A new United Nations report makes the startling assertion that disasters have resulted in $2.5 trillion in damage within the last 13 years alone. Those losses fall principally on the private sector, warned UN Secretary-General Ban Ki-moon, who said at a New York City launch event for the report: “Governments bear the responsibility for disaster risk reduction. But the level of risk is also related to the where and the how of investment by the private sector, which is responsible for 70 to 85 percent of worldwide investment in new buildings, industry and critical infrastructure.”
The new Global Assessment Report on Disaster Risk Reduction 2013, prepared by the UN Office for Disaster Risk Reduction (UNISDR), was developed to make a strong business case for disaster risk reduction and focuses throughout on the effects of disasters on businesses. According to background materials from the agency, it’s common in investor circles to say that a trillion dollars have been lost to disasters in the past decade. “Our startling finding is that direct losses from floods, earthquakes and drought have been underestimated by at least 50 percent,” said Ban. UNISDR tapped new national disaster loss databases in 56 countries to come to the astonishing $2.5 trillion figure, along with survey responses from 1,300 small and medium enterprises (SMEs) in disaster-prone areas and a review of risk management processes in 14 global corporations such as ABB, Citigroup, GE, Hitachi, Nestlé, Roche and Walmart.
The report argues that increased globalization, outsourcing and extended supply chains have led businesses to invest in operations in hazard-prone locations. A new risk model developed by UNISDR estimates that annual losses just from earthquakes and cyclonic winds will be in the range of $180 billion annually this century. At the launch event, Margareta Wahlström, the agency’s chief, pointed to the catastrophic losses from the recent Japan earthquake and tsunami, floods in Thailand and Superstorm Sandy as examples of what’s at stake. She drew an interesting parallel in her remarks at the event: “In the wake of the global financial crisis, disaster risk stands as a new multi-trillion dollar class of toxic assets of unrealized liabilities.”
The agency hopes its report will help businesses do a better job of estimating and managing their disaster risk, to join in public-private partnerships to evaluate and mitigate shared risks, and to assist in efforts to develop greater resilience in society broadly.
Images © Infographic, UNISDR; Thailand flooding, DVIDSHUB; Katrina damage, dental ben.