GAR 2013 Main Report

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power supply and functioning local transport to ensure that his client base as well as his workforce is maintained.

Similarly, although a large national company will have adequate insurance covering its main assets, its operations are equally vulnerable if its local small suppliers are vulnerable to highly frequent, localised events. Thus, effective reduction of extensive risk, if translated into more resilient infrastructure and communities, also reduces risk to larger businesses (Figure III.1).

In the same way, national and local governments that effectively reduce the more extensive layers of risk protect not only their infrastructure investments and avoid growing liabilities for vulnerable communities, but also contribute to an increasingly business-friendly and enabling environment that attracts larger investments. In the context of shared risks, how businesses, governments, investors and insurers perceive and assess disaster risk influences business decisions to invest in hazard-exposed areas. But equally, it can potentially motivate investments in reducing risks and strengthening resilience, thus creating a shared value for all stakeholders.

This subject will be the focus of Part III of this report. Chapters 11 to 13 look at the different ways that businesses, the finance sector and insurance industry consider disaster risks in their investment decisions. Chapters 14 and 15 then consider how different forms of risk governance mediate, regulate and provide incentives to these processes.