In disaster-prone Asia-Pacific, firms don’t quite grasp how exposed their suppliers are to natural catastrophes

Nepal, earthquake, nat cat

The vast majority of companies do not fully understand their suppliers’ exposures to natural catastrophes, according to the StrategicRISK Asia-Pacific Supply Chain Disruption survey.

Only 12% of respondents said they ‘comprehensively’ understood their key production facilities and logistics hubs’ exposures to nat cats. Almost three-quarters (73%) said they did ‘to some extent’.

The results should cause concern for risk managers in Asia-Pacific, the world’s most disaster-prone area when it comes to the frequency and severity of natural catastrophes.

But despite this, underinsurance in the region continues to be a major issue.

In the past 10 years, uninsured losses from storms, floods and earthquakes made up more than 85% of all economic losses in Asia’s emerging markets, according to a report by Swiss Re Corporate Solutions.

A common mistake, said Zurich Global Corporate global supply chain product leader Nick Wildgoose, was companies basing their suppliers’ locations on their mailing address or company headquarters, instead of their manufacturing or logistics location, which may be more exposed.

Parikshit Sen Gupta, vice-president, finance at hotel and resort company Shangri-La, said his biggest concern when it comes to managing the business’s supply chain is the “impact of [the] environment” and its flow-on effects.

InterContinental Hotels Group head of risk management Tan Shuh Lin added that risk managers had to improve their crisis management plans and their knowledge of the locations in which they operate.

“In addition, companies and governments must develop preparedness, response and recovery plans,” she said.

“Properties should be built to withstand earthquakes and typhoons, and risk managers should ensure they have adequate insurance. It is important to know what your policy covers and if it is adequate for the risk profile of your locations.”