Resilience capital allocation

Alder Quay Logistics is a fictional company. Its 20 sites, loss history, hazard indices, valuations and 60 proposed measures are synthetic, generated for this demonstration. The model, the arithmetic and the selection logic are real.

Expected annual loss is frequency × severity × hazard index, per site and per peril, plus business interruption priced as events × downtime × the daily value of declared BI exposure. Measures are ranked by benefit-cost ratio and funded in that order until the budget runs out, skipping anything below the hurdle. Benefits are discounted over the stated horizon. The tail comes from a Monte Carlo of lognormal annual losses with a triangular systemic frequency factor. Structure follows the ISO 31000 process.

• FEMA National Risk Index for Natural Hazards: method template for expected annual loss. fema.gov
• FEMA National Risk Index FAQ: why hazard indices are treated as ordinal drivers, not dollars. PDF
• NFPA Warehouse Structure Fires: fire as a principal warehouse peril; sprinkler adequacy as the control. nfpa.org
• FM Property Loss Prevention Data Sheets: full sprinkler coverage as the benchmark. fm.com
• FEMA P-348 and P-2181 3.4.2: elevating electrical plant as established flood mitigation. PDF
• ISO 31000:2018 Risk management guidelines: identify, analyse, evaluate, treat, monitor. iso.org

Sources retrieved 19 September 2026. They support the method. The percentage effect of each measure, the hazard indices and every dollar figure on this page are synthetic or are analysis assumptions, never sourced fact.

• Only 3.7 years and 120 claims calibrate frequency and severity. The systemic factor in the simulation carries that uncertainty, but confidence in per-peril rates is low.
• Hazard indices are invented ordinal scores. They are not FEMA National Risk Index or NOAA values, and a city label cannot support parcel-level flood assessment.
• This is total economic loss, before insurance recoveries. Limits, deductibles and the BI waiting period are not applied.
• Greedy ranking by benefit-cost ratio is a heuristic. With a binding budget, an exact knapsack could do marginally better.
• Measure benefits are counted against the full site loss. Where several measures hit the same peril at one site, the combined figure used in the ledger is lower.