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5 Reasons Disaster Resilience is Important for Today’s Businesses

Each year, dozens of extreme weather events strike different parts of the world. Whereas there’s still some debate on whether these events are worsening and if such worsening is due to climate change, one thing that virtually everyone will agree on is that extreme weather is here to stay.

The scale of major weather events means there’s hardly anything governments or businesses can do to stop them. What they can do though is to develop resilience within their organization that reduces the disaster’s impact on their operations and reputation. The following are the main reasons why disaster resilience is so vital.

1.  Disasters Affect Performance, Sustainability and Competitiveness

Disasters can disrupt or completely cripple the operations of a business. Yet, for years, disaster recovery and business continuity plans were viewed as something only large corporations needed.

The irony of this presumption though is that of all organization sizes, large ones need such plans the least. They often already have a presence in multiple locations which means that the business is unlikely to completely collapse due to a single weather event.

Small businesses on the other hand usually operate from one location and have a relatively thin infrastructure. If disaster strikes, the business may be shut down permanently due to the severity of the data and financial losses.

2.  Big Data is Today’s Gold

Every day, businesses generate enormous volumes of data. This daily data adds to the already colossal historical data they hold in storage. For decades, it was argued that employees are an organization’s biggest asset. That has been challenged in recent years given the outsized role that data plays in the running of the modern enterprise.

We are not just talking about largely static information such as customer and employee contact information. There’s financial transactions, product distribution data, customer enquiries, vendor information, system logs (see parsing syslog messages) and more. The complete loss of such data can be catastrophic and make it difficult or impossible for the business to recover.

3.  Credit Ratings

Moody’s recently started to include climate change considerations in its credit ratings for US states. It’s broken down into six indicators meant to determine the susceptibility and overall exposure of the states to the impact of climate change.

Businesses could study the credit ratings of their state to assess what types of climate risks they are exposed to. With this information, they can develop an appropriate continuity and recovery plan.

4.  Economic Losses Are Growing

One of the consequences of consistent economic growth is that with each passing year, there’s a greater financial value of not just economic outputs but assets as well. This, and to a lesser extent inflation, is why the absolute value of economic losses from weather disasters is steadily rising.

There’s a huge gap between economic losses ($337 billion in 2017) and insured losses ($144 billion). Also, it’s thought that economic losses may be underestimated by up to 60 per cent.

It may not always be possible to completely avoid exposure but if you want to increase your odds of qualifying for an insurance cover, demonstrating that you are aware of disaster risks and have set up elaborate mechanisms to manage those risks will ensure insurers view you in a positive light.

5.  Regulator and Investor Demand

Investors and regulators are increasingly demanding that companies be transparent on non-evident risks (such as the danger of disaster) and appropriately price the risk into their balance sheets.

It’s impossible for one to completely avoid disaster-prone locations. However, understanding the local and national strategies established for disaster risk reduction then contextualizing it to the business’ operations will be acceptable to most regulators and investors.

Disasters are an existential threat to business. Resilience is about the very survival of a company.

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