Businesses Face Billions in Natural Disaster Economic Losses

A United Nations group and consultancy PwC warned businesses that they are exposed more than ever to billions of dollars worth of economic losses linked to natural disaster risks.

According to a report by the UN International Strategy for Disaster Reduction (UNISDR) and PwC, it warns large multinationals' dependencies on international supply chains, infrastructure and markets poses a systemic risk to 'business as usual'.

"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 Oz Ozturk, PwC partner and leader of the global initiative.

"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."

Annual economic losses from reported natural hazards were up from $10bn (€7.9bn, £6.6bn) in 1975 to $400bn in 2011.

In early May, UN Secretary General Ban Ki Moon described economic losses from disasters as "out of control."

In a separate report Global Assessment Report 2013 (GAR13), it showed mounting losses this century from catastrophic events topped $2.5tn.

Direct losses from floods, earthquakes and drought were reported as under-estimated by at least 50% while disaster risk was described in the GAR13 as 'a new multi-trillion dollar asset class'.

Today's report by PwC and UNISDR report that even businesses with established risk management systems in place need to do more to protect themselves fully against natural disasters.

It also adds that 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

"While many private sector players are demonstrating an improved understanding of how their operations could be affected by natural hazards, there is a huge need for businesses worldwide to play a more central role in reducing disaster risk. The economic losses speak for themselves," said Margareta Wahlstrom, UN Special Representative of the Secretary-General for Disaster Risk Reduction.

"The other side of the equation is that disaster risk management is a business opportunity. For example, the development of new crop insurance products or more disaster resilient infrastructure are major emerging needs in response to extreme weather events, rapid urbanization and growing exposure to disaster risk."