Discussion 1: Financial Reform & Disaster Risk = Business Opportunity
  • Sophie AbrahamSophie Abraham
    Dear All,

    THANK YOU you for taking part in the Post-2015 Framework for Disaster Risk Reduction Online Consultation, "Business for Disaster Risk Reduction and Resilience". This Online Consultation has been launched to provide a common platform for all those interested in influencing the post-2015 Hyogo Framework for Action (HFA2) to share their views and to consider the future direction of the HFA2 from a global business community perspective. Your input over the next three weeks will be thoroughly compiled and will act as substantive material and guidance to support the negotiation process of the HFA2 in the coming months.

    Our first round of discussion is entitled: "Financial Reform & Disaster Risk = Business Opportunity".
    This first round of consultation will focus on the role of financial reform, regulation, building codes and incentives to allow business to make safer investments and avoid creating new risk. Globally about 80% of all investments are made by private companies, both multinational corporations and Micro, Small and Medium Enterprises (MSME’s). The private sector plays a crucial role in managing disaster risk, given that businesses are not only exposed to natural hazards, but can also contribute to increased disaster risk in the process of driving economic growth and development. In order to avoid the creation of new risk, all private investments have to be resilient.

    Furthermore, the post-2015 framework should espouse disaster risk reduction and resilience in positive and aspirational terms, and rephrase disaster risk management as an opportunity for the private sector to build resilient business models that, in turn, support overall resilience of their communities.

    What are your thoughts on the questions below? Please provide an answer to as many of the questions as possible!

    Once again, thank you for your participation and input, which will be invaluable in informing the HFA2 process. I look forward to a fruitful online discussion with you over the next three weeks.

    Kind regards,

    Sophie Abraham (Willis Group, UNISDR Private Sector Advisor Group member)
    Moderator, Online Consultation, Business for Disaster Risk Reduction and Resilience

    ---

    In order to capture these elements, the following 5 key questions are now open for discussion:

    SET OF QUESTIONS:

    1. What are the main public policies that will provide the right incentives to encourage the private sector’s incorporation of disaster risk management into their decisions regarding people, processes, technology and investments? We are interested in hearing both examples of policies that are currently working, as well as future policies that should be implemented.

    2. How can risk communication, reporting and disclosure influence perceptions around disaster risk management and stimulate risk-conscious investments?

    3. What is the value proposition which can drive a higher level of prevention in risk management of public and private organizations and businesses? What are the related public policies and incentives to be provided to encourage its implementation?

    4. How can financial reform through active dialogue between public regulatory bodies, banks, institutional investors, insurance and others financial institutions from public and private sectors, be facilitated to make resilient investment mainstream and account for disaster risk within the financial system? Further, how can private sector organizations be incentivized to reduce disaster risk, through financial incentive and disincentive?

    5. The [UNISDR’s] Global Assessment Report 2013 documents industrial development in flood zones, tourism development in tsunami- and hurricane-exposed areas, and concentration of assets in risk-exposed urban areas: all of which accumulate risk. What underlying risk drivers in these examples can and should be made more transparent, and how? What are the major challenges or obstacles in reducing underlying risk factors? How can these be more efficiently addressed in the post-2015 HFA?
  • Masato TakamatsuMasato Takamatsu
    1. There are diverse incentives for the private sector, such as tax reduction, officially acknowledging the contribution for disaster prevention, offering a special financing scheme for investment to reduce disaster risks with lower interest rates, etc.
    It is critically important to make the senior management of private organizations understand that they are all long time 'investments' that protect their business from potential disaster risks.
    They have already made tremendous efforts and investment against IT risks and financial risks. Why not risks related to disasters?

    2. In order to encourage the decision makers in private sector, we should try to communicate with the terms that are more frequently used in their business world. They are more likely to think whether this will generate further revenue or minimize losses than whether or not it is good thing to do.

    3. The very first thing we should do to motivate the senior management of private organizations to take measures and invest on risk and disaster management is let them know clearly that their business is at a disaster risk.
    And that if a disaster becomes a reality, they are at a high risk of being severely affected in their tangible assets, operation, supply chains, brand and human resources, not to speak of financial damages.
    Tax deduction of investment (contribution) on infrastructure, facilities, equipment and stock of emergency food and water would be a strong incentive for private organizations, even though I do not know if such tax incentive is in real existence.

    4. For the management of private companies, expenses and investment for disaster prevention is a long-time investment with no guarantee of getting immediate direct financial profit. It would be better if the invested facilities and equipment are never used. For this reason, they may not be willing to pay extra interest for the additional loan for disaster prevention. A low-interest financing scheme specifically offered for the disaster risk management expenses and investment would encourage the private sector.

    5. In Okinawa, Japan, many of the beach resort hotels are located on a higher ground by the beach instead of right in front of the sea shore. They are more resistant against tidal waves, typhoon and tsunami, while offering even better view of the ocean from the guest rooms. It is not a result of construction codes or restriction, but the hotel owners' decision to make the guest facility as safe and comfortable as possible. Being a safe accommodation is a great advantage in competition with other lodging facilities, as the customers, especially organizers of big group trips, are extremely sensitive to 'safety' and tend to choose hotels with safety measures.

    ( I will continue my discussion after I hear voices of other members)
  • Thomas BronackThomas Bronack
    I believe that the disciplines of Enterprise Resiliency and Corporate Certification cover all of the concerns listed in this topic because, Enterprise Resiliency will combine all recovery disciplines under one organization using the same tools and speaking the sames language, while Corporate Certification will insure that your company complies with all of the laws and regulations of countries where you conduct business. Unfortunately, the most difficult part of achieving this goal is that it is an Enterprise Project and may cross continents, countries, cultures, languages, and time zones so it is very difficult to control.

    Mt experience has shown me that the coordination of documentation and work task direction is the greatest challenge of all because people are not always working off of the same document. To eliminate this problem I have developed a Management Dashboard System that will provide current and accurate data, while allowing for access from anywhere and at anytime. This system includes: Infrastructure (Asset Management, Inventory, Configuration, and all of the work assignments performed by the Infrastructure Staff); System Development Life Cycle (SDLC), Recovery Management, and Risk and Compliance Management.

    The system shows the progression of work through an organization and can be a valuable tool for tracking work assignments, deadlines, and status. A drill-down feature allows you to connect to the person actually performing a task so that you can discuss status or provide assistance. A work-flow management system is used to log, assign, track, analyze, and report on work activities so that improvements can be made. All of this by simply selecting or clicking the information you desire. As a fall-out grafts and metrics are developed to illustrate where work is being performed, by whom, and the costs associated with the work. A color scheme is used to illustrate if a project is on completed, being worked on now, pending, or behind schedule.

    I have a White Paper describing the process that I believe would help any organization better understand how to overcome the complexities that interfere with their being able to implement a safeguarded and optimized environment that is capable of sensing and responding to disaster events within recovery time objective (RTO) stated in end use contracts. The link to the article is:

    http://www.dcag.com/images/Management_Dashboards_Marketing_v1.6.pdf

    Please let me know if this helps.

    Tom Bronack
  • Sophie AbrahamSophie Abraham
    Thank you for your contributions to this discussion, Masato and Tom.
    It is great to read your suggestions, good practices and practical tools.

    What I notice from both your contributions is that risk communication, reporting and disclosure are important. Firstly, in order to make senior management understand with aligned business terms (Masato) and secondly, in order to keep track of progress across the business (Tom). I wonder if you have any examples of some of the business terms used to make this happen?

    In your experiences, what stimulates decision makers more: risk reporting and terminology with a focus on the opportunities (chances of increased profit, competitiveness) or rather on the risks (reputations risk, risk of losses)?

    It is interesting to read that the tourism industry in Okinawa, Japan did not need higher building codes or regulation to build resilient hotels. Other than competition, were there any drivers that steered investment towards resilience? And was this a sudden change triggered by an event or a gradual evolution?

    Do others have any examples of good practices where business moved towards resilience without any regulation? And what drove this movement?

    Many thanks once again for your input!

    Sophie


  • David BreschDavid Bresch
    Adaptation measures are available to make societies more resilient to the impacts of climate change. But decision makers need the facts to identify the most cost-effective investments. Such decision makers ask:
    1) What is the potential climate-related damage to our economies and societies over the coming decades?
    2) How much of that damage can we avert, with what measures?
    3) What investment will be required to fund those measures - and will the benefits of that investment outweigh the costs?
    The Economics of Climate Adaptation (ECA) methodology provides decision makers with a fact base to answer these questions in a systematic way. It enables them to understand the impact of climate change on their economies - and identify actions to minimise that impact at the lowest cost to society. It therefore allows decision makers to integrate adaptation with economic development and sustainable growth.

    We've applied the ECA methodology recently in New York city: http://media.swissre.com/documents/ECA_New_York_Gov_Factsheet.pdf
    further, we've analysed:
    Miami region, South Florida, USA: http://media.swissre.com/documents/rethinking_shaping_climate_resilent_development_en.pdf#page=105
    City of Hull, UK: http://media.swissre.com/documents/Economics_of_Climate_Adaption_UK_Factsheet.pdf
    Georgetown, Guyana: http://media.swissre.com/documents/Economics_of_Climate_Adaption_Guyana_Factsheet_en.pdf
    Apia, Samoa: http://media.swissre.com/documents/rethinking_shaping_climate_resilent_development_en.pdf#page=110
    Further case studies and detailed methodology (160p): http://media.swissre.com/documents/rethinking_shaping_climate_resilent_development_en.pdf
  • Sophie AbrahamSophie Abraham
    Thank you David for a clear message on the need for cost-benefit analysis as an important step for decision-makers to move towards resilience. It is also a clear example that there are some obvious financial wins on both sides: for local governments such as New York who aim to become more resilient and save money; and for business to deliver the services and implementation to do so.

    Have you, or others, heard of similar approaches to measure the Economics of Climate Adaptation for businesses to prioritize actions and resources to invest in a more resilient way?

    Furthermore, David, what lessons do you take away from applying the same methodology across a number of geographies?

    Many thanks once again for your input!

    Sophie
  • Anna KilmartinAnna Kilmartin
    The Australian Business Roundtable for Disaster Resilience and Safer Communities' ‘Building our Nation’s Resilience to Natural Disasters’ White Paper forecasts the cost of natural disasters in Australia to rise from $6.3 billion a year currently to around $23 billion a year in 2050 as population density increases and the severity and frequency of storms, floods, cyclones and bushfires grow.

    Each year the Australian Government currently spends an estimated $560 million on post-disaster relief and recovery compared with an estimated $50 million on pre-disaster resilience.

    The White Paper outlines how a national investment in cost-effective resilience and preventative activities can reduce the impact on government budgets of having to respond to disasters by more than 50%.

    A co-ordinated approach by government that prioritises mitigation activity:

    The White Paper suggests a fresh approach to pre-disaster resilience is required to enable more effective prioritisation of mitigation expenditure, based on the national interest and the best economic return.

    It acknowledges that while there is a lot of positive resilience and disaster management activity already underway, with work taking place under different policies, departments and agencies, there is an opportunity to be better aligned and co-ordinated.

    The White Paper recommends:

    • Improve co-ordination of pre-disaster resilience by appointing a National Resilience Advisor and establishing a Business and Community Advisory Group: The advisor would co-ordinate and prioritise activity across all levels of government. The Advisor would be supported by the creation of a Business and Community Advisory Group to leverage knowledge and expertise.

    • Commit to long-term annual consolidated funding for pre-disaster resilience: The fund would consolidate current mitigation spend and centralise new spending to deliver long-term taxpayer savings. A $250 million fund could deliver $12 billion in savings over time.

    • Identify and prioritise pre-disaster investment activities that deliver a positive net impact on future budget outlays: All mitigation to be prioritised based on the national interest and economic benefit as determined by the cost benefit ratio achieved and future budget impact.

    For example, a program of resilience expenditure of around $250 million a year to 2050 would ultimately generate budget savings of more than $12 billion and Australian Government expenditure on disaster response could reduce by more than 50%.

    Roundtable members are working constructively with governments in the national interest to prioritise public policy and funding to improve Australia’s resilience against future natural disasters and have committed their own organisations to deliver tangible outcomes that support this vital work.

    Roundtable members are the Chief Executive Officers from Australian Red Cross, Insurance Australia Group, Investa Property Group, Munich Re, Optus and Westpac.

    Members of the Roundtable have come together to champion the need for a more sustainable, coordinated national approach to make communities more resilient and people safer. They believe that national investment in disaster resilience and preventative activities is the most effective way to protect communities and reduce the impact of disasters.


    To learn more about the Australian Business Roundtable for Disaster Resilience and Safer Communities and to source a copy of the White Paper visit www.australianbusinessroundtable.com.au
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