As the reach of multi-national companies spreads ever wider, they will inevitably find themselves operating in hazard prone developing markets, where it is important that they plan to minimise risks to the operators of their business. Businesses stand to lose a great deal from natural catastrophes:
- Natural disasters can lead to disruption of infrastructure, including water and sanitation networks and electricity and gas supplies, which are crucial to business operations.
- Their capital assets - their buildings, plant and equipment - can be damaged and their supply chains disrupted by loss of infrastructure or transportation.
- They can lose their customers through death and displacement, or simply because customers can no longer afford their products or services.
When disasters strike, pre-planned relief operations are set in motion. Effective as these operations mostly are, they often do little to address the root causes of disasters. Background funding is often inadequate, leading to over-reliance on emergency funds for response rather than prior investment in prevention or even preparedness.
The challenge is to persuade business to go beyond post-disaster philanthropy and support prevention activities through work in partnership with the disaster reduction community in a way that is efficient, accountable and transparent.
With a range of factors increasing levels of disaster risk, including urbanisation, poverty and climate change, the case for business involvement in disaster prevention merits exploration. It must also be acknowledged that poorly managed business interests can contribute to rising vulnerability from natural hazards, for example land use for development that increases the risk of landslides or flooding. Therefore, natural hazard risk management should be part of the design of business projects, especially in high risk areas.
There is an obvious rationale for businesses working in disaster prone areas to map risks, predict the effects and invest in business continuity measures. Disaster prevention can make target communities less vulnerable to natural hazards and better able to cope during and recover after the event.
The role of business
All businesses need to balance the risks they face with the resources available. Investing in preventative measures to ensure business continuity means different things to different businesses depending on where they are in the value chain. For a multi-national, it might mean having plans in place to switch to alternative suppliers away from a disaster hit region. For the suppliers themselves - who may already be working with narrow profit margins - planning for the possibility of a disaster may present too heavy a burden on costs.
However, it is important that local companies stay in business after disasters; they are engines for growth in the reconstruction phase. Long term business relationships with suppliers are crucial, and business continuity should not mean expediency - dropping suppliers if supplies are temporarily disrupted. Preventative means of support can include training and awareness raising, as well as micro-insurance schemes.
The construction sector can play a major role in disaster risk management. Most importantly, building codes, responsible construction and sound urban planning can reduce loss of lives and damage to infrastructure in vulnerable regions. Moreover, in the aftermath of natural disasters, construction companies can provide vital expertise and equipment to assess building damage and later help rebuilding, ensuring improvements in construction to mitigate future potential impacts from further events.
Logistics and transport companies are already taking an interest in natural disaster response. Logistics companies have identified a match between their skills and the humanitarian aid agencies that specialise in preparedness and emergency relief. Logistics plays a substantial role in delivering aid in emergencies, and the circumstances and settings present attractive learning opportunities for private sector partners.
Notwithstanding the complexity of disaster prevention and who should pay for it, the private sector clearly has a lot of offer in dealing with disasters, particularly in partnership with development and humanitarian organisations or stakeholders, such as government agencies or the military in developing countries.
While the business case can be made, most importantly, responding to natural disasters proactively is the right thing to do. We are seeing employees and business leaders increasingly acting to make concrete their own values. As the effects of disasters are bought ever closer through round the clock television coverage, people will act to help wherever they can. That is human nature and companies are made up of people.
- Prof Alyson Warhurst is chair of strategy and international development at Warwick Business School. She is also a founding director of Maplecroft consultancy. She undertook this study on behalf of the ProVention Consortium. A copy of the full report is available from www.proventionconsortium.org Email: email@example.com