GAR 2013 Pocket Version

RISKY BUSINESS

Disasters have growing impact on business Recent major disasters such as the 2011 Great East Japan Earthquake and 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 and without adequate investments to reduce risks. And they experience indirect losses, as production, distribution and supply chains are interrupted; consequently, production, output and throughput are reduced.

Globalised supply chains create new vulnerabilities As supply chains become globalised, the interrup-

tion of one critical node or link produces regional and global ripples throughout the network. For example, as a consequence of damage to a maker of microchips for the automobile industry in Japan, 150,000 fewer Toyota automobiles were manufactured in the United States of America.⁴

Business loses its lifelines when disasters damage public infrastructure Even when businesses do not experience direct losses, they depend on publicly managed or regulated roads and transportation lines, energy and water networks as well as on a workforce that in turn depends on housing, education and health facilities. A survey of 1,200 businesses in the Americas highlighted that three of the top four hazard-related business disruptions were related to disruptions in power, telecommunications and water utilities.⁵

Small and medium enterprises are particularly at risk Large global businesses may be more resilient to disasters owing to diversified facilities, operations spread over many countries and regions and good

Figure 1 How businesses are affected by disasters

Main findings

(Source: UNISDR, adapted from PwC)