Risks….and Opportunities…at the intersection of Resilience and Economic Development

As I proudly stated in my last post, I had the distinct honor of meeting with two officials of the United Nations Office for Disaster Risk Reduction in New York before the holidays.  Elina Palm and Maria Hasan were both gracious and receptive to hearing about the planned University of Oklahoma International Resilience Institute.  Elina gave me a copy of the UN’s 2013 Global Assessment Report on Disaster Risk Reduction, and encouraged me to read it in preparation for meetings I hope to have with their head office in Geneva next month.  I had seen the report, and scanned portions of it, but the holidays gave me the rare opportunity to actually read it.  What I learned was both troubling and encouraging.

Troubling was their assertion that, although reported estimates of economic impact of disasters worldwide have topped $100 billion in each of the past three years, which has never before happened, there is evidence that actual losses are up to 50% more than those reported. So, instead of $300 billion in losses in 2010, 2011, and 2012 combined, the economic losses are closer to $450 billion. Think of it–three years, almost a half-trillion dollars.  Those that do not see disasters as a significant economic development issue need to wake up!  In fact, the most surprising aspect of the 2013 GAR is how much of it has a direct relationship to economic issues. Of course, as always, there is no economic measure equal to human life, but the impacts of these events can, in fact, render many lives forever lessened, even if not lost.  

Consider these economic issues, taken directly from the 2013 GAR Report:

1.  Disasters directly effect long-term regional competitiveness and sustainability.  Prior to the 1995 Kobe earthquake in Japan, the Port of Kobe was the world’s sixth-busiest.  Despite massive investment in reconstruction and efforts to improve competitiveness, by 2010 it had fallen to 47th place.  Of course, some may say that is due to the rise of China and stagnation of Japan’s economy.  However, no one can deny that there was at least some negative impact.

2.  Globalized supply chains create new vulnerabilities:  Toyota lost $1.2 BILLION in product revenue from the 2011 Japan earthquake and tsunami.  

3.  Small and medium-sized businesses are particularly at risk. Yet, less than 15% of companies with less than 100 employees in disaster-prone cities in the Americas have a business continuity or crisis management plan in place.

4.  Disaster risk is a new multi-trillion dollar asset class. Globally, $71 trillion dollars of assets would be exposed to one-in-250 year earthquakes alone.  

But, believe it or not, there ARE positives to the new risk paradigm. For example:

1.  Business attitudes are changing–one business survey now ranks disaster risk as the 16th most important out of the top 50 risks, and as the 6th most important driver strengthening risk management. 

2. Businesses are increasingly factoring risk information into investment decision making.  Leading site location consultants, who are tasked with finding optimum locations for new corporate investment, increasingly cite disaster resilience as an important location factor.

3. Disaster risk management is a business opportunity:  The development of crop-insurance products or more disaster resilient infrastructure expands existing, and opens new, markets. 

4.  As the expiration of the 2005 Hyogo Framework for Action in disaster risk reduction approaches in 2015, international efforts are strengthening to create a new framework for disaster risk reduction, one that increases the role of businesses and Public-Private Partnerships in creating a more resilient planet.

As the 2013 GAR states “Disaster risk, reduction, therefore, is a compelling shared value proposition for business”. The wall between economic development and disaster risk reduction is falling as quickly as the Berlin Wall fell in 1989.  This time, the beneficiaries will be people from around the world, who will hopefully live in a more secure, more resilient, more economically sound planet. However, hope is useless without action.  So, act.  Give me your thoughts–good or bad.  Are investments, such as the Rockefeller Foundation’s $100 million+ investment in resilient cities, a waste?  Are the risks too low to be concerned about?  Stay tuned–a survey of site location consultants is underway.  Is the intersection of disaster resilience and economic development is simply a speed-bump, or something more–much more?  We shall see.  

 

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2 Responses to Risks….and Opportunities…at the intersection of Resilience and Economic Development

  1. As one who is intimately familiar with all kinds of post disaster trauma, as it impacts individuals and entire families, communities, our state and federal governments and, increasingly, the global impact of certain disasters, it is self-evident of the wisdom of having a non-political repository for validated information which can hasten recoveries. It is increasingly important to distill and effectively communicate what individuals and their governments need to do to effectively prepare for disasters; to mitigate as much as possible their impact; and identify and bring media attention to the “success stories” of disaster recoveries that too often are not widely reported. To me, this is essential as our planet’s climate swings, driven by atypical solar activity, (or lack thereof) wreak havoc of a severity that has previously not been observed.
    My hat is off to you, David Dodd, for taking the leadership to make it happen.
    Tom Nocera

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