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Global Assessment Report on Disaster Risk Reduction 2013
From Shared Risk to Shared Value: the Business Case for Disaster Risk Reduction |
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Global Assessment Report on Disaster Risk Reduction 2013
From Shared Risk to Shared Value: the Business Case for Disaster Risk Reduction |
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Building on the findings of GAR09 and GAR11, this third Global Assessment Report on Disaster Risk Reduction seeks to fill that gap. It explores why in- creasing disaster risks represent a growing problem for the economic and business community at different scales. The report examines how para- doxically business investments that aimed to strengthen competitiveness and productivity may have inadvertently contributed to increasing risk.
GAR13 explores how businesses, by investing in disaster risk management, can reduce costs and interruptions represented by disaster losses and impacts; how performance and reputation can also be enhanced by minimising uncertainty and unpredictability; why effectively managing disaster risks should be the hallmark of a competitive, sustainable and resilient business; and why a broader approach to business value creation that also addresses underlying drivers of risk is required.
GAR13 highlights the interdependence of the public and private sectors and why business competitiveness, sustainability and resilience will also depend on governments’ ability to manage disaster risk through effective policies. Governments depend on business investment to generate employment and the wealth required to provide public services. Likewise, businesses depend on reliable public infra- structure and utilities, on efficient urban systems, on an educated and healthy workforce and on a range of ecosystem services. Reducing disaster risks in business and in public investment presents a win-win situation for both.
The principal of shared value involves creating economic value that also benefits society by addressing its needs and challenges (Porter and Kramer, 2011
Porter, M. and Kramer, M. 2011.,Creating shared value., Harvard Business Review, 89(1/2): 62–77.. . shared risks into shared value for business, govern- ments and civil society.
Why do disasters challenge business?
The major disasters that struck Japan and Thailand in 2011 and the United States of America in 2012 re- vealed how disasters can impact businesses. Earthquakes, floods and storms can damage exposed and vulnerable factories, offices and other facilities and resources, interrupting and paralysing output and business processes.
But disaster risk does not stop at the factory gate. Businesses depend on infrastructure and urban systems run by utilities and the public sector. Damage to transport and energy networks, ports and airports or to neighbourhoods where employees live interrupts business and imposes additional costs. And in today’s globalised world, even businesses in safe locations may be affected by disasters that hit suppliers and partners on the other side of the globe.
Extended insurance coverage may enable businesses to compensate for both direct loss as well as supply chain interruption. But disasters have broader, more pervasive effects on business competitiveness. When business is interrupted, skilled workers may leave, market share may be lost to competitors, relationships with key suppliers and partners may be severed and confidence and reputation may be eroded. Once business is lost, it may never come back.
Businesses, of course, come in many shapes and sizes. And different sizes are exposed to different kinds of risk. Small businesses, for example, that serve local markets are affected directly by localised extensive disasters, as associated with flooding or landslides. And these businesses also depend heavily on local public infrastructure. Destruction of a bridge in a flash flood, for example, may isolate a local smallholder farm, workshop or restaurant from markets and suppliers for days. And many such businesses go bankrupt because they lack the cash flow or reserves to be resilient.
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