This 2013 edition of the Global Assessment Report on Disaster Risk Reduction examines how public regulation and private investment shapes disaster risk.
It finds that direct disaster losses are at least 50 percent higher than internationally reported figures. Total direct losses in 40 low- and middle-income countries amount to US$305 billion over the last 30 years; of these more than 30 percent were not internationally reported.
Disasters directly affect business performance and undermine longer-term competitiveness and sustainability. Business loses its lifeline when critical infrastructure is hit. When business leaves it may never return, and globalised supply chains create new vulnerabilities.
Decades of businesses decentralising and outsourcing production to facilities located in areas with comparative advantages, such as low labour costs and easy access to export markets, has been critical to enhancing competitiveness and productivity. However, because many of these areas are hazard-prone, this trend has dramatically increased the exposure of businesses and their supply chains to devastating hazards.
Investors have paid insufficient attention to this growing hazard exposure and its threat to business resilience, competitiveness and sustainability. The pricing of risk in insurance markets has yet to act as an effective disincentive to investment in hazard-exposed areas.
If business becomes more risk-sensitive, governments will be encouraged to invest more heavily in disaster risk reduction. Effective disaster risk management will become a basic requirement for competitive countries and cities that are successful in attracting business investment. Growing convergence of public and private initiatives to model and estimate disaster risks is beginning to underpin these efforts.
Businesses are now beginning to perceive investments in disaster risk management as a compelling proposition to create shared value. For example, investing to reduce the vulnerability and strengthen the resilience of smaller businesses that are suppliers of larger businesses strengthens the latter’s business sustainability. It also generates shared value in securing local employment, increased productivity, tax revenue and welfare.
