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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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236 Chapter 16
management is being increasingly viewed less as an additional cost and more as an opportunity to enhance business resilience, competitiveness and sustainability.
But this change is recent, and there are few blueprints or well-worn paths to follow. As such, this concluding chapter offers a compass rather than detailed navigational charts. In the coming years, as more businesses innovate and gain experience in this area, a new practice will emerge that in turn will help to redefine the future of disaster risk reduction.
16.1
Intersecting global
crisis
Any economic system is underpinned by values (Castells et al., 2012
Castells, M., Caraca, J. and Cardoso, G. 2012.,Aftermath. The Cultures of the Economic Crisis., Oxford,UK: Oxford University Press.. . Evidence gathered for GAR13 attests that this veneer of competitiveness may often be illusory. Businesses have exploited comparative advantages of different locations by decentralizing and outsourcing production, and have accelerated turnover time by fine-tuning the efficiency of their supply chains. In the process, however, they have increased their own exposure and vulnerability to earthquakes, storms, tsunamis, floods and droughts. In many cases, they have also generated significant shared social and environmental risks and costs.
As a result, many apparently productive and profitgenerating assets on business accounts may really be disaster-prone contingent and potential liabili-
ties. This contingent liability extends to (i) financial institutions—such as pension funds, sovereign wealth funds—that have invested significant parts of their portfolio in businesses whose assets are at risk; and (ii) cities and countries that have hidden and dissimulated their disaster risks to attract investment. Imagery used by cities and countries to highlight their comparative advantages is increasingly sophisticated and now relies as much on intangible values, related to quality of life, as on the basic conditions of competitiveness, such as infrastructure and the labour force. But in hazard-exposed locations, these comparative advantages are also illusory and can be dispelled with a single intensive disaster. GAR13 opened with the example of the decline of the Port of Kobe following the 1995 earthquake—once the spell is broken and business leaves, it may never return.
The global financial crisis that began in 2007 has metamorphosed into a broader economic, political and social crisis, particularly in Europe and the United States of America. One of the visible causes of the crisis was an over-accumulation of financial risk through large flows of capital into speculative, debtfinanced urban development. This debt—and the risks it internalized—was then sold and shared through opaque investment vehicles that had not been assessed or valued.
The accumulation of disaster risk in recent decades is analogous. In many hazard-exposed countries, governments, institutional investors, businesses and households are now sitting on another mountain of hidden debt—the contingent liabilities represented by unrealized disaster risk. This disasterprone capital stock, whether privately or publicly owned, represents another category of toxic assets, which do not appear on any balance sheets.
In addition, the contemporary world is characterized by unmitigated climate change, volatile energy markets, material resource, water and food scarcity, unequal wealth distribution, increasing consumption, increasing urbanization, ecosystem decline,
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