Floods, earthquakes, cyclones, hurricanes, tornadoes, volcanoes, tsunamis and, of course, bushfires and droughts. There is not a place on the planet immune to the devastating impact of natural disasters.
International insurance giant Munich RE crunches the numbers each year for a harrowing snapshot into the tangible effects of natural emergencies. Since 1980, Munich RE has calculated the cost of 30 years of natural disasters globally to be nearly US$4.8 trillion ($7.1 trillion). It found in 2019 alone, 820 natural catastrophes worldwide caused overall losses of $US150 billion ($223 billion).
These figures are jaw-dropping on their own, but as those who bore witness to Australia’s horrific 2019/20 bushfire season can attest, the true cost extends beyond the financial to include the loss of life, homes, Australia’s natural biodiversity and to infrastructure and business. Given the indisputable impact climate change has on Earth’s natural systems these natural disasters, unfortunately, are likely to increase in frequency.
Now is the time for affected business to not just rebuild, but to reflect on how they can build back better and stronger than before. It is time for those businesses that were fortunate to have physically escaped to reflect on how they too, can stand strong against future natural disasters and take steps towards disaster resilience.
Natural disasters can impact businesses directly and indirectly through their value chain, so a company needs to consider the potential impact of a crisis on all aspects of its operation.
To assess direct impacts, companies must consider the potential damage to their sites and infrastructure and the safety of their employees, suppliers and customers.
A realistic recovery and rebuilding timeframe should also be considered. Scenario planning is a great tool for companies to stress-test their operations and identify areas of vulnerability. This planning process can also benefit companies by providing a medium to engage and educate their workforce on natural disaster impacts and management.
Emergency plans are vital for businesses and should be optimised for each company to cover a range of potential disasters, for example, flood, fire, cyclone or earthquake.
Plans should include:
- Vital information such as external authorities for notification or information purposes;
- Contacts for key internal personnel;
- Procedures to ensure site safety such as shut-down processes;
- Evacuation plans;
- Communications strategy;
- Recovery processes such as relocation plans; and
- Back-up system details.
Businesses also need to consider their community in disaster management and recovery.
It is worth investigating and stocktaking a company’s capability, so it is ready to lend logistic support and services to local relief and recovery efforts, if required.
For example, during Brisbane’s 2011 floods, Rock Trade Industries used its mining trucks to rescue individuals stranded by floods.
Physical asset management and planning
The physical assets of a company are often the first things that spring to mind when contemplating disaster impact.
Potential vulnerability to disaster is usually considered when acquiring new assets or developing infrastructure but vulnerability assessments must be considered beyond the retrospective risk. Climate change and the alterations we continue to make to the physical environment through urbanisation mean that the past is likely to be an underrepresentation of the future risk.
Where possible, it may be prudent to diversify operational sites and consider storing backup systems of vital information at a separate location. Businesses should also consider construction standards and whether they are adequate for a climate-changed future. Further, investigate developing alternative arrangements for supplies of critical resources such as water and electricity if traditional sources are disrupted.
Depending on the size of a facility, these may include renewable energy, battery storage, water storage and waste treatment systems. Where there are several companies in one area, there may be an option to build resilience through joint assets or shared plans. If disaster strikes, companies need to consider whether they are adequately covered by their insurance arrangements.
Businesses impacted by a disaster are faced with rebuilding have a strategic opportunity, a window of change, in which they can build back better.
This concept is commonly applied to physical infrastructure and property but can extend to products and services.
Strategic management and planning
When a natural disaster strikes, companies are physically, financially and strategically impacted so need to consider their value chain and vulnerability.
There are several questions a business should ask itself.
- What are the implications of major suppliers or customers affected by disaster?
- Are there contingency plans or a diversified set of suppliers/customers?
- Is there a sole reliance on rail, shipping or road to bring products to market?
- Do major suppliers have contingency plans?
- Are there force majeure clauses in contracts?
Strategically, a company must adapt to its new physical and market environment as its prior operation model may no longer work. The extent to which a business can recover is dependent on the level of slack resources that can be accessed to keep a company operating, meet obligations to staff and stakeholders and rebuild.
Companies must take responsibility for the sustainability of their operations. Considering the impact a company and its products have on the natural environment may identify new opportunities for improvement and new products that will benefit the environment and build strategic resilience into an organisation.
As shocking as it may seem, disasters may now be part of the new ‘business as usual’.
Companies who fail to plan for disaster management leave themselves at a critical disadvantage to their counterparts. It is the companies that can recover quickly and minimise the impact on business continuity who will arise stronger from the adversity.
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