NEW YORK, May 20, 2013 /PRNewswire/ -- A new report from PwC and the UN International Strategy for Disaster Reduction (UNISDR) warns that large multinationals' dependencies on international supply chains, infrastructure and markets poses a systemic risk to 'business as usual', as mounting losses this century from catastrophic events top $2.5 trillion. The findings come after the UN's Global Assessment of Risk (GAR13) report warned that direct losses from floods, earthquakes and drought were under-estimated by at least 50%, economic losses were "out of control" and business needed to act to protect itself better.
The UNISDR/PwC report Working together to reduce disaster risk examines disaster risk management approaches and experiences in some of the world's leading global businesses and is released to launch a new initiative led by UNISDR and PwC to link private sector businesses of all sizes in better disaster planning.
Businesses taking part in the report participated in a pilot assessment of their risk management activities which showed that while good practices existed for disaster risk reduction for corporate-owned assets, the level of understanding and ability to manage risks in local supply chains was far lower.
The private sector has witnessed increasing numbers of occasions of indirect impacts of natural disasters amplifying losses globally through commodity price rises, supply chain disruption, workforce dislocation, asset damage, and lost or damaged infrastructure. The report highlights how:
- Even businesses with established risk management systems in place need to do more to protect themselves fully against natural disasters;
- Small, more vulnerable enterprises in developing economies do not have the capacity to strengthen their risk management and overall supply chain resilience alone;
- Global businesses need to consider shared risks with suppliers, SMEs and local businesses in their supply chain, particularly in developing and emerging economies, where disproportionate economic and human impacts of disasters are being felt;
- Few global corporations collaborate actively with governments across countries in which they operate;
- Some large businesses rely on the insurance industry alone for risk assessments, with most having only limited access to disaster risk information on which to base investment decisions.
"The risks posed by natural disasters go well beyond the boundaries of a company's operations. The damaging effects of disasters are reaching beyond protection insurance covering physical assets, and businesses need to consider productivity, declining customer demand and goodwill, and employee morale and stress," said Dennis Chesley, PwC principal and Global Leader of the firm's Risk Consulting Practice.
Oz Ozturk, PwC partner and leader of the global initiative, added, "The businesses we interviewed understand they need to do more than just do business in the communities they are working in. Collaborating on disaster risk management is a strong platform on which to create local partnership with governments and cities, and demonstrates that business is having a full and positive impact on society."
The initiative facilitates the involvement of private and public sector organisations of all sizes and in all sectors, to take steps on disaster risk reduction, offering an assessment tool to help companies identify where their companies' plans stand, and where gaps exist in the management of disaster risk.
Margareta Wahlstrom, UN Special Representative of the Secretary-General for Disaster Risk Reduction said, "While many private sector players can demonstrate a great understanding of how their operations could be affected by natural hazards, there is a gap to be bridged to share and coordinate these capabilities at scale, within sectors, through supply chains, to smaller and more local organizations, and also co-ordinating with public and government bodies."
Wahlstrom continued, "This is ultimately about improving the safety for all, and the security of our supply chains and economic growth, and this initiative will provide a common platform for understanding disaster risk management in the private sector across businesses of all sizes, in any industry or sector. Leadership by governments is important, but the only way losses can be reduced at scale is in partnership with the private sector, who are responsible for 70% to 80% of all capital investment worldwide."
To learn more, visit www.pwc.com/resilience.
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