Global Assessment Report on Disaster Risk Reduction 2013
From Shared Risk to Shared Value: the Business Case for Disaster Risk Reduction









background image
237
economic and political turmoil, rapid technological change and the increasing interconnectedness of global trade, financial markets, and supply chains (PwC, 2012
x

PwC (PricewaterhouseCoopers). 2012.,Risk in Review: Rethinking Risk Management for New Market Realities., March 2012., London,UK.. .
, KPMG, 2012), among other factors. These processes interact with each other and are underlying drivers of disaster risk. In this context, the ripple effects of recent intensive disasters have contributed to a world viewed more and more as a set of intersecting crises where it is increasingly difficult to separate cause from consequence (Williams, 2012
x

Williams, R. 2012.,The Rolling Apocalypse of Contemporary History., Chapter 1. In: Aftermath. The Cultures of the Economic Crisis., Oxford, UK: Oxford University Press.,. .
). Many future disasters will form part of a challenging terrain of improbable and un predictable events.
The number of business surveys released in the last years (Deloitte, 2012
x

Deloitte. 2012.,Aftershocks: Adjusting to the new World of Risk Management., Deloitte Development LLC.. .
; Ernst and Young, 2012
x

Ernst and Young. 2012.,Turning risk into results. How leading companies use risk management to fuel better performance.. .
; Forbes, 2012; Aon Benfield, 2011
x

Aon Benfield. 2011.,Global Risk Management Survey 2011., Chicago,USA: Aon Risk Solutions.. .
) all highlight that businesses perceive an increasingly riskier marketplace characterized by complexity, uncertainty, unpredictable events, and sudden change in which risks can manifest themselves swiftly and unexpectedly, with far-reaching ramifications.
In this environment of uncertainty and volatility, the values that underpin business are starting to change. Many businesses are becoming more risk averse and are strengthening their risk management capacities. Risk management is being increasingly perceived less as a cost and more as an opportunity and value proposition. Risk perception, therefore, seems to have gone through a point of inflection. Businesses are beginning to see effective risk management as a key competitive advantage that can enable long-term profitable growth and sustained future profitability. Many more large businesses report having a dedicated risk management department, and responsibility and accountability for risk management is increasingly being vested in the top layers of management (Deloitte, 2012
x

Deloitte. 2012.,Aftershocks: Adjusting to the new World of Risk Management., Deloitte Development LLC.. .
).
Recent business surveys highlight the value of strong and effective risk management, including reduced operational, credit, or market losses, and improved reputation and analyst ratings (Accenture, 2011
x

Accenture. 2011.,Risk management as a source of competitive advantage and high performance., Report on the Accenture 2011 Global Risk Management Study.. .
). There are at least three interrelated ways in
which investing in risk management generates results for businesses (Ernst and Young, 2012
x

Ernst and Young. 2012.,Turning risk into results. How leading companies use risk management to fuel better performance.. .
). First, identifying, assessing and addressing critical risks increases ownership and accountability, reducing uncertainty and strengthening confidence not only within the business but also among investors, analysts and regulators. Second, addressing critical risks also can lead to important cost reductions and savings, which are critical to business performance. These include avoided losses from business interruption, avoided costs of rehabilitation or relocation of damaged plant and facilities, as well as efficiencies gained from taking anticipatory or preventative actions. And third, risk management can also be key to value creation.
By analysing and valuing risks correctly, businesses can accept and own certain risks, which provide competitive advantage; savings from effective risk management can fund other strategic corporate activities; and investments in risk reduction may lead to higher returns.
Businesses that have invested the most in risk managementmaynanciallyoutperformtheirpeers.A survey carried out among 576 companies and reviewing almost 3,000 analyst and company reports highlighted that the 20 percent of businesses that had invested most heavily in risk management had implemented on average twice as many key risk capabilities as the 20 percent that had least invested and on average had earnings three times greater (Ernst and Young, 2012
x

Ernst and Young. 2012.,Turning risk into results. How leading companies use risk management to fuel better performance.. .
). Embedding risk management in business processes is increasingly seen as a key to resilience, competitiveness and sustainability: a business survival kit in an increasingly unpredictable, complex and fast-changing world.
As highlighted in Chapter 11, although corporate risk management is usually focused on financial, economic, market and legal risks, there are signs that disaster risk management is becoming a real concern. One business survey now lists disaster risk as the 16th most important out of the top 50 risks, and as the 6th most important driver strengthening










Contact us  |  Disclaimer  |  Our Partners  |  References  |  Acknowledgements  |  PreventionWeb |  The Global Platform  |  © United Nations 2011.