Disasters are having a growing impact on businesses.
The 2011 Great East Japan Earthquake and the Chao Phraya River floods in Thailand have focused attention on the growing impact of disasters on the private sector.
Businesses suffer direct losses when they have invested in locating factories, offices, plants, warehouses and other facilities in locations exposed to hazards such as floods, cyclones, earthquakes or tsunamis, without adequately investing to reduce the risks.
Aimed at making the world a safer place, policy makers and business leaders from around the world gathered in Geneva from May 19 to 23 for the Fourth Session of the Global Platform conference on disaster risk reduction held by the United Nations International Strategy for Disaster Reduction (UNISDR).
Attended by around 4,000 representatives of governments, businesses, NGOs, scientists and academics, the forum is expected to mobilize resources to create awareness and ways to reduce risks stemming from disasters.
“This gathering shows the cross-cutting nature of disaster risk reduction. The representatives are the keys to building resilience to disasters and making our communities safer. This is our collective and shared responsibility,” said United Nations deputy secretary-general Jan Eliasson on Tuesday. Eliasson explained that no country had a leading model of disaster risk reduction.
While Japan is considered the model in the campaign, the country’s encounters with deadly combinations of disasters was overwhelming and catastrophic. The US state of Oklahoma was recently hit by a tornado, killing at least 24 people and injuring about 240, despite measures the country had long put in place to reduce the risks.
The impact of such disasters, which have cost trillions of dollars in economic losses, was evident for the world’s most economically developed countries.
“Think how much more dangerous the situation is if there is no risk management process in place,” said consulting firm PwC’s head of crisis leadership practice Paul Robertson in a session during the Global Platform conference.
“Good crisis management creates value and without it, firms could potentially be in ‘company killer territory’,” said Robertson.
Aside from PwC, 14 global corporations – ABB, ARUP, BG Group, Citigroup, General Electric, HCC Group, Hirco Group, Hitachi Group, InterContinental Hotels Group, Nestle, NTT East Corporation, Roche, Shapoorhi Pallonji & Co and Walmart – gathered in the Global Platform conference to design a framework to facilitate the role of the private sector to take leadership in disaster risk reduction.
A concrete outcome of the framework, such as standards for buildings, financing schemes for projects in disaster-prone areas and supply chain management during disasters, is expected to be endorsed during the World Conference on Disaster Reduction in Japan in 2015.
While efforts to reach common standards are ongoing, Indonesia has taken a milestone measure to have businesses comply with a map on disaster-prone areas when determining locations and building standards to place their facilities.
“Since the 2004 tsunami, we have raised the awareness of businesspeople to the need for evaluating the locations of facilities and infrastructure,” said National Agency for Disaster Management (BNPB) chairman Syamsul Maarif on Wednesday.
“Most provinces have their own bylaws that set standards for business facilities to reduce disaster risks. One good example is the West Sumatra administration, which regularly invites us to advise on the construction of big buildings and assess existing building standards,” said Syamsul.
West Sumatra was hit by deadly earthquake in 2009, killing more than 1,000 people. The BNPB estimated that economic losses from the disaster topped Rp 21.6 trillion (US$2.2 billion).
According to Syamsul, big local and international businesses were already aware of the risks entailed with their operation in Indonesia in relation to natural disasters. He said most of them had adjusted their building standards, supply chain management and facility locations.
“The recent Jakarta flood has alarmed them again over the need of their facilities to be in safer places, or to build necessary infrastructure that can prevent facilities from being impacted by disasters,” he said.
Since 2000, there have been more than 8,000 disasters in Indonesia, such as earthquakes, tsunamis, floods, landslides, volcano eruptions and droughts. These disasters have claimed more than 181,000 lives and displaced around 7.7 million people, according to the BNPB.
The agency has estimated economic losses to the tune of more than Rp 106 trillion (US$10.9 billion), almost double the Rp 55.9 trillion allocated for health services in the 2013 state budget.
Economic losses from natural disasters in RI
1. Aceh tsunami (2004) Rp 39t
2. Earthquake in Yogyakarta (2006) Rp 27t
3. Earthquake in W. Sumatra (2009) Rp 21.6t
4. Merapi volcano eruption (2010) Rp 3.56t
5. Jakarta floods (2013) Rp 8t