Vulnerability within U.S. Infrastructure

Air Date: 08/16/23
Record Date: 06/29/23

Andrea Blair, Zurich’s Director of Business Resilience and Continuity Management Services, details critical infrastructure vulnerability and the importance of being proactive corporate citizens.

Guest:

Andrea Blair
Director Business Resilience and Continuity Management Services Group
Zurich North America

Andrea leads Zurich’s Director of Business Resilience and Continuity Management Services Group, by  developing practical solutions for business continuity and supply chain risks. She specializes in assessing  client risk trends and vulnerabilities and developing strategies to address them. This   information can be  used to mitigate client business interruption and supply chain related losses as well as optimizing client  customer and insurance underwriting confidence.

Host:

Stephani Gordon
Future of Risk podcast co-host
Zurich North America

As part of Zurich’s Communications team Stephani Gordon finds and shares stories by asking questions that connect people with ideas to pique curiosity and broaden awareness and create communities. Fondly considered a compassionate interrogator, she has had roles coaching and supporting executive communications for the CEOs of Zurich North America and Zurich Canada, has lead C-suite video production and has connected employees with corporate strategy through storytelling and engagement. Stephani is currently one of the hosts of Zurich North America’s Future of Risk podcast. She unabashedly spends too much time on TikTok in the guise of “anthropological study.”

Episode transcript:

STEPHANI GORDON: Hi, my name is Stephani Gordon. I'm one of the co-hosts for the Zurich North America Future of Risk podcast. Did you know that public investment in U.S. infrastructure as a share of gross domestic product has actually fallen by more than 40% since the 1960s and that the World Economic Forum now ranks the United States 13th when it comes to the overall quality of our infrastructure? We're going to talk about that today. I'm joined by Andrea Blair. She's Zurich's Director of Business Resilience and Continuity Management Services. So, welcome Andrea.

ANDREA BLAIR: Thank you, Stephani and thank you for everybody listening, for taking time to listen to our perspective on the fragility of our nation's utility infrastructure.

GORDON: So, we know that without safe roads, bridges, drinkable water, electricity, even broadband service now businesses cannot run productively, and people can't live well, or sometimes even survive. In addition to that statistic that I just shared, we've also seen reports that more than 45,000 U.S. bridges and one in five miles of U.S. roads are in poor condition, for instance. There are millions of people that we know, unfortunately, still get water from lead pipes. We saw a significant impact in places without reliable access to broadband internet during the pandemic. Those are all infrastructure issues. I'm hoping that we can talk about the issues that the government and private businesses are grappling with; the impact that it's had. I think you're going to be sharing some examples, and on the positive side, if there are some mitigating actions that you see as a member of our Zurich Resilience Solutions team. Does that sound like a plan?

BLAIR: Definitely. It sounds like a good plan. So, the critical infrastructure really includes quite a bit. It's anything that gets people or goods where they need to go, like highways, bridges, tunnels, railways, airport transport. And then what else is included in that is what we need to keep humans sustainable and manufacturing going and things like that on your buildings and in your plants. And that's more the utility part of critical infrastructure. That includes the buildings, clean water, electricity, natural gas, nuclear energy — any of those things, any of those vital systems that are needed to keep our society really running.

GORDON: So, out of all of those elements, Andrea, obviously we can't drain them all in one podcast episode. I think you want to focus primarily on energy and water during our conversation today, but maybe we can talk for a couple minutes about bridges because there have been a lot of high-profile stories in the news about the safety of bridges. Can you speak to that for a minute?

BLAIR: Yeah, we've all kind of had some recent … one was very interesting, which was the Pittsburgh Forbes Bridge, where Biden was going to be doing a speech on an infrastructure bill that he had and was ready to sign. And they actually had to reroute where that was going to happen because the big bridge completely collapsed. That's a bridge that at the time that it happened, the injuries were few, but if it had been an hour later, they were saying during rush hour, that that bridge handles over 15,000 cars per day. Then another one that was more down in my neck of the woods — I live in Nashville — was the Hernando de Soto Bridge, which is a major artery on I-40, which really runs almost all the way across the country. Memphis area, center of the country, very large for goods and services.

GORDON: It's a big distribution hub, right?

BLAIR: Yeah. A full FedEx headquarters is there.

GORDON: Right.

BLAIR: But supply chain was impacted by that one, and that was down for quite some time. Then the very recent one was the I-95, right through Philadelphia, which is the main north-south artery on the East Coast, which was a tanker fire. But it really ended up being a success story because they got that bridge reopened in 12 days and they actually did some green initiatives there. They used recycled bottles as the material to reconstruct that bridge. So, there is an inspection system that's ongoing, but they're finding that our bridges overall are old, and they're just deteriorating. So, that's one aspect. We're not going to concentrate it on a whole lot, but I did want to mention it because it has been in the news and it's something that everyone can kind of attach to that transportation piece. We've also known about all of the cargo bays and import ports that have been having issues that have impacted the supply chain quite a bit as well.

GORDON: That's exactly what I was thinking is the supply chain disruption is where a lot of people become aware of things that are happening outside their immediate vicinity and maybe the roads or the bridges, highways, even tunnels I would imagine that you use locally. But then we see national news with these big headlines.

BLAIR: We’re such a global economy, so reliant on things, especially from the Pacific Rim. The cargo piece, Suez Canal issues, geopolitical issues even that don’t even involve physical infrastructure, so to speak, have really impacted supply chains. There are a lot of companies now that are really re-thinking geography and geopolitical issues, and transportation issues are becoming a big piece of whether they consider to go to an outside country supplier versus finding somebody internally.

GORDON: You mentioned cargo, Andrea. Are airports also included within infrastructure?

BLAIR: Yes. So, the critical infrastructure, again, it's the resources that we need to keep businesses and humans running. The infrastructure is what it takes to get them and their goods wherever they need to be. So yes, airports are included.

GORDON: Okay. So, let's shift now to utilities and I guess that would encompass the electrical grid, right? Is it also waters? Sewage? Would we put renewable energy in that category?

BLAIR: Yes. It would be anything that, again, is used to keep businesses and homes running, where the infrastructure is more if you need to go from your home or business somewhere else, whether it's a human being or a product. And the utility part is within those manufacturing facilities or schools or hospitals or homes — what it takes to keep them running. So, it includes electricity, water, natural gas, petroleum and solar. Solar is also looked as a solution. So, there's a little bit of transfer there. It also includes nuclear — any of those things that are used to keep people moving around.

GORDON: Okay. So, then what are some of the challenges that businesses face, who are providing those utility services? There's probably not a one size fits all answer to that.

BLAIR: No, certainly there's not and we can, again, like the bridges, if we want to just think of some recent events, for electricity there is a large European energy crisis and it's been said that it's really due to agility issues: their inflexibility to be able to transfer from natural gas to turbine or solar, anything like that. And it's also the geopolitical crisis. Some countries there are so small, like Ukraine, that Russia owns a lot of its power and it has the ability to kind of shut them off. And they have done that. Here in the states, we've had issues such as the Texas freeze. So, that really showed how vulnerable and fragile their electrical grid is. The cause is, as I understand it — because I listened to a speech on it a few months ago — is that they are so lean, which normally saves the customer's money, [but] when something like this happens, everything breaks down and that's why people were getting like $9,000 bills. And the cost of that, there was something like anywhere from 80 to 130 billion dollars in losses. Some were actually insurable losses, but then the rest were … Texas freeze is 80 billion to 130 billion in direct losses, then the ones that were tied to insurance claims were 10 to 20 billion. That's a massive thing when you think it was just one state that experienced that. Colonial Pipeline is probably another one that people remember. That's the major petroleum pipeline. There were gas shortages, so it was on the East coast and that was cyber-related.  

GORDON: Yeah, that was a hack attack, right?

BLAIR: Yeah, it was a hack attack.

GORDON: Yeah, I do remember that.

BLAIR: Yeah and that industry — that was surprising, because the power generation — power and utilities — have been pretty heavily regulated in terms of their business continuity planning. So, cyber was something that they just weren't quite ready for. It impacted all the way, because that it produces gas all the way to almost the Midwest. So, there were big gas shortages also. It's because everybody went to the pump, because of that. Then natural gas hasn't had as many issues, quite frankly, but our load is just so high on our grid. Our water infrastructure … a lot of it is very old, which is when you get into the Flint water issues, where they had contaminated water for quite some time. That was because the piping and the infrastructure that transports the piping wasn't good and so it ended up making the water unsafe for those residents in that area.

GORDON: All of these things, it's interesting. We take them for granted when they're functioning the way we expect them to and it's such a surprise then when something so crucial to our lives, to our businesses, you know, stops … fails … something happens to it, etc. It is an immense hardship for people or businesses who are experiencing those things. Are there any other examples in terms of either energy or water that you want to talk about? Because the U.S. water system is this sprawling network of entities that provide us hopefully with safe, reliable drinking water.

BLAIR: Yes. So, the water and the water issue … there's two, three different types of water sources. It's surface, ground and recycled. So again, Flint Michigan's issues, that was contamination. That was because the water distribution system was just old and had not been brought up to standard and ended up having contaminated water. It took them quite a while to straighten that out.

Gordon:Years, right?

BLAIR: Years. And then in the U.S. here, [in] the Western states, it's the shortages. So, it's the overpopulation. The predictions are that unless usage is reduced significantly, those states specifically, will be looking at severe water shortages in 2040. A lot of the aquifers are very low, and globally, more than one billion people don't have access to clean drinking water. Three billion experienced scarcity at least once per month. So, what we're seeing in the U.S. isn't even really the magnitude of what we see globally as far as the water goes.

GORDON: And when you talk about water, especially in the Western states, not only is it — especially California — a huge population out there, but that affects a lot of our agriculture because [of] that obviously reliance on water, but that's what a large portion of the water's going to, right?

BLAIR: Correct.

GORDON: So, what about the EPA? What's the Environmental Protection Agency…what is their responsibility?

BLAIR: The EPA is really more about when someone's using water. Like if a manufacturing plant is using water, they need to treat it before it goes back. And the EPA is also responsible for air emissions. We're not really talking about air, because it's not really a utility, but the EPA puts controls in place for companies; the EPA is involved in if your cars have to go through an inspection in your state for admissions and things like that. So, the EPA is more the overall governing body that is giving out some rules and regulations basically to keep the air and water clean, but they're not necessarily on the supply end. They're dealing with the end result. So, like the fires in Canada right now. They're unfortunately coming down and making our entire country smoky in areas. I mean, New York City, you couldn't even see the building across the street a couple weeks ago. So, they are dealing with the output. Something like a wildfire, they can't control that. You know, they can tell a manufacturing plant, you can only have this much emissions. If you're going to use public water, you have to clean it before you return it. So, they're doing some things, but they don't really control all of this.

GORDON: So, you've given us several examples of the bigger implications of not investing [in] or prioritizing, maintenance or improvement or even innovation for that matter. So, I think we've talked pretty thoroughly about those issues facing the infrastructure. Let's pivot now and talk about some of the solutions that might fix this. How do we plan it? How do we fund it? [How do we] make things hopefully safer, more efficient?

BLAIR: Yeah, I mean, really we all know that this is important. It's what we need to keep citizens and consumers safe and healthy. That is what we plan on doing but we need to invest in it, that's for sure. So right now, it seems as if the plan is when something breaks fix it versus just investing to, you know…

GORDON: Be proactive.

BLAIR: Being proactive about it. If a bridge collapses, we put all kinds of resources together. I mean, we do have the inspection program, which is great. When water goes bad or there's a main break, we are more reactive, right now, for all, whether it's the transportation, the bridges or the utility infrastructure, the water and energy. We fix it when it breaks, but we don't really have a plan to be proactive about repair and improvement.

GORDON: Do you have a couple examples of what solutions might look like if they were going to be more proactive?

BLAIR: I would say there needs to be more coordination with corporate America and the federal government in terms of this, teaming together, to go together on projects … big corporations that need these things … making sure funds are redirected to support them. Again, balancing supply and demand. They should always be looking at areas of growth. And you know, again, they'll add water when they absolutely have to. They add electricity when they absolutely have to. But they're not looking at the entire grid in a proactive manner as much. Most aren't. Looking at alternative sources­: hydro, solar, wind. Some states do give incentives for that, but to my knowledge for personal people, not companies, there are no programs to really support people in making those investments in themselves.

GORDON: Incentivize them.

BLAIR: Incentivize them. Correct. And again, the water education and water reclamation is another thing. There’s a lot of looking into ways to convert salt water…collect rainwater in better ways. A lot of us have seen those big white windmills. That's air support and you are seeing more solar panels, but I do feel it's people personally saying, “Hey, I'm going to do this because I'm worried about our power grid.” It's not just vulnerable from their perspective that it's aged and a little overtaxed; it’s what if either a geopolitical issue — someone decides to attack our utility infrastructure — it wouldn't be that difficult to create a real crisis situation.

GORDON: So, what I hear you saying is the support for maintaining or enhancing elements of the infrastructure is really fragmented. But if we start to look at it more holistically … you know, this is an ecosystem … you talk about keeping things in balance. I'd be curious to see, are there more things that companies — you mentioned that they have a lot of skin in the game here obviously to keep their supply chain running and to keep their consumers connected to goods, etc. — are there any other thoughts that you have about how companies can participate in that? Or you started to mention a kind of a symbiotic relationship with the government. What's that look like?

BLAIR: Yeah, so really working together and having companies look at a large industrial park. You know, some of them can have massive companies. They're making lots of money and they're asking them to go in and help support a federal grant for that area that may be improving. They're using large amounts of water — more than a regular consumer would — large amounts of energy and have large trucks going over the transportation routes. And they also have skin in the game that if those things aren't provided, they're going to have issues. So, asking them instead … many areas are giving so many tax breaks to the big companies to get the jobs there that they're almost not paying their fair share. Not everywhere, but in some ways, they're not paying their fair share. But incentivizing them to increase the reliability. I've seen in a lot of different companies where all of a sudden, they're drawing so much water to do what they do. They have their wastewater treatment plant, but if the community increases or they're in a big business park where a lot of companies move in, that small town’s water, typically by city, can't accommodate that. Having them help invest in improving, not just what they need for their industrial part. But let's just take a look at the whole system and work together to improve it for just the residents and the companies in the area.

GORDON: It's really a matter of corporate responsibility or being a good corporate citizen.

BLAIR: Exactly. If there was more cooperation and they would team together, it probably wouldn't cost the companies all that much because they'd be sharing the load with 20 other companies.

GORDON: And probably less to invest proactively, to your point, than have to scramble to make repairs when things fail, which is incredibly disruptive to business.

BLAIR: Yeah. I think the other thing that they probably should start to implement is automated monitoring of everything. Companies are using the internet of things to monitor all of their production equipment and all of their internal resources … but really educating the public utility providers how to do that, so they're going to find out before a failure that something is starting to degrade to the point that it might fail.

GORDON: Well, and it's interesting because that idea of constant monitoring … and I think I read something — you'll correct me if I'm wrong — about a technology they can attach to bridges…

BLAIR: Yes.

GORDON: …which is constantly monitoring their stability or if there's a crack or that kind of thing, because we've gone beyond the days that human inspectors can actually get to tens of thousands of bridges or roads or tunnels or things like that. It's just not technically feasible anymore.

BLAIR: Right.

GORDON: We're in an age where technology can help us do that if we make that investment, right?

BLAIR: Exactly. And they're not doing that. And I think that's an area too, where businesses could help. Again, that's that more proactive approach instead of waiting till something breaks and fixing it. I mean, we hear about a railway failure or whatever, and then they go out and fix it. But at that point, the damage is done, and you could have the same issue a mile down. There's only so much you can look at visually, humanly. Power's a little bit ahead [of other sectors] in being able to do that, especially when you get into the renewable energy such as solar and the wind. A lot of that is built in, but our primary electrical grid, not so much.

GORDON: Right. And like you said, we've seen the strain on that several times.

BLAIR: Yes. I mean, we're having brownouts pretty continually a lot of times in the summer, in the hot months. I think they did it … Texas as well… they did it in Nashville last summer, where we were actually for maybe 30 minutes a day? They just cut your power because Nashville's a very growing area and the electrical grid is having trouble keeping up.

GORDON: And that's just not sustainable for the long term.

BLAIR: It's not sustainable.

GORDON: We've covered a lot of ground today. Andrea, thank you so much for being part of this conversation and for sharing your insights about this.

BLAIR: Absolutely. Thanks for having me.

GORDON: And to all of our podcast listeners, thank you so much for tuning in. We hope you'll join us in the future for another edition of Zurich's Future of Risk podcast. Thanks.