Traditionally seen as a country relatively free of natural catastrophe risk, Malaysia is learning how to deal with more frequent flooding
Head of Willis Malaysia Maarof Omar (pictured) has told StrategicRISK that Malaysia is a “blessed country in the sense that it has does not really ever experience natural catastrophic losses”.
“Though we have seen our neighbours like Thailand, Indonesia and the Philippines suffer such losses,” he added.
This experience has driven Malaysian companies with global assets to consider their international natural catastrophe exposures, Omar told SR.
With more and more Malaysian firms venturing into countries prone to catastrophe loss, business interruption and security of supplies risks need to be reviewed, according to chairman of the Malaysian Association of Risk and Insurance Management Mohamad Bin Mohd Zain.
“The other issues to be look at is the readiness of the government agencies in the area that was never experiencing natural calamity as the slow response may prolong the business interruption exposure,” Zain said.
“Take the 2011 Thai flood as an example where the unpreparedness of the state increased the quantum of loss – both insurable and non-insurable losses.”
Lack of readiness
But it’s not only international nat cat exposures being reviewed by Malaysia-based corporates in recent times. One of Malaysia’s most pressing risks is now flooding, as Zain explains.
“Flood is happening in areas that never had flood before,” he said.
“The risk is in the lack of readiness. Are the people and companies in those areas ready for floods, especially from the perspective of business continuity management (BCM)? How strong are their BCM programmes and diversity of resources?”
Senior manager in the risk management division of Malaysia Airports Zalina Jaflus believes her company is prepared for the worst.
“For us learning from the past flood incident, we have developed flood emergency response teams at airports prone to flood and did structural improvement to prevent flood damage to critical equipment,” she told SR.
Telecoms firm Maxis Berhad’s head of business continuity and insurance Bernard Lee said that his company too had “learned from previous incidents and raised our key sites well above historic levels”.
Principal officer and chief executive of JLT Malaysia Michael Leong said that his firm’s clients were aware that proper risk management prior to an event and preparation for a possible natural disaster were key to reducing the impact of an event.
“Some of our clients have put in place contingency and business continuity plans for disaster preparedness and for restoration of operations quickly after an event, which is a vital element in minimising business interruption losses,” he said.
This is just a scratching of the surface of the risk landscape in the third largest economy in South East Asia, which we will explore in more detail in StrategicRISK’s upcoming 2014 Malaysia Risk Report.
Since we produced last year’s report, the MH370 and MH17 disasters have cast a shadow over Malaysian society and business, and one feels that long-term damage has been done to the country’s psyche.
While researching the 2014 report, we talked to local risk practitioners and brokers who explained that the Malaysia Airlines tragedies highlighted the importance of reputation and crisis management.
Furthermore, it was suggested they came at a time of rising societal tensions and anxiety about the strength of the Malaysian economy.
It will be interesting to see how this so-called ‘tiger-cub’ economy fares in what seems to be an increasingly challenging regional environment.
Keep an eye out for future risk reports on countries such as China, Japan, South Korea, Taiwan and the Philippines, sponsored by Zurich and supported by the Pan-Asia Risk & Insurance Management Association (PARIMA).
All our country reports are available here.