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Assessment of business interruption of flood-affected companies using random forests

  • Losses due to floods have dramatically increased over the past decades, and losses of companies, comprising direct and indirect losses, have a large share of the total economic losses. Thus, there is an urgent need to gain more quantitative knowledge about flood losses, particularly losses caused by business interruption, in order to mitigate the economic loss of companies. However, business interruption caused by floods is rarely assessed because of a lack of sufficiently detailed data. A survey was undertaken to explore processes influencing business interruption, which collected information on 557 companies affected by the severe flood in June 2013 in Germany. Based on this data set, the study aims to assess the business interruption of directly affected companies by means of a Random Forests model. Variables that influence the duration and costs of business interruption were identified by the variable importance measures of Random Forests. Additionally, Random Forest-based models were developed and tested for their capacity toLosses due to floods have dramatically increased over the past decades, and losses of companies, comprising direct and indirect losses, have a large share of the total economic losses. Thus, there is an urgent need to gain more quantitative knowledge about flood losses, particularly losses caused by business interruption, in order to mitigate the economic loss of companies. However, business interruption caused by floods is rarely assessed because of a lack of sufficiently detailed data. A survey was undertaken to explore processes influencing business interruption, which collected information on 557 companies affected by the severe flood in June 2013 in Germany. Based on this data set, the study aims to assess the business interruption of directly affected companies by means of a Random Forests model. Variables that influence the duration and costs of business interruption were identified by the variable importance measures of Random Forests. Additionally, Random Forest-based models were developed and tested for their capacity to estimate business interruption duration and associated costs. The water level was found to be the most important variable influencing the duration of business interruption. Other important variables, relating to the estimation of business interruption duration, are the warning time, perceived danger of flood recurrence and inundation duration. In contrast, the amount of business interruption costs is strongly influenced by the size of the company, as assessed by the number of employees, emergency measures undertaken by the company and the fraction of customers within a 50 km radius. These results provide useful information and methods for companies to mitigate their losses from business interruption. However, the heterogeneity of companies is relatively high, and sector-specific analyses were not possible due to the small sample size. Therefore, further sector-specific analyses on the basis of more flood loss data of companies are recommended.show moreshow less

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Author details:Zakia SultanaORCiD, Tobias SiegORCiDGND, Patric KellermannORCiDGND, Meike Müller, Heidi KreibichORCiDGND
DOI:https://doi.org/10.3390/w10081049
ISSN:2073-4441
Title of parent work (English):Water
Publisher:MDPI
Place of publishing:Basel
Publication type:Article
Language:English
Date of first publication:2018/08/07
Publication year:2018
Release date:2021/10/20
Tag:Random Forests; business interruption; companies; floods; variable importance
Volume:10
Issue:8
Number of pages:16
Funding institution:Deutsche Forschungsgemeinschaft (DFG)German Research Foundation (DFG) [641811]; German Ministry for Education and Research (BMBF) as part of the Flood 2013 projectFederal Ministry of Education & Research (BMBF) [13N13017]
Organizational units:Mathematisch-Naturwissenschaftliche Fakultät
DDC classification:6 Technik, Medizin, angewandte Wissenschaften / 69 Hausbau, Bauhandwerk / 690 Hausbau, Bauhandwerk
License (German):License LogoCC-BY - Namensnennung 4.0 International
External remark:Zweitveröffentlichung in der Schriftenreihe Postprints der Universität Potsdam : Postprints der Universität Potsdam : Mathematisch-Naturwissenschaftliche Reihe ; 939
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