasters leave people stressed and vulnerable. Scammers know this—and exploit it.
Fraud spikes after major events, driving losses even higher. For financial institutions, every $1 lost to fraud costs $4.41.5
Is AI the Answer to Communicating During a Crisis?
AI is boosting natural disaster resilience across many industries. For example:
➔ The WMO (World Meteorological Organization) uses AI for early-stage disaster warnings.
➔ FEMA is applying AI to help communities create better hazard mitigation plans.
Financial institutions are also tapping into AI to improve resilience. During climate or financial emergencies, clear, timely communication is essential to protect financial wellbeing, build trust, and support recovery.
Take a closer look at how AI is helping credit unions and banks safeguard against disaster-related losses:
- Network Resilience & Management: AI-driven systems detect and resolve issues in communication networks in real time, reducing downtime and maintaining service continuity.
- AI-Powered Emergency Communication Platforms: AI chatbots and virtual assistants deliver real-time support during emergencies They can manage high message and call volumes, answer common questions, reducing delays and pressure on staff.
- Predictive Analytics for Disaster Risk Management: Real-time weather data integrated with predictive modeling offer proactive insights – helping institutions adjust emergency policies, bolstering communication, and reallocating resources before disaster strikes.
- Enhancing Accountholder Resilience: AI can deliver personalized financial advice to help members/customers build emergency savings or secure appropriate insurance coverage.
- Fraud Detection: Continuous monitoring can help mitigate risks even when staff resources are limited or reallocated due to disaster-related disruptions.
Continuity, Community, and Confidence
In times of disruption, leveraging AI and predictive forecasting isn’t just smart – it’s critical. By integrating these tools into your disaster preparedness strategy, your institution can protect its people, maintain operations, and fulfill its mission of serving financial needs—even in the face of billion-dollar weather events.
Are you ready for disaster-proof readiness strategies? Get the full natural disaster preparedness guide for financial institutions here.
1www.ncei.noaa.gov/access/billions/events/US/2024
2www.vertiv.com/globalassets/documents/reports/2016-cost-of-data-centeroutages-11-11_51190_1.pdf
3newyorkfed.org/microeconomics/sce#/
4federalreserve.gov/consumerscommunities/shed.htm
5risk.lexisnexis.com/about-us/press-room/press-release/20240424-tcof-financial-services-lending