• 20-MAY-2013

  • By PwC

Businesses urged to tackle disaster risk reduction in new UN / PwC led initiative

Working together to reduce disaster risk
A new report by the UN International Strategy for Disaster Reduction (UNISDR) and PwC warns that large multinationals' dependencies on international supply chains, infrastructure and markets poses a systemic risk to 'business as usual'.

The findings come after a separate report, the UN's Global Assessment of Risk (GAR13) report warned that direct losses from floods, earthquakes and drought were under-estimated by at least 50%. The GAR13 warned that business needed to act to protect itself better, as mounting losses this century from catastrophic events top $2.5 trillion and economic losses were described as 'out of control.'

The UNISDR/PwC report Working together to reduce disaster risk examined disaster risk management approaches and experiences in 14 leading global businesses, including Nestle, Walmart, General Electric, Citigroup and BG Group. It was launched to mark a new initiative led by UNISDR and PwC to link private sector businesses of all sizes in disaster planning.

Businesses taking part in the report undertook a pilot assessment of their risk management activities which showed that while good practices existed for disaster risk reduction for corporate-owned assets, the level of understanding and ability to manage risks in local supply chains was far lower.

The private sector has witnessed increasing numbers of occasions of indirect impacts of natural disasters amplifying losses globally through commodity price rises, supply chain disruption, workforce dislocation, asset damage, and lost or damaged infrastructure. The report highlights how:

• Even businesses with established risk management systems in place need to do more to protect themselves fully against natural disasters;

• Small more vulnerable enterprises in developing economies, do not have the capacity to strengthen their risk management and overall supply chain resilience alone;

• Global businesses need to consider shared risks with suppliers, SMEs and local businesses in their supply chain, particularly in developing and emerging economies, where disproportionate economic and human impacts of disasters are being felt;

• Few global corporations collaborate actively with governments across countries in which they operate

• Some large businesses rely on the insurance industry alone for risk assessments, with most having only limited access to disaster risk information on which to base investment decisions.

Oz Ozturk, PwC partner and leader of the global initiative, said:

"The risks posed by natural disasters go well beyond the boundaries of a company's operations. The damaging effects of disasters are reaching beyond protection insurance covering physical assets, and businesses need to consider productivity, declining customer demand and goodwill, and employee morale and stress.

"The businesses we interviewed understand they need to do more than just do business in the communities they are working in. Collaborating on disaster risk management is a strong platform on which to create local partnership with governments and cities, and demonstrates that business is having a full and positive impact on society."

The new initiative, facilitates the involvement of private and public sector organisations of all sizes and in all sectors, to take steps on disaster risk reduction, offering an assessment tool to help companies identify where their companies' plans stand, and where gaps exist in the management of disaster risk.

Margareta Wahlstrom, UN Special Representative of the Secretary-General for Disaster Risk Reduction said:

"While many private sector players are demonstrating an improved understanding of how their operations could be affected by natural hazards, there is a huge need for businesses worldwide to play a more central role in reducing disaster risk. The economic losses speak for themselves.

"The other side of the equation is that disaster risk management is a business opportunity. For example, the development of new crop insurance products or more disaster resilient infrastructure are major emerging needs in response to extreme weather events, rapid urbanization and growing exposure to disaster risk.

"This is ultimately about improving safety for all, and the security of supply chains and economic growth, and this initiative will provide a common platform for understanding disaster risk management in the private sector across businesses of all sizes, in any industry or sector."