Chemical, precision machinery, petroleum industries at high risk, says report by ABSG Consulting and EQECAT

Japan’s chemical industry could suffer major financial losses, while the precision machinery and petroleum industries could also suffer damage, from a large earthquake, according to a study by ABSG Consulting and its subsidiary, EQECAT.

Dennis Kuzak, senior vice president of EQECAT, commented: “The study, to be presented at a seminar here on November 14, also shows that “the five other industry groups in the study also have significant loss exposure,”

The additional five groups are steel, non-ferrous metals, automobiles, electronics and pharmaceuticals. Kuzak said: “The study does not represent all Japanese industrial companies, but demonstrates that the earnings impact for many industries can be very substantial.”

“The study used EQECAT’s highly advanced, probabilistic JapanQuake TM earthquake model to simulate the ground motions from earthquake events and to estimate the consequent industry damage,” he said.

Kuzak added: “Interest and concern by Japanese business leaders in earthquake risk has been heightened by recent earthquake events. After the Niigata prefecture Chuetsu-oki earthquake earlier this year, the automobile industry suffered a production drop of about 120,000 units caused by damage to a critical supplier’s facility that manufactured piston rings. It is obvious earthquakes can inflict heavy property damage and loss of life, as well as severely affect business revenue and profit. To help protect their businesses and control possible losses, senior corporate officers should initiate studies to fully understand all their earthquake exposure, and if warranted, implement prudent, pre-emptive risk mitigation strategies to manage earthquake risk.”

“Even earthquakes such as the Chuetsu-oki event, well below a magnitude 8 at a magnitude 6.8, caused considerable business losses,” Kuzak said.

The study examined the potential earthquake damage and loss for 32 corporations in the eight industry groups.