Media coverage always goes for the dramatic, and coverage of the Northridge earthquake was no exception – flashing visuals of flattened apartment buildings, collapsed freeway overpasses and grotesquely twisted steel-framed structures dominated the airwaves long after the disaster struck.

What wasn’t shown – but was just as alarming – is that more than 6,000 commercial and industrial structures were damaged on that pre-dawn morning of Jan. 17, 1994, according to the Public Policy Institute of California.[i] This contributed to significant losses for the business owners, employees, vendors, and customers. U.C. Berkeley found that more than 36% of all businesses surveyed said the Northridge quake caused them to lose an average of $85,026 in 1995 dollars. xxvi

That’s about $170,000 in today’s dollars. And that’s an average. Your costs could be more.

A similar study by the University of Delaware reached the same results, with a staggering 39% of all businesses surveyed in the Greater Los Angeles area reporting some sort of structural damage in the Northridge quake. About a third of those cases involved damage so severe that buildings were determined to be unsafe for occupancy. [ii] At the time that survey was conducted, (one-and-a-half years after the Northridge event), about a quarter of the businesses reporting structural damage from the quake said they had failed to recover from the experience. [iii]

“Firms that do business in a single location risk their entire investment should disaster strike,” the Disaster Research Center at the University of Delaware reported, adding that an overwhelming 80% of those reporting damage from the quake fell into that category.

Guarding against damage, disruption

Twenty-five percent of businesses will not reopen after a disaster, according to the Federal Emergency Management Agency[iv]. That’s a staggering figure, considering the sheer numbers of businesses that open shop every day to provide jobs, services, goods and entertainment to our communities.

In 2021, there were 521,077 businesses providing $67 billion in payroll to the Los Angeles/Long Beach area, according to the California Employment Development Department.[v] If another Northridge, earthquake hit today, any disruption to those businesses would have a rippling effect on the communities they serve.

The Anheuser-Busch brewery along the 405 in L.A.’s San Fernando Valley experienced its first major quake when the Sylmar temblor struck in 1971. The 95-acre facility suffered extensive damage from the 6.5 magnitude event and had to cease operations for a prolonged period of time to rebuild and replace what was damaged.

During that 1971shutdown, competitors were able to make large gains into the brewery’s market share, resulting in significant financial loss that motivated the brewery to place a greater value on seismic safety, the California Seismic Safety Commission wrote in a 1999 case study.[vi] Hard-hit by the reality of being unprepared in the Sylmar quake, the self-proclaimed “King of Beers” upgraded the brewery with earthquake retrofits and new construction designed to the latest seismic standards.

The money invested in those upgrades paid off big time: when the Northridge earthquake struck 23 years later, the brewery remained in operation and was even able to bottle water to help communities whose services had been shut off by the quake.[vii]

“Anheuser-Busch estimated that their facility would have suffered a direct property loss of about $350 million from the Northridge earthquake had there been no seismic strengthening,” the Seismic Safety Commission concluded. “This averted damage is more than 30 times the actual cost of the brewery’s loss control program.”[viii]

How can you protect your business?

The first step is to identify your business’ vulnerabilities.

Anheuser-Busch experienced extreme loss from the 1971 Sylmar quake, and knew where its weaknesses lie. It spent $1.2 million in seismic retrofits and other upgrades — an expense that ultimately saved the business more than $1.1 billion in combined property and business loss when the 1994 Northridge quake hit, state and federal officials reported.

“We never take shortcuts,” one of the company values asserts. “Integrity, hard work, quality, and responsibility are key to building our company.”[ix]

Businesses are extremely vulnerable to the risks presented by earthquakes, which threaten the life, livelihood and well-being of the communities those businesses serve.  This is true for businesses that lease space in a commercial building, as well as those which own and occupy their buildings. In either case, you should prepare for circumstances in which your business may experience the following:

  • Damage: Earthquake damage could shut down your business either temporarily or permanently. It may also mean significant costs for repairs, while still having to bear the burden of monthly mortgage payments.
  • Business disruption: If your business were to be closed, even temporarily, consider how you might move operations to another location and if that’s not possible, you may want to consider a retrofit to avoid this situation.
  • Loss of cash flow: A disruption in business can mean a loss of revenue, putting a heavy strain on a business owner’s ability to pay ongoing expenses.
  • Loss of equipment/inventory: Damage to equipment and inventory can stifle or halt production. This adds another burden to the initial costs of replacing what was lost.
  • Loss of workforce: Operational delays caused by earthquake damage may result in employees resigning to take jobs elsewhere. This may in turn lead to lowered production once operations resume.
  • Liability: Business owners may be held liable for costly losses incurred by employees or customers, when negligence is a factor.
  • Environmental concerns: Many businesses manage toxic substances that may pose hazards if exposed to the environment during an earthquake. Businesses are liable for cleanup costs associated with spills.
  • Loss of market-share to competitors: If business operations are slowed down or halted after an earthquake, it’s likely that competitors will absorb the difference — temporarily or permanently, depending on the situation. Conversely, businesses that come out of a major earthquake unscathed may be better positioned to fill voids left by less fortunate competitors.

Is your building vulnerable to damage in an earthquake? Here is a list of structures proven to be at risk:

  • Soft-story structures built before 1978: This style is common among apartment buildings, characterized by open parking on the ground floor and dwelling units built above. In some instances, the ground floor may be used as retail space and enclosed by windows that do not provide any structural support. These wood-framed structures are considered extremely vulnerable to collapse in a major earthquake.
  • Non-ductile concrete buildings built before 1978: These structures have concrete floors and/or roofs supported by concrete walls, columns and/or frames. Due to their rigid construction and limited capacity to absorb the energy of strong ground-shaking, these structures are at risk of collapse in an earthquake. In fact, non-ductile concrete buildings make up the majority of earthquake losses around the world. Because they are frequently used for office and retail uses that draw large numbers of people, the potential for death and injury with these structures is of particular concern.
  • Tilt-up construction built before the 1970s: This type of building began in the early 1900s, but didn’t really catch on until the post-World War II construction boom. This cost-effective technique of pouring a building’s walls directly at the jobsite and then raising or “tilting” the panels into position was and continues to be a popular way to meet California’s demand for new commercial buildings. The walls of a concrete tilt-up building can weigh between 100,000 and 300,000 pounds. Steel plates with headed studs are positioned into the forms prior to pouring the concrete to establish viable connection points that secure the walls to the foundation and the roof trusses to hold them in place. Many tilt-up structures built prior to the late 1970s were constructed with limited or weak connections that have been proven to fail in an earthquake, causing severe damage and/or collapse. These building defects can be easily corrected with seismic retrofitting.
  • Steel moment frame construction dates back to the 1880s with the very first skyscraper, the Home Insurance Building in Chicago, but this building technique was most commonly used in the 1960s to 1990s. Steel moment frame construction is characterized by the use of a rigid steel frame of beams connected to columns to support the many floors of the structure. These structures, when built before the 1994 Northridge earthquake, can sustain brittle fracturing of the steel frames at the welded joints between the beams and the columns. In fact, many moment frame buildings in Southern California reveal cracks and fissures in these frames and may be susceptible to collapse in a major earthquake.
  • Unreinforced masonry buildings make up many of the older structures typical in downtown communities. They are characterized by walls (both load-bearing and not) and other structures such as chimneys that are made of brick, cinderblock, or other masonry materials not braced with rebar or another reinforcing material. URM structures are vulnerable to collapse in an earthquake, due to a general failure of the mortar or when portions of the masonry such as parapets peel from the building façade and fall onto the sidewalk below.

Once you determine the vulnerability of your business to earthquakes, consider creating an earthquake resilience plan. Be sure to evaluate the safety of operations inside your buildings. Make certain that non-structural issues, such as shelves and other heavy objects, are strapped down. Hold regular earthquake drills and train employees the proper “drop, cover and hold on” technique, finding a safe place under a desk or table to protect against falling debris. Be sure to have ample medical supplies, water and food available in case services are unavailable for an extended period of time.

Encourage neighbors to fortify their buildings

A building doesn’t have to be completely destroyed for damage to hinder business operations. Businesses can also suffer hardship if neighboring structures fail, but theirs does not. Risk analyst Barbara Stewart calls the over-arching economic impacts of a major earthquake “The Ripple Effect.”

“A catastrophic earthquake will have a national impact, and there will be national damage,” she wrote in a report for the National Academies of Science.[x] She summarized those impacts in three categories: (1) disruptions to supply lines, (2) shocks to financial markets, and (3) drain on the insurance system.

“There has been very little study of these consequences for obvious, very understandable reasons,” she said. “It is quite human to focus on the suffering and physical damage that occurs immediately after an earthquake. The problem is that it is unknown, other than estimates of the physical damage, just how bad the general economic damage might be — and that uncertainty is a problem in itself.”[xi]

In San Francisco, the Association of Bay Area Governments performed a case study of a downtown Napa coffee shop to illustrate the problems typical of hardships businesses face following a major quake. In this study, the business did not suffer any direct damage from the quake — yet it was significantly impacted by surrounding damage and loss of services.

In the study, the unnamed business had rented the space and opened five years prior to the 2014 Napa earthquake and its customer base was split between local residents and tourists.  It employed fewer than 10 people, and its annual revenues were less than $500,000. Prior to the earthquake, the business was breaking even but it was growing rapidly, but after suffering no structural damage in the quake, the shop’s operations were devastated by surrounding damage, loss of utilities and more.[xii]

“The building was located adjacent to other buildings which experienced significant damage,” the study said. “For that reason, the building was posted as a ‘yellow’ placard. It took approximately 1 to 3 months for business operations to resume and approximately 3 to 6 months for the placard to be changed to ‘green’ because danger from adjacent buildings was removed… The business is currently operating at 50% reduced capacity.”[xiii]

Prior to the quake, the business had property insurance (including for contents), business interruption insurance, and business liability insurance. A few days after the quake, the study said, the owner made claims that were rejected. He also submitted requests for other funding from the Small Business Administration, corporate assistance, and local, state, or federal assistance and was rejected on all counts. FEMA assistance and other grant money was rejected because the business had re-opened. In the end, the owner dug into his own pocket to fund recovery: 70% from personal savings, 20% from business revenues and the remainder from debt.[xiv]

Examples like these are important to consider because the threat of an earthquake is not unique to any one structure. Vulnerability to earthquakes impacts entire blocks of businesses and homes. The Structural Engineers Association of Southern California has stated that resilience is a necessary part of any community. “Improved performance of our community’s and region’s built environment is critically important to saving lives as well as important to protecting its economy, character and fabric,” the organization stated.[xv]

Evaluate the cost benefits when developing your plan

Anheuser-Busch’s averted damage and loss — estimated at 30 times the costs of building upgrades and 60 times potential business loss — is indicative of the benefits businesses realize when they protect their assets.

Researchers at Caltech recently determined that for every dollar spent in retrofitting soft-story structures, property owners could expect to save up to seven dollars, and that study didn’t factor in loss to contents, alternate living expenses or deaths and injuries – all of which would have significantly increased the cost-to-benefit ratios.[xvi] FEMA found similar cost benefits in a two-year analysis of seismic retrofit scenarios applied to a variety of building types in locations throughout the United States. The study found high benefit-to-cost ratios for California, including a scenario of a tilt-up warehouse building in Hayward.[xvii] That return on investment was even higher for tilt-ups with a higher occupancy, such as light industry, the study found.

Another Caltech study found that seismic retrofits are cost-effective when expected annualized loss would be reduced by 50 percent or more at a cost that would equal no more than 10 percent of the replacement cost of a building.[xviii]

These figures show that retrofits make good business sense. In fact, the National Institute of Building Sciences in its seminal report, Mitigation Saves, estimates that for every dollar spent on mitigation, society sees a resilience benefit of four dollars or more.[xix]   Mitigation is Affordable and Saves up to $13 per $1 Invested.

Every building protected from earthquake damage enhances its capacity to spring back quickly from hardship – for tenants, employers, hospitals, government services and the building owners themselves.

Every building saved means businesses continue to operate, families can remain in their homes, and employees can go to work. It’s another step away from the chaos and crime that can result from a community’s economy shutting down due to earthquake damage.

You owe it to yourself, your employees and your community to make sure your business is prepared.

[i] Public Policy Institute of California, https://www.ppic.org/content/pubs/jtf/JTF_NorthridgeJTF.pdf

[ii] Kathleen Tierney, DisasterResearch Center, University of Delaware, 1997. https://onlinelibrary.wiley.com/doi/epdf/10.1111/1468-5973.00040?purchase_referrer=www.google.com&tracking_action=preview_click&r3_referer=wol&show_checkout=1

[iii] Kathleen Tierney, DisasterResearch Center, University of Delaware, 1997. https://onlinelibrary.wiley.com/doi/epdf/10.1111/1468-5973.00040?purchase_referrer=www.google.com&tracking_action=preview_click&r3_referer=wol&show_checkout=1

[iv] Federal Emergency Management Agency, https://www.fema.gov/press-release/20210318/stay-business-after-disaster-planning-ahead

[v] California Employment Development Department, https://www.labormarketinfo.edd.ca.gov/LMID/Size_of_Business_Data.html

[vi] “Earthquake Risk Management: Mitigation Success Stories,” California Seismic Safety Commission,

https://ssc.ca.gov › forms_pubs › ssc_1999-05_risk_success

[vii] Santa Clara Valley History, https://scvhistory.com/scvhistory/lw3354.htm

[viii] “Earthquake Risk Management: Mitigation Success Stories,” California Seismic Safety Commission,

https://ssc.ca.gov › forms_pubs › ssc_1999-05_risk_success

[ix] Anheuser-Busch company website, https://www.anheuser-busch.com/about/culture/ten-principles.html

[x] “Economic Impacts of a Catastrophic Earthquake.” Barbara Stewart. https://www.nap.edu/read/2027/chapter/8

[xi] Ibid.

[xii] Earthquake Engineering Research Institute, https://www.eeri.org/wp-content/uploads/116_PAPER_Almufti.pdf

[xiii] Ibid.

[xiv] Ibid.

[xv] Structural Engineers Association of Southern California, 2016 Safer Cities Survey.

[xvi] Association of Bay Area Governments, “Soft-Story Residential Buildings in Earthquakes – Risk Management and Public Policy Opportunities.” http://resilience.abag.ca.gov/wp-content/documents/PR-Soft-Story.pdf

[xvii] FEMA, “A Benefit Cost Model for the Seismic Rehabilitation of Buildings.” https://www.fema.gov/media-library-data/1403228695368-210f1be4cbc6a07876a737a02c69a543/FEMA_227_-_A_Benefit-Cost_Model_for_the_Seismic_Rehabilitation_of_Buildings_Volume_1.pdf

[xviii] Porter, Keith; et al, “Simple Estimation of Economic Seismic Risk for Buildings.” http://jimbeck.caltech.edu/papers_pdf/simplified_estimation_of_economic.pdf

[xix] National Institute of Building Sciences, “Mitigation Saves.” https://c.ymcdn.com/sites/www.nibs.org/resource/resmgr/MMC/hms_vol2_ch1-7.pdf?hhSearchTerms=%22Mitigation+and+saves%22