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Resilient Businesses for Resilient Nations and Communities

1. Resilient businesses for a resilient Asia-Pacific

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[PROVISIONAL COVER PAGE]

RESILIENT BUSINESSES FOR RESILIENT

NATIONS AND COMMUNITIES

UNDERSTANDING THE ROLE AND POTENTIAL OF ASIA-PACIFIC BUSINESSES IN

DISASTER RISK MANAGEMENT

DISCLAIMER:

The contents of this document have not been peer-reviewed. While to the best of the authors’

knowledge the information and data presented are correct and accurate, those intending to

reference the information contained herein or make decisions based on this information are

advised to wait until the peer review process is completed. The authors are fully and solely

responsible for the contents herein presented.



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“…we cannot envision a resilient society without resilient businesses. To that end, the

private sector must stand up and be counted as a major component in the post-2015

disaster risk reduction framework.”

– Eduardo Batac, Undersecretary of State, Philippines.



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Foreword

Disaster risk management is increasingly being recognized as a priority area in order to protect

the hard-earned development gains in Asia Pacific region. However, businesses and the private

sector have not yet been sufficiently involved in disaster risk management. The private sector is

estimated to hold 70-85% of the investment globally in most national economies and makes over

US$80 trillion worth of institutional investments on an annual basis. Clearly, the global community

can no longer pursue a disaster risk management agenda without involving the active

participation of the private sector. In turn, the private sector needs to step up to the challenge,

through multi-stakeholder partnerships, to build its own resilience, to contribute more to the

resilience of the global economy, and to attain safer nations and societies.

The present publication is built on an almost two year collaboration by the agencies involved in

promoting the increased involvement of the private sector in DRR. After a decade of promoting

public-private partnerships, including those in the ESCAP Business Advisory Council, a partnership

between UNESCAP, UNISDR and ADPC produced two studies on DRR and the private sector. The

first study on ‘Engaging Asia-Pacific Businesses in Disaster Risk Management’ (2014) was

generated following a series of engagements with the private sector to develop the Asia-Pacific

inputs into the post-2015 framework for disaster risk reduction. The second study (2014) served

as the basis for a technical session on ‘Public-Private Partnerships’ at the 6th Asian Ministerial

Conference for Disaster Risk Reduction in Bangkok, Thailand. Subsequently, this latter paper was

brought to the broader regional platform at the Asia Pacific Business Forum held in Colombo, Sri

Lanka towards the end of 2014.

As the world prepares for the post-2015 framework on disaster risk reduction, there is a strategic

opportunity to establish a clear set of responsibilities and measures of accountability for

meaningful private sector engagement in disaster risk management. This will also involve the

broadening of the current paradigm from the responsive conventional Corporate Social

Responsibility to include disaster risk reduction and ultimately, disaster risk prevention.

Implementation of the HFA2 in Asia-Pacific will require careful consideration as more than 90% of

businesses in the region are micro, small or medium enterprises (SME) which tend to be highly

exposed to risks. Establishing an approach which involves major multinational corporations,

alongside strengthening SMEs, will be critical for the effective engagement of the private sector in



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disaster risk management. As such, the provision of an enabling environment with sound legal

and regulatory frameworks which are actively implemented and enforced, the establishment of

sound monetary and non-monetary incentive schemes and increased accessibility to risk finance,

insurance and information will be key. In addition, the promotion of multi-stakeholder

partnerships among the public and private sectors, nonprofit organizations and academic bodies,

will need to be further promoted.

The next challenge will be in translating the post-2015 framework on DRR into actions. As public

policy makers will need to make informed choices, private sector leaders will also need to

embark on multi-stakeholder dialogues to integrate disaster risk management into their business

processes and, more importantly, in their investment decisions thus preventing the exacerbation

of existing risks and the creation of new risks.

Involvement of private sector in DRM is still in formative stage and goods practices are yet to be

systematically accumulated. Notwithstanding, first steps have to be taken to begin documenting

the evolving thoughts and practices particularly in the Asia Pacific region. Therefore, this

publication provides an invaluable reference point on the private sector’s crucial role to close such

gaps and to improve our understanding of the private sector’s involvement in disaster risk

management. It offers the Asia-Pacific perspective on business and disaster risk management, the

public sector’s role, and the collaborative arrangements in promoting resilience. It also offers best

practices, case studies, and examples.

We believe this study will prove useful in the implementation of future disaster risk reduction

agendas that seek the full engagement of the private sector. Our organizations, and those other

dedicated partners with whom we work, look forward to joining you in making a safer and more

resilient Asia-Pacific region.

Mr. Shane Wright

Executive Director

Asian Disaster Preparedness

Center

Shamika Sirimanne

Director, Information and

Communications

Technology and Disaster

Risk Reduction Division, UN-

ESCAP

Ms. Jainey Bavishi

Executive Director

R3ADY Asia-Pacific



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Acknowledgements

This publication is the result of a joint effort between the Asian Disaster Preparedness Center

(ADPC) and the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP),

with financial and technical support from R3ADY Asia-Pacific.

On ADPC’s side Pedro J. M. Edo led the research and writing team under the supervision of Bill

Ho, with Kilian Murphy providing outstanding research assistance and inputs. On ESCAP’s side,

key team members comprised Puji Pujiono, Nia Cherrett, Alf Bilkberg, Sung Eun Kim and Emma

Johnston under the overall guidance of Shamika Sirimanne, of the Information and

Communications Technology and Disaster Risk Reduction Division (IDD). Danate Donparadorn of

ADPC and Mei-Ling Park of ESCAP were responsible for the excellent layout and graphic design

of the publication.

Masato Abe of ESCAP’s Trade and Investment Division (TID) provided both supervision and

substantial technical inputs during the preparation of the two papers which this book is built on.

In particular, he appreciated Soka University of America for providing valuable research facilities

to the study. Other important contributions during this phase came from Deanna Morris and

Teemu Puutio, consultants at TID, ESCAP. Chanidabha Yuktadatta and Aslam Perwaiz (ADPC)

provided extensive contributions on BCP and SMEs throughout the papers. ESCAP interns Toni

Reyes, Jeroen Schillings, Timothee Pouzet and Yiqun Li, provided useful research assistance.

The team is also grateful to Brigitte Leoni and Natalia Tostovrsnik from UNISDR Asia-Pacific

Regional Office for providing funding and guidance for the two papers, as well as Marc-Olivier

Roux, also from UNISDR Asia-Pacific Office for his comments on the final phase of the project.

This publication was made possible through the kind contributions of the following partners: Maki

Yoshida of the Asian Disaster Reduction Center (ADRC); Takeshi Komino of Church World Service

(CWS) and the Japan CSO Coalition for 2015 WCDRR (Japan Platform, NGOs & Companies

Partnership Promotion Network, and The Network of Civil Disaster Response Organizations and

Supporters of Disaster-Stricken Areas); Jane Rovins of Disaster Risk Reduction Solutions Ltd.; Dr.

Bingunath Ingirige from Salford University; Yoshiko Abe and Akira Doi of Kokusai Kogyo Co. Ltd.;

and Bharat Pathak of Mercy Corps Indonesia. Contributions from Afghanistan, India, Indonesia

and Pakistan, as well as from the Australian Business Roundtable, the Japanese International



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Cooperation Agency (JICA), the Pacific Asia Travel Association (PATA) and the Top Leaders Forum;

as well as comments from different partners during the 2014 IAP Meeting, enriched the

publication.

The team also secured interesting insights from interviews conducted with Apichai Intakaew of

Siam Cement Group, Dinesh Bista of Soaltee Hotel Limited, Asif Ibrahim of Newage Group of

Industries, Vasant Chatikavanij and his team of Loxley Public Co. Ltd., U Win Aung of Dagon

Group of Companies, Niyati Sareen of Hindustan Construction Company Group, Satoshi Sugimoto

of Toyota Thailand, Akira Doi of Kokusai Kogyo Co.Ltd. and Kiki Lawal of UNISDR.

Special thanks also go to Dale Sands of AECOM and UNISDR-PSAG, Wei-Sen Li of APEC,

Catherine Boiteux of AXA Group and Hiren Sarkar, for their very useful comments during the peer

review process of the initial papers.

Lastly, the team is extremely grateful to Jainey Bavishi from R3ADY Asia-Pacific for making this

project a reality by providing the necessary funding and technical support.



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Table of contents

FOREWORD 4

ACKNOWLEDGEMENTS 7

LIST OF ABBREVIATIONS 13

EXECUTIVE SUMMARY 16

1. RESILIENT BUSINESSES FOR A RESILIENT ASIA-PACIFIC 28

1.1 SOCIOECONOMIC DIMENSIONS OF DISASTERS IN ASIA-PACIFIC 28

1.1.1 DISASTER CHARACTERISTICS AND TRENDS 29

1.1.2 IMPACTS OF RECENT DISASTERS ON ASIA-PACIFIC BUSINESSES 33

1.2 ASIA-PACIFIC BUSINESSES: WORLD’S ENGINE FOR GROWTH AT RISK 34

1.3 INCREASED EXPOSURE OF BUSINESSES TO DISASTER RISKS 36

1.3.1 FAST-GROWING INVESTMENTS AND REGIONAL INTEGRATION IN ASIA-PACIFIC 37

1.3.2 RAPID DEVELOPMENT OF GLOBAL VALUE CHAINS (GVCS) 41

1.4 BUSINESS IN THE HYOGO FRAMEWORK FOR ACTION 43

2. RISK, RESILIENCE AND ACCOUNTABILITY 45

2.1 DEFINITIONS OF RISK AND RISK MANAGEMENT; BUSINESS CONTEXTUALIZATION 45

2.2 SUSTAINABLE DEVELOPMENT AND BUSINESS RESILIENCE 47

WHAT MAKES A BUSINESS RESILIENT? 48

BUSINESS CONTRIBUTION TO COMMUNITY RESILIENCE 52

2.3 THE ROLE OF BUSINESSES IN RISK CREATION AND RISK REDUCTION 53

2.4 THE PRINCIPLE OF SHARED RESPONSIBILITY AND ACCOUNTABILITY IN DRM 56

3. DISASTER RISK MANAGEMENT FOR BUSINESSES 61



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3.1 DRIVERS FOR BUSINESS ENGAGEMENT IN DISASTER RISK MANAGEMENT: AN ISSUE OF BUSINESS

MANAGEMENT ACCOUNTABILITY. 61

3.1.1 A PROPOSED MODEL OF DRM DECISION-MAKING 63

3.2 ECONOMIC IMPACT OF DISASTERS ON BUSINESSES 74

3.3 THE BUSINESS APPROACH TO RISK MANAGEMENT 77

THE BUSINESS RISK MANAGEMENT CYCLE 77

RISK ASSESSMENT AND THE IMPORTANCE OF RISK INFORMATION 78

RISK TREATMENT STRATEGIES: AVOID, ACCEPT, MITIGATE OR TRANSFER 78

COST-BENEFIT ANALYSIS OF RISK TREATMENT STRATEGIES 80

3.4 INDUSTRY STANDARDS FOR RISK MANAGEMENT 81

NATIONAL STANDARDS 82

REGIONAL STANDARDS 83

INTERNATIONAL STANDARDS 84

NEW STANDARDS IN THE TOURISM SECTOR 88

3.5 BUSINESS CONTINUITY MANAGEMENT AND PLANNING 91

INDUSTRIAL PARKS AND AREA-WIDE BUSINESS CONTINUITY 93

3.6 GLOBAL VALUE CHAINS AND DRM 95

CHALLENGES FACED: DISRUPTIONS 95

GVC RESPONSES TO INCREASING DISASTER RISKS 98

3.7 DISASTER RISK FINANCE AND TRANSFER FOR BUSINESSES 101

RISK FINANCING TOOLS 101

RISK TRANSFER TOOLS 101

THE CURRENT SITUATION: LOW INSURANCE PENETRATION 102

CHALLENGES IN INSURANCE ADOPTION 105

3.8 CORPORATE SOCIAL RESPONSIBILITY AND SHARED VALUE 106

CREATING SHARED VALUE 108

3.9 LIMITATIONS OF SMES ENGAGEMENT IN DRM 111

3.10 PRIVATE SECTOR REPRESENTATION IN DRM FORUMS AND FRAMEWORKS 114

4. PUBLIC SECTOR APPROACHES TO BUSINESS ENGAGEMENT IN DRM 118

4.1 GOVERNMENT’S ROLE AND RESPONSIBILITIES ON BUSINESS PARTICIPATION IN DRM 118

4.2 POLICY FRAMEWORKS FOR THE ENGAGEMENT OF BUSINESSES IN DRM 119



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4.2.1 INTERNATIONAL LEVEL: THE HYOGO FRAMEWORK FOR ACTION (2005-2015) 120

4.2.2 REGIONAL LEVEL 121

4.2.3 NATIONAL LEVEL: VARYING DEGREE OF INVOLVEMENT OF THE PRIVATE SECTOR IN NATIONAL DRM

FRAMEWORKS ACROSS ASIA-PACIFIC 127

4.3 PUBLIC POLICY OPTIONS TO CREATE AN ENABLING ENVIRONMENT FOR BUSINESS ENGAGEMENT IN

DRM 137

4.3.1 LEGAL AND REGULATORY FRAMEWORKS 137

5.3.3 INCENTIVE SCHEMES 150

5.3.5 ROLE OF THE PUBLIC SECTOR IN INSURANCE AND REINSURANCE 158

4.3.6 DISASTER RISK INFORMATION 161

4.3.7 SUPPORTING SMES: AWARENESS RAISING AND CAPACITY BUILDING. 164

4.4 POLICYMAKING CHALLENGES IN DRM AND WINDOWS OF OPPORTUNITY 168

4.4.1 POLITICAL ECONOMY ISSUES OF DISASTER RISK REDUCTION 168

4.4.2 STRUCTURAL VS. NON-STRUCTURAL MITIGATION MEASURES 170

4.4.3 WINDOWS OF OPPORTUNITY AND THE PRIVATE SECTOR 170

5. COLLABORATIVE ARRANGEMENTS 174

5.1 PUBLIC-PRIVATE PARTNERSHIPS 174

PUBLIC-PRIVATE PARTNERSHIPS FOR DISASTER RISK REDUCTION 178

CHALLENGES OF PPP IN DRM 181

EMERGENCY AGREEMENTS IN JAPAN: A SUCCESSFUL MODEL OF PPP 182

5.2 BUSINESS AND NON-PROFIT ORGANIZATIONS 185

5.3 BUSINESS AND ACADEMIA 188

5.4 MULTI-SECTOR PARTNERSHIPS 191

5.5 COLLABORATIVE PLATFORMS AND FORUMS 194

NATIONAL LEVEL 194

REGIONAL LEVEL 196

GLOBAL LEVEL 197

6. CONCLUSIONS AND RECOMMENDATIONS 199

6.1 THE ROLE OF THE PRIVATE SECTOR: “WITH GREAT POWER COMES GREAT RESPONSIBILITY” 201

6.2 THE NEED FOR A PARADIGM CHANGE 203



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6.3 CREATING AN ENABLING ENVIRONMENT FOR PRIVATE SECTOR RISK-SENSITIVE INVESTMENTS 204

REGULATORY FRAMEWORKS: DECONSTRUCTING BUSINESS RISK BY INCREASING ACCOUNTABILITY AND RISK-

SENSITIVITY OF BUSINESS INVESTMENTS 205

MONETARY INCENTIVES AND NON-MONETARY INCENTIVES 206

MAKING INSURANCE WORK FOR BOTH BIG AND SMALL BUSINESSES 206

RISK INFORMATION: INCREASING AVAILABILITY AND ACCESSIBILITY 207

PROVIDE SUPPORT TO SMES 208

6.4 WORKING TOGETHER: PROMOTING MULTI-STAKEHOLDER APPROACHES TO REGIONAL AND LOCAL

DRM CHALLENGES 210

REFERENCES 212

ANNEX I. THREE CASE STUDIES ON BUSINESS CONTINUITY PLANNING 229

CASE STUDY 1: SIAM CEMENT GROUP BUSINESS CONTINUITY PLAN (BCP) MODEL, THAILAND 229

CASE STUDY 2: THE OTAGAI PROJECT, THAILAND 230

CASE STUDY 3: INSTITUTIONAL SUPPORT FOR THE ADOPTION OF BCP IN SINGAPORE 233

ANNEX II. MICRO-INSURANCE COLLABORATION SCHEME IN INDONESIA 235

ANNEX X. ASSESSMENT OF INSTITUTIONAL FRAMEWORKS IN SELECTED ASIA-PACIFIC COUNTRIES. 238

ANNEX IV. A CASE OF BUSINESS-NONPROFIT PARTNERSHIP: AXA AND CARE 250



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List of abbreviations

ACCSQ ASEAN Consultative Committee for Standards and Quality

ADB Asian Development Bank

ADPC Asia Disaster Preparedness Center

ADRC Asia Disaster Reduction Center

AMCDRR Asian Ministerial Conference on Disaster Risk Reduction

APBF Asia-Pacific Business Forum

APEC Asia-Pacific Economic Cooperation

ASEAN Association of Southeast Asian Nations

BAC Business Advisory Council

BCI Business Continuity Institute

BCM Business Continuity Management

BCMS Business Continuity Management System

BCP Business Continuity Plan

BOOT Build-Own-Operate-Transfer

BOT Build-Operate-Transfer

BROT Build-Rent-Own-Transfer

CBA Cost-Benefit Analysis

CCA Climate Change Adaptation

CIR Critical Infrastructure Resilience

CNDR Corporate Network for Disaster Response

COAG Council of Australian Government

CSO Civil Society Organizations

CSR Corporate Social Responsibility

CSV Corporate Social Value

DDMA District Disaster Management Authority

DEWN Disaster Early Warning Dissemination System

DMC Disaster Management Center

DOST-

PAGASA

Department of Science and Technology-Philippine Atmospheric,

Geophysical and Astronomical Services Administration

DRM Disaster Risk Management

DRR Disaster Risk Reduction

DRR-PSP Disaster Risk Reduction Private Sector Partnership

EAs Emergency Agreements

FDI Foreign Direct Investment

FEMA Federal Emergency Management Agency

GAR Global Assessment Report

GDP Gross Domestic Product

GEJ Great East Japan Earthquake



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GFCF Gross Fixed Capital Formation

GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH

GVCs Global Value Chains

HFA Hyogo Framework for Action

IDNDR International Decade for Natural Disaster Reduction

IO International Organizations

ISO International Organization for Standardization

MOU Memorandum of Understanding

MSMEs Micro, Small and Medium Enterprises

NCDM National Council for Disaster Management

NDMO National Disaster Management Office

NDRRMC National Disaster Risk Reduction and Management Council

NEDA National Disaster Management Authority

NGOs Non-Governmental Organizations

OCD Office of Civil Defense

OECD Organization for Economic Co-operation and Development

OPARR Office of the Presidential Assistant for Rehabilitation and Recovery

PASC Pacific Area Standards Congress

PATA Pacific Asia Travel Association

PDCA Plan Do Check Act

PDMA Provincial Disaster Management Authority

PHT Pacific Humanitarian Team

PIA Philippine Information Agency

PPDRM Pacific Platform for Disaster Risk Management

PPP Public-Private Partnerships

PSAG Private Sector Advisory Group

PSP Private Sector Partnership

SAARC South Asian Association of Regional Cooperation

SBF Singapore Business Federation

SIDS Small Island Developing States

SME Small and Medium Enterprise

TISN Trusted Information Sharing Network

TNCs Transnational Companies

TSP Tri-Sector Partnership

UNESCAP United Nations Economic and Social Commission for Asia and the Pacific

UNISDR United Nations International Strategy for Disaster Reduction

WEF World Economic Forum

WHO World Health Organization



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Executive Summary

1. Introduction

The Asia-Pacific region has been driving global economic growth over recent decades. However, it

is also the most disaster-prone region in the world. Between 2004 and 2013, 43 per cent of

disasters occurred in the Asia-Pacific region representing 63 per cent of total deaths and 50 per

cent of total economic damages. While the number of casualties has been progressively

decreasing over time, there is a clear upward trend in economic losses.

From a yearly average of US$

1.8 billion during the 1970s,

disasters have cost the Asia-

Pacific region some US$ 73.8

billion on average annually

during the decade 2004-2013.

This represents a 40-fold

increase and 49 per cent of

global economic losses.

Significantly, the impact of natural disasters on Asia-Pacific’s total GDP is 50 per cent higher than

that on the global GDP, pointing to high regional levels of exposure and vulnerability to

disaster risk.

The private sector is the primary generator of wealth, employer of the majority of the labor force,

and the dominant vehicle for innovation in the region. However, the private sector also bears

the brunt of disaster impacts. Micro, small and medium enterprises (MSMEs), which employ over

half of the labor force and contribute to 20 to 50 per cent of GDP in the majority of economies,

are particularly vulnerable due to

their generally lower capacity to

absorb disaster losses. Greater

economic integration in Asia and the

Pacific, and the rising investments,

especially within tightly knitted

global value chains (GVCs), further

0

100

200

300

400

500

600

700

0

50

100

150

200

250

300

350

1970 1980 1990 2000 2010

Th

ou

san

ds o

f fa

taliti

es

Billio

n U

SD

Deaths A Economic losses

Deaths (trend) Economic losses (trend)

0 10 20 30 40 50 60 70 80 90 100

Thai floods 2011

Pakistan floods 2010

Philippines TyphoonOndoy 2009

Lao PDR Typhoon Ketsana2009

%

Private (%)

Public (%)



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exacerbates the situation.

In the supply chain context, disasters have far-reaching ramifications and participating firms are

naturally more exposed to hazards due to the wider geographical dispersion of assets and

activities. The Great East Japan Earthquake (GEJE) and the Thai Floods of 2011 revealed the extent

to which disasters can impact on GVCs, with automobile production falling in Thailand by 19.7 per

cent and in the Philippines by 24 per cent in the case of the GEJE, and the world price of hard

drives increasing by 20-50 per cent after the Thai floods.

These losses highlight the gravity and urgency for achieving greater disaster resilience in Asia and

the Pacific, particularly in terms of protecting economic assets.

2. Risk, resilience and accountability

DRR experts and businesses take different approaches in regards to DRM. On one hand, they

share similar priorities, e.g. efficiently saving lives, protecting assets, restoring operations as well

as providing cost-effective, accountable services to stakeholders. However, whilst non-profit DRM

experts focus on the negative consequences of risk and the need for better management of

available resources, business practitioners typically see risk as a neutral factor in the attainment of

business objectives. By presenting disaster risk also as a potential opportunity rather than only a

threat, there can be a shift in emphasis from the possibility of an event (something to face, or

contend with) to the possibility of undertaking action (something to do) thereby encouraging

proactive private sector DRM engagement.

However, from a moral point of view, why businesses need to be resilient particularly in the face

of disaster risks? The answer to this question could spring from the concept of sustainable

development, i.e. “…development that meets the needs of the present without compromising the

ability of future generations to meet their own needs" (WCED 1987). In this context, resilience is

understood as a necessary condition for achieving society’s goal of long-term sustainable

development, as disasters can easily destroy hard-earned development gains. In order to be

resilient, society would require that all of its stakeholders – including private sector - are

themselves resilient. It is, therefore, of common interest that businesses have the capacity to

survive, adapt and grow in the face of turbulent change (Fiksel 2006), as well as to evolve and

organize into new, more desirable configurations when necessary (Pettit 2008).



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Bruneau et.al (2003) defines resilience as a system consisting of four properties, which are:

robustness (the degree of resistance or strength to negative shocks without significant

degradation or loss of functions); rapidity (the speed to respond to adverse threats and impacts);

resourcefulness (the capacity to mobilize

assets); and redundancy (the degree of excess

capacity which can guarantee the continuity of

functions). Building resilience in business is

the art of pursuing these four characteristics

while maintaining a balance in the ratio

between the firm’s excess capacity and

vulnerability so as to maintain profitability

(Pettit 2008).

In considering the private sector role in DRM it is important to recognise that businesses can

potentially contribute to reduce risk, but also create further risk for society. It is important that

institutional and social frameworks hold businesses accountable for their own share of risk.

3. Disaster risk management for business

All business activity involves a certain amount of risk. Investing in disaster risk management is

poised to yield economic benefits, which is the ultimate goal of any business, as well as societal

resilience. However, because the benefits of risk-sensitive investments are not immediately

evident, an argument has to be made which considers business survival, competitiveness and

long-term viability. Furthermore, budget constraints, narrow ‘myopic’ policies and underestimation

of disasters due to data/information gaps as well as interdependency with neighbors (i.e. not

investing until others do) are all constraining factors in terms of private sector engagement in

DRM.

All organizations are subject to the forces of a range of internal, external, and non-business

stakeholders (Post et al 2002). This publication proposes a conceptual framework whereby the

degree to which a business is

engaged in DRM depends on an

inherent relationship of

Tier-3

Non-businessstakeholders

Tier-2

Business partners

Tier-1

Internal stakeholders

• Government

• Community

• NGO/CSO/IGO

• Customers

• Suppliers

• Creditors

• Shareholders/owners

• Management

• Employees



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accountability of the firm’s management to the different organizational stakeholders. The

survivability and legitimacy of the corporation, in other words, its "license to operate", depends

not only on its success in generating economic profits but also in meeting the expectations of the

different stakeholders.

Internally, engagement in DRM can be regarded as an investment in survivability, reputation

building, generation of new opportunities, duty of care with employees and an opportunity to

gain a competitive edge over sectoral rivals. In other cases, private sector organisations may be

obliged to implement resilience building measures in accordance with governmental and public

sector legislation/regulations, even involuntarily. Some businesses also choose to engage in

voluntary social/environmental responsibility activities, which can invoke tacit accountability and

the potential added benefit of enhanced reputation and long-term profits. Businesses may also

regard DRM and CSR activities as necessary for maintaining their societal ‘license to operate’.

Part of the motivation for private sector to engage in DRM is to avert the negative prospect of

business disruption and losses. Disasters impact businesses both directly, in terms of human and

economic losses, as well as indirectly through loss of future income and disruption to supply

chains and customers. A study conducted by the Institute for Business and Home Safety (IBHS)1

revealed that an estimated 25 per cent of businesses do not reopen following a major disaster.

Furthermore, 80 per cent of companies that do not recover from a disaster within one month are

likely to go out of business2. There is a need to consider the macro-economic impacts which

disasters can have on efficiency, including harm to country GDP, unemployment and currency

inflation. These factors impact negatively on wider national economies and affect individual

businesses by lowering their productivity and disrupting their operations.

1 “Open for Business”, Institute of Business and Home Safety. Available at

www.ibhs.org/docs/OpenForBusiness.pdf 2 Jonathan Bernstein, president, Bernstein Crisis Management, LLC in Director, June 1998, v51n11, p44.

http://www.ibhs.org/docs/OpenForBusiness.pdf



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After conducting their risk

assessments, businesses can

choose to avoid risk by limiting

their exposure to hazards e.g. by

choosing not to invest in

disaster-prone areas or not

trading with non-resilient

suppliers. Businesses that opt to

mitigate risk may implement

either structural (industry

standards building codes, building and equipment retrofitting, acquisition of specialist equipment,

etc.) or non-structural mitigation (e.g. BCP, emergency management plans). Cost-benefit analyses

(CBA) can assist firms in deciding on the best mitigation options as structural measures can

require significant expenditure. Non-structural mitigation targeting low impact high frequency

events represent a suitable approach for SMEs as these typically offer the best benefit-cost ratio

solutions.

Other businesses choose to transfer part of their risk to insurance companies. However, risk

sharing often faces challenges associated with market failures, thus necessitating public/private

solutions to ensure that markets function properly. Other options, such as the utilization of

industry standards and codes, provide governments with useful tools to ensure that businesses

meet a certain minimum standard of resilience by either mandatory requirements or embedding

them as part of incentives.

Accessibility to relevant data and information which enables businesses to make informed

decisions is crucial to ensure that risk acceptance is determined by a firm’s risk appetite rather

than by gaps in disaster risk information. National legislation should regulate risk acceptance by

establishing legal boundaries to the amount of risk that an individual business should be allowed

to bear, reducing potential moral hazards.

Similarly, industry standards on safety and risk management can be used by companies to

increase the resilience of their businesses partners and reduce their own risk, for instance, by

putting in place contractual requirements for a specific certification that increases the likelihood

of supply chain continuity. Banks and insurers can also utilise standards to reduce the risk profile

• Structural mitigation

• Non-structural mitigation

• Insurance• Financial markets

• Can serve as incentives for mitagation

• Risk appetite

• To be limited by law/regulations

• Avoid risky investments

• Not engaging with a non-resilient supplier

Risk avoidance

Risk acceptance

Risk mitigation

Risk transfer



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of their customers by giving discounted interest rates or insurance premiums to disaster-ready

businesses.

Corporate social responsibility (CSR) has been utilised by some business practitioners to fulfill

their social obligations. CSR can open windows for new business opportunities through enhanced

reputation or strengthened community engagement. However, CSR activities tend to be based on

short-term motivations. There is a need for CSR activities to go beyond one-time philanthropic

interventions and move towards long-term partnerships that create greater value for both

business and nonprofits, as well as for the society in general. In particular, Shared Value

approaches can tap into the innovation, productivity and organizational capacity of businesses

and enable identified solutions to be operationalized at scale to cope with social problems,

including disasters, more effectively and efficiently.

Holistic disaster resilience should encompass all types of private sector organisations including

SMEs. These enterprises represent a crucial constituent of the Asia Pacific region’s economy;

however, they suffer from a dearth of resources, lack of capacity and low levels of awareness in

comparison to large private corporations, making them extremely vulnerable to disaster risk.

Support must be given to these smaller organisations from the public sector. The private sector

can also offer solutions from within via business to business (B2B) approaches in the form of

pro bono and market based initiatives.

The private sector can strive for a higher level of representation at profile international, regional

and national frameworks and forums in order to facilitate tangible change. Businesses can

formally organize themselves by establishing DRM reference groups within existing platforms

such as business advisory councils at the international and regional levels e.g. EBAC, ABAC or

business associations, chambers of commerce at national and local levels to engage more readily

in DRM activities.

4. The public sector role in increasing business resilience

Businesses are key facets in any society. They create employment, generate revenue via taxes and

contribute to social cohesion. However, involvement of the private sector in DRM is still limited,

emphasizing the role which governments need to play in establishing a suitable environment for

enabling businesses to invest more readily in disaster resilience. Governments therefore need to



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take on the responsibility of ensuring the resilience of the private sector as well regulating the

conduct of businesses.

High profile policy frameworks such as the post-2015 framework for DRR and regional platforms

such as the AMCDRRs, the ESCAP Regional Committee on Disaster Risk Reduction or the Regional

Consultative Committee (RCC), are fundamental in bringing the issue of private sector resilience

to prominence. It should also be noted that in the Asia Pacific, the level of development of

national DRM frameworks across different countries varies drastically. This implies a need to

standardize and support resilience building at the national level to improve the overall regional

DRM picture.

To foster greater private sector

engagement, governments can help create

enabling environments via normative

measures such as laws and regulation as

well as through financial and non-financial

incentives. In the case of small businesses,

raising awareness and capacity building

are important factors in encouraging these

enterprises to strengthen their resilience.

In exploring the components required for sound regulatory DRM frameworks this publication

provides a pilot assessment of selected Asia Pacific economies. This snapshot of the current

regional standing in terms of DRM frameworks analyses a number of regulatory instruments

including building codes, land use plans, safety/resilience standards and risk information

disclosure. The framework can be used as a benchmarking tool or even for self-assessment

and provide the basis for future comprehensive assessments of the national resilience frameworks

of specific countries across the Asia Pacific, including the mechanisms employed to encourage

private sector engagement.

The challenge of enforcement is a notable factor as developing countries typically lack the

human and economic resources necessary to properly implement existing frameworks.

Furthermore, legal and regulatory frameworks vary from country to country which makes the

implementation of standardized regional resilience measures difficult. The onus falls upon



23

governments to develop and enforce legal and regulatory frameworks within which stakeholders

can operate in a responsible manner.

Monetary and non-monetary incentives such as taxation, subsidies, grants as well as public

procurement and contracts offer the public sector a number of tools by which to encourage

businesses to invest in enhancing their resilience.

The public sector can also play a role in insurance and reinsurance to help provide adequate

coverage for natural disasters. Insurance is a powerful instrument to incentivize the private sector

to invest in DRM. However, governments need to address market failures in order to utilise risk

financing and risk transfer as a means of building resilience. Furthermore, the public sector needs

to prioritize improving the availability, accessibility and affordability of disaster risk information

which stakeholders can utilise to make risk informed, sensitive investments and more sound risk

assessments. Risk data and information should increasingly be treated as a ‘public good’ which

needs to be more comprehensive and reliable than is currently the case.

Post-disaster financial and social aid should be delivered on a conditional basis to make sure

that the investments undertaken with the received aid during recovery phases are risk-sensitive

and do contribute to the ‘rebuilding’ of risk. To achieve this, both information campaigns and

appropriate audits need to be conducted, pre and post-delivery of funding.

As has been outlined, the public sector can play a key role in fostering private sector

engagement. It is pivotal that governments pay adequate attention to SMEs, which are the

engine of the Asia Pacific region’s economy but are also the most vulnerable type of business to

the impacts of disasters. The public sector thus needs to address the main weaknesses of SMEs

namely a lack of awareness, capacities and resources. These limitations can be overcome

through public awareness campaigns, capacity building programs and other legal and incentive

policies.

Although disasters are destructive events, they can be the catalyst for constructive, albeit reactive,

change by opening ‘windows of opportunity’ during which levels of resilience can be

strengthened through the introduction of new DRM policies, strategies and measures.

Nonetheless, it should be acknowledged that the reality of the political economy of many

societies creates barriers to the implementation of change. Therefore, prominent

intergovernmental forums, such as the World Conference on DRR - which can also open ‘windows



24

for change’ - should be utilized as more proactive means by which new approaches and

strategies for strengthening resilience can be introduced.

5. Collaborative Arrangements

Engaging businesses in DRM processes encompasses actors, institutions and organizations from a

diversity of different sectors and backgrounds across national, regional and global scales. There is

a need for multi-sector collaboration across public, private and nonprofit sectors as well as

academia.

In this regard, public-private partnerships (PPPs) can play an important part in DRM - these

collaborative efforts can benefit the public sector by improving the efficiency of public service

delivery by harnessing private sector knowledge and resources whilst private companies can offer

benefits through profit making and reputational gains. There are challenges associated with PPPs

including unclear expectations between partners, unclear roles over authority and accountability

as well the risk of the capacity of the public sector being ‘hollowed out’ by outsourcing functions

to private companies.

Businesses can benefit from entering into partnerships with non-profit organizations with

whom they share a similar agenda. Such engagements require a high level of trust and typically

work best on the basis that all parties are equal partners. Well-established, long term partnerships

can act as a powerful marketing tool for enterprises to gain a competitive edge through a

positive corporate reputation.

Although partnerships between businesses and academic/scientific institutions are not new,

they are currently underutilized. These institutions can work with business to develop and deliver

training or short courses

that help to educate

businesses, employees

and others on various

topics related to

hazards. In return,

businesses can

fund/support research

COMMUNITY

GOVERNMENT

CIVILSOCIETYORGANIZATIONSBUSINESSES

ENVIRONMENT

LaborFinancialresources(taxes)

Publicgoodsandservices

Solvesocialproblems

Socialservices,

Protecon

Financialresources

(donaons)

Labor(voluntary)

Jobs

Incom

e(salaries)

Labor

Money(purchases)

Socialservices

Fillingcoveragegaps

Watchdog

Reputa onWatchdog

CSR(financialresources,exper se,…)

Financialresources(aid)

Financialresources(taxes)

Experseandtechnology

Publicservices(infrastructure,…)

Revenue(contracts)



25

that can later on be used by the business itself and by the community. However, there is a need

to overcome some challenges, such as the difference in culture among the two sectors and a

potential conflict of interest when businesses fund research programs.

Similarly, multi-sector partnerships between businesses, nonprofits and governments can provide

benefits for these groups including: enhanced reputational capital, proving a sense of

responsibility and accountability and assisting each organisation in meeting their respective goals.

6. Conclusions and Recommendations

Recommendation one: The important role, responsibility and accountability of the private

sector in DRM needs to be highlighted whilst raising awareness across all sectors. Businesses

should be included in DRM discussion forums and given a stronger voice - this can come about

only if the sector is properly represented on international, regional, national and local platforms.

Nonetheless, there is no need to reinvent existing structures; instead, the private sector can more

actively utilise existing forums and frameworks. Business advisory councils, chambers of commerce

and business associations should be used by enterprises to create DRM reference groups and

focal points for private sector engagement in resilience building. Due to the private sector

potential to create further risk, businesses should recognize the need to actively contribute to

DRM processes. Furthermore accountability of private sector actors is fundamental, as businesses

that fail to behave responsibly can in turn hinder the competiveness of fellow businesses which

are compliant.

Recommendation two: There is a pressing need for changing the paradigm of business

engagement in DRM. Businesses should move away from reactive approaches towards more

preventative strategies when managing disaster risk. Furthermore, DRM building should go

beyond a short-term mentality focused on the reduction of risk, instead focusing on longer-

term resilience building, which can in turn enhance the sustainability and profitability of

businesses. Whilst planning for longer-term resilience may incur initial short-term costs, ultimately

long term societal gains can be derived from the adoption of long term, sustainable approaches.

Businesses can also start shifting from CSR initiatives - typically underpinned by short-term

motivations - towards the long-term creation of shared value, which can benefit wider society

while generating economic profits by addressing social problems with a business model.



26

Recommendation three: The creation of an enabling environment is important to facilitate the

private sector in taking a more active role in resilience building. There is a need for the creation

of new, and enforcement of existing, regulatory frameworks in order to increase the

accountability and risk sensitivity of business investments. A comprehensive set of monetary and

non-monetary incentives can also encourage businesses to invest in their own resilience. Market

failures that are hindering natural disaster insurance also need to be addressed by the public

sector. Crucially, as the cornerstone of effective DRM, the availability of, and accessibility to,

reliable risk information needs to be greatly improved and streamlined. In this regard, disaster

risk data can be considered to be a public good. Furthermore, specific support should be

provided to SMEs so as to enhance their risk awareness and risk management capacities - this

can be achieved through cooperation between national DRM institutions and domestic SME

support agencies.

Recommendation four: Ultimately, there is a key need to work together and promote multi-

stakeholder approaches to address prevalent regional and local DRM challenges. Collaborative

arrangements among all risk shareholders of society are necessary and can provide different

benefits to all parties involved as well as simultaneously strengthening the resilience of society. It

is important for partners across public, private, nonprofit and academic fields to be aware of each

other’s capabilities and limitations so that common objectives for comprehensive, holistic and

reliable DRM strategies and interventions can be formulated and implemented across the Asia

Pacific region.

* * * *

Building resilience to disasters in an effective way will require the full engagement of the private

sector as a critical stakeholder. Governments need to raise awareness of the role of the private

sector in DRM across all sectors, whilst also creating an enabling environment that will facilitate

and motivate the private sector in taking a more active role. Collaborative arrangements among

business and all other risk shareholders will be critical in strengthening the resilience of society in

Asia-Pacific. The private sector must therefore stand up to contribute to the crucial task of

making societies more resilient and be recognized as a critical component of the post-2015

framework for disaster risk reduction.



27



28

1. Resilient Businesses for a Resilient Asia-Pacific

The Asia-Pacific region, the engine of the global economic growth, is also the most disaster prone

region in the world. While the number of casualties has been progressively decreasing over time,

there is a clear upward trend to economic losses. From a yearly average of US$ 1.8 billion during

the 1970s, disasters3 have cost the Asia-Pacific region some US$73.8 billion annually during the

decade 2004-2013.

The private sector is the primary generator of wealth, employer of the majority of the labor force,

and the dominant vehicle for innovation in the region. The private sector also bears the brunt of

disaster impacts. Micro, small and medium enterprises (SMEs) are particularly vulnerable due to

their generally lower capacity to absorb disaster losses. Greater economic integration in Asia and

the Pacific, and the rising investments, especially within tightly knitted global value chains, further

exacerbates the situation, especially

The Hyogo Framework for Action, the global blueprint for disaster risk reduction efforts, has not

adequately factored the important role of the private sector in disaster risk reduction and building

resilience. The transition to the post-2015 framework for disaster risk reduction provides a unique

opportunity to more strategically engage with the private sector in strengthening disaster risk

reduction and management. This opportunity should not be missed.

1.1 Socioeconomic dimensions of disasters in Asia-Pacific

The impact of disasters on societies is felt both directly through the loss of lives, livelihoods and

assets, as well as indirectly through broader knock-on effects on the economy and society. These

adversities are amplified by current social and economic trends, such as rapid population growth,

urbanization and industrialization of areas that have historically served as ecological buffer zones

to disasters (WEF 2008) especially when investments are not adequately informed by sound

disaster risk assessments.

3 Throughout the publication, the term ‘disaster’ refers to all type of disasters –natural, technological and

complex- unless otherwise stated.



29

The Asia-Pacific region, while being a main contributor to the world’s GDP and having been an

engine for growth and development for the past several decades, is also the most disaster-prone

region in the world. The coming decades will certainly pose a challenge for the region to

reconcile its dynamic growth and the accumulation of assets, with a rapidly rising risk posed by

natural and technological hazards. In this context, the private sector has a crucial role to play as

main driver of economic growth in preventing the emergence and creation of risk. Building

resilience of businesses to disasters is crucial for making nations and their communities resilient.

1.1.1 Disaster characteristics and trends4

Over the past five decades, the incidence of disasters has increased globally but the sharpest rise

has been seen in Asia and the Pacific. The number of disasters in the region has grown from an

average of less than 60 in a year during the 1970s to over 300 in a year during the 2000s. In the

past decade, a person living in Asia and the Pacific was almost six times more likely to be affected

by a disaster than someone in Latin America and the Caribbean, and almost 30 times more likely

than a person living in North America or Europe (ESCAP 2013a; 2013b).

Figure 1.1. Disaster occurrence in Asia and the Pacific

4 The data on human and economic losses was extracted from the EM-DAT Database on 26 Oct 2014 unless

otherwise stated. http://www.emdat.be/database

http://www.emdat.be/database



30

Source: EM-DAT database

There has been a steep trend in disaster occurrence in the past 50 years, where the average

number of disasters per year in Asia-Pacific has grown five-fold as illustrated in figure 1.1.

Figure 1.2. Disaster impacts in Asia-Pacific relative to the world 2004-2013

Source: EM-DAT database

0

50

100

150

200

250

300

350

400

450

1960 1970 1980 1990 2000

Nu

mb

er

of

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aste

rs

Occurrence Linear trend line

43%

63%

85%

50%

0%

25%

50%

75%

100%

Occurrence Deaths Total affected Damages

% o

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lob

al



31

During the period 2004-2013, 2,919 disaster events or 43% of global disasters occurred in the

region, affecting around 1.5 billion people and killing more than 700,000. These numbers

represent 85% and 63%, respectively, in relative terms to the world.

The data clearly shows that Asia and the Pacific is the most disaster-afflicted region in the world.

Although the higher population density contributes to the higher relative number of deaths and

affected people, this fact should not be used as a justification for the losses and complacency.

Instead, it is a call for greater risk-reducing investments in the region, in relative terms to the rest

of world.

Figure 1.3. Economic and human losses in Asia and the Pacific, 1970-2013

Note: damages are in current US dollars

Source: EM-DAT Database.

Figure 1.3 depicts recent disaster losses in Asia and the Pacific, both in terms of human lives and

economic assets.

On the one hand, the number of casualties has been progressively decreasing since 1970 as

indicated by the green trend line. Despite the 2004 Indian Ocean Tsunami and the 2008 Sichuan

0

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200

300

400

500

600

700

0

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100

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1970 1980 1990 2000 2010

Th

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SD

Deaths A Economic losses

Deaths (trend) Economic losses (trend)



32

Earthquake, each claiming over 200,000 lives, there is a solid downward trend that suggests that

progress has been made in better protecting human lives during disaster events.

On the other hand, there is a clear upward trend to economic losses over this period. From a

yearly average of USD 1.8 billion during the 1960s, disasters have cost the Asia-Pacific region

some US$73.8 billion annually during the decade 2004-2013. This represents a 40-fold increase

and 49% of global economic losses. The year 2011 was the costliest in history with total

registered losses amounting to USD 294 billion in the Asia-Pacific region alone, representing 81%

of total global losses.

Figure 1.4. Economic losses as share of GDP, 1970-2012

Source: UN-ESCAP database. Data from natural disasters only.

While the significance of disaster losses in relative terms to the GDP has been increasing since the

1970s, as can be observed on the steep linear trend lines in figure 1.4, the data clearly shows that

0.00%

0.30%

0.60%

0.90%

1.20%

1.50%

1970 1975 1980 1985 1990 1995 2000 2005 2010

Global Economic Damage / GDP Asia Pacific Economic Damage / GDP

Global Economic Loss Trend Line Asia Pacific Economic Loss Trend Line



33

the relative impact on Asia-Pacific is roughly 52% higher than that on the world, with annual

averages of 0.38 and 0.25 per cent respectively in the 2003-2012 period. These staggering losses,

both in absolute and relative terms, highlight the gravity and urgency for achieving greater

disaster resilience in Asia and the Pacific.

1.1.2 Impacts of recent disasters on Asia-Pacific businesses

Effects of disasters on businesses are significant regardless of the size or the nature of the

indsutry. Yet, micro, small and medium enterprises (SMEs) are particularly vulnerable due to a

generally lower capacity to absorb disaster impacts. In the Philippines in 2009, Typhoon Ketsana’s

destruction amounted to a total loss estimated at US$ 246 million (NDCC 2009). The agricultural

sector, which comprises a large number of micro and small-scale businesses, sustained the most

damage at US$ 157 million. The typhoon significantly affected the SME sector, which was already

in a disadvantaged position and marginalized even before the disaster. This experience was

similar to that of the 2010 floods in Pakistan where losses totaled US$ 10 billion and micro and

small enterprises likewise bore the brunt of the economic losses of this disaster event (ESCAP and

UNISDR 2012).

Figure 1.5. Who pays for disaster loses?

Source: ESCAP and UNISDR (2012)

0 10 20 30 40 50 60 70 80 90 100

Thai floods 2011

Pakistan floods 2010

Philippines TyphoonOndoy 2009

Lao PDR Typhoon Ketsana2009

%

Private (%)

Public (%)



34

As economies are becoming increasingly integrated at regional and global levels, global value

chains (GVCs) with their rapid expansion and interdependency among nodes are also increasingly

exposed to disaster risks. The Great East Japan Earthquake and the Thai Floods of 2011 revealed

the extent to which disasters can impact on global value chains (GVC). The Great East Japan

Earthquake caused Japanese automobile production to fall by 48 per cent. Since the production

was highly integrated into the world economy, the widespread disruptions were felt across the

globe, with a pronounced impact in Asia. For example, automobile production fell in Thailand by

19.7 per cent; in the Philippines by 24.0 per cent; and in Indonesia by 6.1 per cent (ESCAP 2013a).

Similarly, the floods in Thailand hurt transnational companies the most, impacting on their cross-

border operations throughout Asia and other continents. According to the World Bank, economic

damages amounted to US$ 45.7 billion,5 with manufacturing loss and insurance payment

shouldering 94 per cent of the cost (ESCAP and UNISDR 2012).

1.2 Asia-Pacific businesses: world’s engine for growth at risk

The private sector is the primary generator of GDP, employer of the majority of the labor force,

and the dominant vehicle for innovation (ESCAP and UNISDR 2012). Thus, the private sector is the

engine for economic growth of most nations. On the other hand, whether or not the investment

is risk sensitive will determine the level of disaster risk faced by both businesses and the society

at large. As such, the private sector shares both the consequences of disaster risks and a

responsibility to act in reducing them.

Figure 1.6. Annual real GDP growth comparison

5 World Bank website news, December 13, 2011, “The World Bank Supports Thailand's Post-Floods Recovery

Effort” http://www.worldbank.org/en/news/feature/2011/12/13/world-bank-supports-thailands-post-floods-

recovery-effort

http://www.worldbank.org/en/news/feature/2011/12/13/world-bank-supports-thailands-post-floods-recovery-effort

http://www.worldbank.org/en/news/feature/2011/12/13/world-bank-supports-thailands-post-floods-recovery-effort



35

Source: UN-ESCAP database

Asia-Pacific has remained the world’s growth engine in the past decades. Figure 1.6 illustrates the

annual GDP growth rates of Asia-Pacific (blue), the rest of the world (RoW, red) and the world’s

average (green). Except for the year 1998, when the effects of the 1997 Asian financial crisis

brought the region’s GDP growth to nearly zero, Asia-Pacific has been the fastest-growing region,

pulling the average world economic growth upwards every year since 1990, as revealed by the

gap between the blue and the red lines. Asia-Pacific grew on average 2.13% faster than the rest

of the world on an annual basis since 1990.

Figure 1.7. GDP and Investment evolution in Emerging and Developing Asia (EMDA) and the

World, 1980-2013

-4%

-2%

0%

2%

4%

6%

8%

10%

1990 1995 2000 2005 2010

an

nu

al

% c

han

ge

Asia-Pacific RoW World



36

Source: International Monetary Fund, World Economic Outlook 2014

Emerging and developing Asia’s (EMDA) GDP share of world GDP (green area in figure 1.7) has

increased from 7.5 percent in 1980 to 25.9 percent in 2013. Over the past three decades EMDA

has transitioned from a marginal position in the world’s economy, to having a leading role by

representing over a quarter of today’s world output. Furthermore, while world investment has

been slightly decreasing in relative terms from 25.5 percent of the GDP in 1980 to 24.5 percent of

the GDP in 2013 (blue line), investment in emerging and developing Asia has however increased

from 28.8 to 42.7 percent of GDP in the same period (red line).

In spite of this strong growth, ensuring sustainable and inclusive growth while being the most

disaster-prone region in the world will be a major challenge for the region in the long-term. This

will require joint efforts to address a wide range of vulnerabilities, especially those related to the

preparedness of the private sector to manage increasing disaster risks.

1.3 Increased exposure of businesses to disaster risks

Rapid population and economic growth pose a unique challenge for the region. A combination of

demographic pressure and shortage of land for infrastructure and business expansion on the one

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0%

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1980 1985 1990 1995 2000 2005 2010

% o

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orl

d's

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P

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DP

Share of World's GDP based on PPP World Emerging and developing Asia



37

hand, and lack of adequate awareness and culture of safety on the other, pushes people,

economic assets, and business operations to rapidly accumulating and increasingly encroaching

hazardous areas. The increase of urban disasters in the region demonstrates the consequences of

such a loosely managed rapid development.

Figure 1.8. Population living in agglomerations of 750,000 or more inhabitants in Asia-Pacific

Source: Author’s construction from data from UN-ESCAP Statistical yearbook 2013

http://www.unescap.org/stat/data/visual/sp-countries/StatPlanet.html

This situation is exacerbated by greater economic integration in Asia Pacific and the rising

investments, especially within tightly knitted global value chains. Greater integration translates

into large-scale adverse knock-on effects to businesses, including those that spread through

global value chains (GVCs). In a globalized world, disaster losses affect not only individual

businesses, but also critical infrastructure and ecosystems on which individuals and businesses

rely, as well as the broader economic environment in which the public and private sectors

operate. It forms a vicious cycle of risk accumulation. Therefore, new investments targeted at

building resilience to disasters should come from all actors to help in reducing future losses (WEF

and UNISDR 2007).

1.3.1 Fast-growing investments and regional integration in Asia-Pacific

1990 1995 2000 2005 2010

% of total pop 14.3 15.4 17.2 18.5 19.9

Millions of people 465 541 640 727 823

0

5

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38

In 2013, Developing Asia accounted for almost 30 percent of global foreign direct investment

(FDI) inflows and remained the world's number one recipient region in absolute terms. Asia-Pacific

Economic Cooperation (APEC) represented the largest regional economic grouping in terms of FDI

inflows, with a share of 54 percent of global inflows.6

Figure 1.9. Inward FDI stock (US$ billions)

1990 2013

World 2,078 25,464

Developing Asia 340 5,202

Developing Asia share of World 16% 20%

Source: World Investment Report 2014, UNCTAD (2014)

According to the 2014 World Investment Report, the inward FDI stock in Asia has been following

a constant upward trend since 1990, increasing 15 times from USD 340 billion to USD 5.2 trillion

in 2013. This represents an increase of inward FDI stock as a share of the global total from 16 to

20 per cent. Investment continues to flow into Asian countries attracted by rapid economic

growth and favorable policy reforms, but also increasing the economic exposure to disaster risk,

especially in disaster-prone areas.

Figure 1.10 Merchandise exports (left) and imports (right) of Asia-Pacific.

6 Data from UNCTAD 2014 World Investment Report.


3. Disaster risk management for businesses

39

Source: UN-ESCAP Statistics

Since 1990, Asia-Pacific has experienced rapid trade growth in trade both in absolute and

relative terms to the rest of the world. Both imports and exports have increased six-fold

from less than USD 1 trillion in 1990 to almost USD 7 trillion in 2012, and their share on

total world imports-exports grew from 21-22% to 36-37%, respectively.

A stronger interdependence among the different economies in the region has also been

observed. This has been attributed to an ongoing process of geographical dispersion of

production, with final assembly operations moving to low-wage economies while high-value

added processes operating in more developed economies. The increase in intra-industry

trade has created a sophisticated production network in emerging Asia (IMF 2007).

Figure 1.11. Intraregional trade in Asia and the Pacific, 1990-2011

Source: UN-ESCAP database

0%

20%

40%

60%

80%

100%

-

2,000

4,000

6,000

8,000

1990 1995 2000 2005 2010

Share of world exports

Total exports

Trend

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

-

2,000

4,000

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1990 1995 2000 2005 2010

% of World Merchandise Imports

Total merchandise imports

Trend

42

44

46

48

50

52

54

56

58

0

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1990 1995 2000 2005 2010

%

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illio

ns

USD billions Share of total Asia-Pacific international trade



40

Intraregional trade in Asia-Pacific has become increasingly important for the region in the

past two decades. The intraregional share of total trade approached 56 percent in 2011,

with a steady increase in the level of regional integration since 1990. This interdependence,

while fostering trade also poses new risks as s disaster in one country, can quickly spread to

other areas, with severe consequences.

Figure 1.12. Private sector share of total GFCF in selected disaster-prone Asian countries

Source: World Development Indicators database, The World Bank.

Since there is currently no consensus for an indicator to represent economic exposure to

disaster risk at the macroeconomic level, gross fixed capital formation (GFCF), which

measures the change in the value of fixed assets in a given economy, is used following the

example in GAR 2013. as an indicator of the economic exposure to disasters. The real

exposure, however, is expected to be considerably higher since disasters not only destroy

fixed capital but other intangible assets such as customer portfolios, buy-sell agreements,

and human capital, among others. Although it is not an indicator of total investment,

available data on the private sector’s share of total GFCF makes it a good proxy to compare

public/private investment levels.

Private investment represents around 70 to 85 per cent of overall investment in most

economies, especially in developing countries (UNISDR 2013b), while public sector

investment is essential to provide functioning social and productive infrastructure. Figure

1.12 represents the private sector share of total GFCF for three selected disaster-prone

emerging Asian economies for which data is available: India, Philippines and Thailand. In the

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1980 1985 1990 1995 2000 2005 2010

Philippines Thailand India



41

case of Philippines and Thailand, the private sector share of total GFCF has been fluctuating

between 70 and 80 percent since 1980. The case of India deserves special mention for the

spectacular growth of private sector GFCF in the past three decades, indicating increasingly

higher investments from the private sector in the national economy. In 2010 it represented

more than 70 percent of total GFCF. These figures for these three Asian countries are in line

with UNISDR findings that today 70-85 percent of total investment is done by the private

sector.

The findings of this section showcase that with more frequent disasters, higher investments

in fixed capital and infrastructure, and fast-growing trade operations in an increasingly

integrated region, exposure to disaster risk is on the rise in Asia and the Pacific.

1.3.2 Rapid development of global value chains (GVCs)

In today’s global economy, there is an increasing number of transnational companies

(TNCs), or multinational corporations, and more are engaged in global value chains (GVCs).

These are cross-border business networks which consist of a number of facilities, operations,

suppliers, subcontractors and consumers in various parts of the world. According to

UNCTAD, TNC-coordinated GVCs account for 80 percent of global trade.

Recent research has shown that contribution of GVCs to development can be significant. In

developing countries, value added trade contributes nearly 30 per cent to countries’ GDP on

average, as compared with 18 per cent in developed countries. Furthermore, increases in

GVC participation leads to increases of the GDP per capita and can have a direct economic

impact on value added, jobs and income (UNCTAD 2013).

Figure 1.13. GVC participation of selected Asian economies in 2010



42

Source: world Investment Report 2013, UNCTAD (2013)

The level of participation in the regional value chains varies widely in the Asian region.

Figure 1.13 represents the GVC participation of several Asian countries for which data is

available, by providing the share of GVC-related exports on total exports. With Singapore

and Hong Kong leading the ranking with over 80 percent and 70 per cent respectively, the

other four Asian countries that are above the regional average of GVC participation of 54

percent are Malaysia, Korea, China and the Philippines, in that order. Thailand; Japan;

Taiwan, China; Viet Nam and Indonesia follow immediately after with a participation of over

40 per cent, while South-Asian economies are in the 30-40 percent range. China is

considered the leading destination for intermediate goods exports of electronic goods and

the main focal point of the regional chains since it acts as the assembly platform of finished

goods before they are shipped to the global markets (UNCTAD 2003).

While the participation in the regional production chains has been a key success factor of

emerging Asian countries in developing their export sectors, it also involves risks, including

those derived from an increased exposure to disasters.

In the GVC context disasters have far-reaching ramifications and participating firms are

naturally more exposed to hazards due to the wider geographical dispersion of assets and

activities. Although businesses are impacted differently by hazard events depending on

82

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43

factors such as the nature of business, operations and size, disruption in one part of a

global value chain can quickly spread to entire business networks. As a result, the entire

value chain could be easily crippled. As TNC’s wider geographic dispersion of operations

makes them more likely to get hit by hazards, it is the SMEs that are part of these cross-

border networks often experience the biggest impacts relative to their small operations.

1.4 Business in the Hyogo Framework for Action

The Hyogo Framework for Action (HFA) has been the global blueprint for disaster risk

reduction (DRR) efforts for the 2005-2015 decade. It has taken a multi-stakeholder approach

in order to enhance society’s resilience. However, the important role of the private sector for

DRM and building resilience was not sufficiently recognized in the HFA. This is evident as

only half the countries assessing progress against the Hyogo Framework for Action regularly

report on active engagement with business on DRR (UNISDR 2013a). The mid-term review

of the HFA 2010-11 also revealed there has only been little effort by the private sector and

international financial institutions to increase access to risk transfer measures such as

insurance and insurance-linked securities. In recent years, however, the active involvement of

the private sector has become a greater priority in DRM as more evidence is demonstrating

the direct links between disaster risks and businesses.

While the primary responsibility for protecting communities is vested in national and local

governments, the private sector plays a crucial role in managing disaster risks and building

resilience (ESCAP 2013a). The private sector has the know-how, resources and capacities to

contribute to a number of solutions through partnerships with multiple actors. At the same

time, disaster risk management (DRM) has also become a necessity for the private sector as

it is increasingly identified as a means by which to build a sustainable and resilient business

model.

Whereas general awareness of the disruptions caused by disasters is increasing, companies

based in the Asia-Pacific region are yet to fully embrace DRM in all of its forms. The lack of

efforts in risk prevention, low investment in preparedness and mitigation activities such as

developing business continuity plans, can be largely attributed to the perceived unlikelihood

of disasters occurring (Datamonitor 2002). However, the increased number and intensity of



44

disasters present a compelling case for engaging in DRM at all levels of business operations

(Hale and Moberg 2005).7

Implementation of the HFA in the public sector has been dominated by a paradigm focused

on reducing existing risks or compensating disaster losses and damage. However, in terms

of business involvement, there is an increasing need to shift the paradigm from merely

business continuity to risk-sensitive investments and from relief and recovery philanthropic

CSR activities to tri-sector partnerships for risk prevention, risk reduction and preparedness.

Ex-post financial support package schemes may also need to be revisited in order to avoid

rewarding risk-insensitive behaviors, and not encouraging further risk creation.

The Hyogo Framework Action (HFA) is due to conclude in 2015. As preparations for post-

2015 framework for DRR are underway, a unique opportunity exists for the private sector to

directly engage with governments and policymakers and provide inputs and expertise to

create future disaster risk management policies, define best practices and drive regulatory

legislation and standards. The coming framework would need to explicitly include public

policies that provide incentives and opportunities for risk sensitive private investment

including those from business that would also generate the corresponding voluntary

commitments.

The transition to the post-2015 framework for DRR, provides the opportunity to more

strategically engage with the private sector in strengthening DRM, and thus tap into the

enormous potential of this relationship.

7 Other types of disaster, such as terrorist attacks like the September 11 or the recent global financial

crisis, have also encouraged businesses to adopt DRM seriously.



45

2. Risk, resilience and accountability

Private sector engagement in DRM is driven by different and overlapping motivations. In

many cases this involves compliance with regulations that invoke involuntary actions that

may run counter to the business profit-driven behavior, at least in the short-term.

Companies may engage in social responsibility, which invokes voluntary action and tacit

accountability, which can in turn enhance profitability. However, ultimately profit orientation

is the strongest motivation that propels risk-informed investments.

This chapter attempts to provide a moral and social perspective behind business resilience.

Starting with the different perspectives on risk by DRM practitioners and business managers,

it argues that achieving sustainable development greatly depends on societal and business

resilience, for disasters can quickly destroy development gains. It discusses the different

determinants of business resilience and how business can contribute both to reduce and

create risk. Lastly, some thoughts on accountability of the different stakeholders in DRM and

the principle of shared responsibility are used to make the case for greater engagement of

the private sector in DRM.

2.1 Definitions of risk and risk management; business contextualization8

In order to better understand the drivers behind business engagement in DRM it is

necessary to first understand how businesses perceive risk as compared to DRR

practitioners, as well as the nuances in their respective definitions of resilience given that

they are substantially different. In table 2.1, the two most widely accepted definitions of

disaster risk and risk management are presented. They are UNISDR’s definition that

represents the DRR practitioners’ perspective and the International Organization for

Standardization’s (ISO) definition that more accurately reflects the business perspective.

Table 2.1. Definitions of disaster risk and disaster risk management.

8 For the purpose of this publication, disaster refers to both events caused by natural hazards/climate

events and technological / human-made hazards.



46

Terms UNISDR9 ISO10

Risk

The combination of the probability

of an event and its negative

consequences.

The effect of uncertainty on

objectives.

Risk

management

The systematic approach and

practice of managing uncertainty to

minimize potential harm and loss.

A systematic process of optimization

that makes the achievement of

objectives more likely.

DRR practitioners generally focus on the negative side of risk and thus propose the need for

better management of human resources, environmental issues and economic assets to

mitigate such adverse consequences. In contrast, business practitioners see risk as, at least, a

neutral factor in the attainment of business objectives, which necessitate a systematic

process of optimization towards achieving objectives. By making clear that risk is perceived

as a potential opportunity and not just as a threat, there is a shift of emphasis from the

possibility of an event (something to face, or contend with) to the possibility of undertaking

action (something to do). This is a good starting point to analyze the main drivers behind

private sector involvement in DRM.

For businesses, risk management has been an important driver as business stakeholders are

increasingly concerned about the risks that the firm may face. Be it shareholders, employees,

customers, suppliers or government agencies, a wide range of interest groups are

increasingly scrutinizing the risk appetite and risk management practices of business

managers to ensure that these aspects are in line with their respective interests.

A business organization needs to consider the potential impact of all types of risk on all of

its processes. Given the increasing complexity of firms and business operations, a firm-wide

approach to risk management is needed in order to ensure that all potential risks are

identified and risk treatment strategies are effectively designed and applied. As with any

major business undertaking, successful implementation requires commitment from all of a

firm’s stakeholders -not just from risk executives or management teams.

Although it may seem that traditional non-profit and business DRM approaches are too far

apart, they share a lot of similarities in terms of priorities, e.g. saving lives, protecting assets

9 UNISDR official website: http://www.unisdr.org/we/inform/terminology

10 ISO Guide 73:2009. Risk Management: vocabulary.

http://www.unisdr.org/we/inform/terminology



47

and restoring operations as quickly as possible. In fact, DRM practitioners from government

agencies and non-profit organizations can learn from general business risk management

practices in terms of cost-efficiency and process optimization. This is crucial to improve their

accountability to their respective donors/tax payers in the use of financial resources, and to

the wider community in terms of quality of service delivery. Conversely, business risk

managers can tap into the knowledge of DRM practitioners and their wealth of knowledge

generated through exposure to a number of both large and small-scale disaster events at

the national and international level.

2.2 Sustainable development and business resilience

The Brundtland Commission's report11, defined sustainable development as “…development

that meets the needs of the present without compromising the ability of future generations

to meet their own needs" (WCED 1987). The report also references two implicit factors:

human needs on the one hand, and the idea of limitations to certain actions/behaviors on

the other.

It is widely accepted that sustainable development has three dimensions: economic, socio-

cultural and environmental. Sustainable development has the objective of not only creating,

but also maintaining, prosperous social, economic, and ecological systems (Folke et al.

2002). However economic development that is environmentally sound and socially inclusive

does not automatically qualify as sustainable in the long-term. Sustainability intrinsically

implies persistence over time as well as survival, endurance and adaptability in the face of

adversity. Hence, the concept of resilience is necessary to complete the overall picture.

Resilience is a necessary condition for achieving society’s goal of long-term sustainable

development.

Resilience was first defined by ecologist C.S. Holling as “a measure of the persistence of

systems and of their ability to absorb change and disturbance and still maintain the same

11 Formally known as the World Commission on Environment and Development, the Brundtland

Commission was established by the United Nations General Assembly’s resolution 38/161 of 19

December 1983, in order to formulate “a global agenda for change” including proposed strategies for

sustainable development. The nearly 400-page document, known as the Brundtland Report, was titled

Our Common Future.



48

relationships between populations or state variables” (Holling, 1973, p. 14). Folke et al

(2010) state that resilience is “the capacity to change in order to maintain the same

identity”. Adger (2000) also applied the ecological concept to a social context, stating that

“…resilience is the ability of groups or communities to cope with external stresses and

disturbances as a result of social, political, and environmental change”. Linking resilience to

the lives of people, ESCAP (2012) defines it as “The capacity of countries to withstand, adapt

to and recover from natural disasters and major economic crises – so that their people can

continue to live the kind of life they value.” In other words, a resilient system or society

has both the strength and the capacity to adapt to internal or external shocks without

changing its true nature. A good analogy can be that of water, which can resist direct

external pressure as well as adapt to the shape of its container without changing is physical

attributes, resisting both stress and change and quickly returning to its previous form after

the external pressure ceases.

Regardless of the definition used the combination of strength, adaptability and a pro-active

attitude ultimately allows society to thrive and not collapse.

Disaster risk and resilience received insufficient emphasis in the original Millennium

Development Goal agenda, despite the obvious relationship between disasters and

development. Clearly, reducing the risks of potential disasters helps to protect both human

and economic assets and harness development gains (UNISDR and WMO, 2012). Conversely,

natural disaster can severely undermine and roll back development. The ultimate goal of

disaster risk reduction is to increase society’s resilience, as well as to protect human lives

and economic assets. In order for a society to be resilient, all pillars need to be resilient,

including the community, government, nonprofits and, of course, businesses.

What makes a business resilient?

With the business world in constant change, resilience is needed in order to manage the

inherent risk that is brought about by changes in an emerging competitive environment

(Council on Competitiveness 2007). The word resilience is often used in academic papers

and other rather theoretical contexts. However what does resilience mean for business? How

can business harness resilience in order to benefit in a practical, tangible sense? And how

can business measure it?



49

Business resilience is the capacity to survive, adapt and grow in the face of turbulent change

(Fiksel 2006) as well as to evolve and organize into new, more desirable configurations when

necessary (Pettit 2008). It is a two-dimensional concept, which encompasses both hard

aspects (related to the status and use of business physical assets), and soft aspects (related

to organizational and human capacities).

In view of hard aspects, Bruneau et al (2003) defines system resilience as consisting of four

properties: robustness, rapidity, redundancy and resourcefulness.

Figure 2.1. Resilience of business assets

Source: author’s interpretation based on Bruneau et al (2003) and Pettit (2008).

Robustness is the degree of resistance or strength of an organization’s assets to negative

shocks without suffering significant degradation or loss of function. This strength could

emanate from the prevention or aversion of risks during the business pre-investment phase

and the capacity to manage them along the business processes Meanwhile, Rapidity refers

to the speed at which assets are able to respond to negative impacts in order to stop losses

and minimize disruption. Resourcefulness is the capacity to appropriately mobilize the

available assets in adverse conditions. Finally, Redundancy is the degree of excess capacity

in the process ensuring that if one part of the systems fails, there is a direct substitute,

which can guarantee the continuity of that specific function. In the business context, it is an



50

imperative to maintain a balance in the ratio between the firm’s excess capacity and

vulnerability so as to maintain profitability (Pettit 2008).

In terms of the soft aspects of business resilience, the Resilient Organizations project has

identified 13 indicators that can be used to measure resilience.12 Figure 2.2 illustrates a

representation of the framework. The 13 key concepts can be classified in three broad

categories: 1) leadership and culture; 2) networks; and 3) change ready. Business

organizations can utilize the framework for benchmarking and improving their levels of

resilience - the different components of the framework are further outlined and detailed in

the following section.

Figure 2.2 Organizational resilience indicators: soft aspects.

Source: ResOrgs Project (http://www.resorgs.org.nz/)

Leadership and Culture

12 ResOrgs (Resilient Organizations) is a collaboration between top New Zealand research universities,

particularly the University of Canterbury and the University of Auckland http://www.resorgs.org.nz/

http://www.resorgs.org.nz/

http://www.resorgs.org.nz/



51

Having a clear and inspiring vision is a good indicator of leadership. Such a vision provides

a pathway stretching from the early phase of business pre-investment through the business

life cycle to help cultivate opportunity and to maintain risks at the acceptable level. Strong

crisis leadership contributes to good management and sound decision making during

disaster events, as well as the alignment of current strategies with organizational goals. In

order to execute management decisions on DRM successfully, engagement of staff to

ensure they understand the link between their own role, the organization’s resilience, and its

long-term vision is needed. The staff should also be encouraged to assess and be aware of

every risk affecting the organization and its performance within their own competences,

helping to identify potential problems. In this regard, appropriate rewards should be

available to staff who provide substantive risk assessment, early warning signals or report

potential problems to organizational leaders. In the establishment of clear roles and

authority, managers should ensure that staff, regardless of their position, have a certain

amount of authority to make decisions related to their work and enable a timely crisis

response where their specific knowledge adds significant value, or where their involvement

will aid implementation. Managers should also cultivate a culture of creativity and

innovation by providing incentives for staff to use their knowledge in novel ways to solve

current and future problems.

Networks

An organization might need to access specific resources and/or support from other

organizations during a crisis. Effective partnerships, as well as proper planning and

management to ensure this access can be vital in emergency scenarios. Good knowledge

management facilitates access to critical information by staff as well as access to expert

opinions when needed. Role-sharing and training of staff in tasks other than those required

for their specific position can help ensure employees are able to fill key roles regardless of

their usual responsibilities. Minimization of divisive social, cultural and behavioral barriers,

i.e. applying integrative approaches and breaking silos, can help avoid disjointed,

disconnected and detrimental ways of working. Furthermore, the timely and proper

management and mobilization of the organization’s internal resources can help ensure its

ability to continue business operations by providing excess capacity which can be utilized

during a crisis.



52

Change Ready

A firm needs to have the ability to quickly adapt and react in taxing situations. To this end,

organization-wide awareness and unity of purpose on what the organization’s priorities

would be during and after a crisis, together with a complete understanding of the

organization’s minimum operating requirements should be promoted at all levels. This can

be done by enhancing communication between management and staff, as well as by

rehearsing the emergency management and business continuity plans. Other valuable traits

are a proactive attitude and strategic and behavioral readiness to respond to early warning

signals of change in the organization’s internal and external environment before a crisis

event unfolds. Finally, strategies to manage vulnerabilities in relation to the business

environment and its stakeholders should be developed and constantly monitored. These

plans should be subject to testing under stress conditions and undergo validation via

simulations and drills ideally involving high levels of staff participation.

Business contribution to community resilience

While public sector investment is essential to provide functioning and effective social and

productive infrastructure, private investment represents around 70 to 85 per cent of overall

investment in most economies, especially in developing countries (UNISDR 2013b). The

private sector is the primary generator of GDP, employs the majority of the population, and

is the dominant vehicle for innovation (ESCAP and UNISDR 2012). Holding such a large

share in the economy renders the private sector to be a key determinant of the resilience of

society at large while making it more susceptible to adverse consequences when a disaster

strikes.

Society depends on businesses and functioning markets for the provision of necessary

goods and services. Businesses also contribute significantly to the livelihoods of people, by

providing employment that brings income to households. For these reasons, businesses are

deeply embedded into the fabric of the communities in which they are present and

contribute to their development and wellbeing, thus being a major force for social cohesion.

Business being a key actor and contributor in society, business resilience greatly determines

the level of society and community resilience. In fact, business failure or discontinuity when

a disaster strikes can have a critical impact on society. In this regard, business engagement



53

in DRM is a determinant of long-term sustainable development especially as resilience,

as previously analyzed, is a necessary condition for the persistence of socio-economic

development over time.

2.3 The role of businesses in risk creation and risk reduction

Whilst there is universal consensus that disasters have the potential to erode development

gains, there is limited recognition of the role that different approaches to development play

in creating or increasing vulnerability (UNISDR and WMO 2012), and the resulting impact on

business operations.

RISK = HAZARD x EXPOSURE x VULNERABILITY

The concept of risk lies at the intersect of hazard, exposure and vulnerability. Reductions or

increments in any one of these factors - when other aspects remain constant - will yield

reductions or increments in the level of risk which is present. Although the private sector

has unique capabilities to contribute to the reduction of risk, businesses can also

accumulate risk depending on their behavior and the nature of their operations. Table 2.2

shows the impact that different business decisions have on the three risk determinants and

their dimensions, as well as the final outcome in terms of the risk faced by the society.

Although the risk-exacerbating behaviors presented in the table do not necessarily bring

anything new to the discussion, what is interesting are the reasons behind the behaviors

outlined below.

Table 2.2. Impact of business activities on the risk faced by society

RISK DETERMINANTS

HAZARD EXPOSURE VULNERABILITY



54

Natural

disasters

Man-made

disasters Location Conditions Sensitivity

Adaptive

capacity

Business

Act

ions

Polluting,

wasting /

overusing

resources

Behaving

with

insensitivity,

moral hazard

Investing in

hazardous

areas due to

lack of risk

information or

sensibility

Exposure to

risk generated

by mediating

social,

economic and

regulatory

structures

Purchasing

inadequate

equipment,

non-

compliance

with building

codes

Operating

with

inadequate

emergency

management

or business

continuity

plans

Outc

om

e

INCREASED RISK FOR THE SOCIETY

Typically, business organizations tend to look at risk as a purely external factor when

performing their risk assessments and SWOT13 analyses. Generally, risk that is posed to

other stakeholders by business operations or investment decisions, will not be taken into

consideration, unless these are specifically punishable by law. This natural human and

organizational behavior can be explained with the theory of collective action (Olson 1965)

and represents the typical free rider / moral hazard problem which is discussed in more

detail below.

Moral hazard problems occur when an individual or organization takes on higher risks than

normal in the knowledge that that in case of failure, the resulting losses will be partially or

totally borne by others (Krugman 2008). In the business context, this translates into a firm

undertaking riskier investments or operations without accounting for the negative

externalities that could arise from that decision, since there is the assumption that they will

be paid for by insurance companies (in the form of payment of claims), the government (via

bailouts/ subsidies) or directly by the community (through losses in environmental and

social capital). Mueller (2003, p. 473) states that: “the appearance of organizations that

effectively represent large numbers of individuals requires that separate and selective

incentive(s) be used to curb free-riding behavior”. In other words, if we consider society as

13 Strengths, weaknesses, opportunities and threats (SWOT)



55

an organization of different agents with individual interests, we need either a set of

incentives (or disincentives/ coercive system) that ensures that individuals will not take

advantage of other agents’ compliance with risk management regulations or use risk to

their own advantage creating moral hazard problems.

The attitude of firms is slowly evolving towards increased corporate social responsibility as

shown by the increased prevalence of responsible business groups that have come about as

a result of global or regional initiatives (e.g. The Global Compact or the UN-ESCAP Business

Advisory Council, respectively). However, there is a need for better enforcement of existing

laws and regulations, or the development of new ones, so as to accelerate the advent of

enhanced corporate social responsibility in the medium-short term. In other words: there is

a need to recognize business potential in reducing risk but also to hold businesses

accountable for the risk that they might create.



56

2.4 The principle of shared responsibility and accountability in DRM

One of the key questions when considering the different risks faced by a society and the

associated accountability issues is: who is actually responsible for reducing risk? As all

stakeholders within society contribute to the creation of risk in different manners, there is

an undeniable underlying principle of shared responsibility which should also be recognized.

Society can be understood as a structure sustained by four pillars, namely the public (1) and

private (2) sectors, the non-profit (3) sector and the community (4). As such, each pillar or

stakeholder group is firstly, exposed to disaster risk; and secondly, can individually

contribute to either increasing or reducing risk for the other stakeholders. For these reasons,

each one of the four pillars is a de facto risk shareholder. Any one particular pillar can

exacerbate the risk borne by the rest of the society by carrying out irresponsible actions or

neglecting their accountability.

As the main economic actor and major contributor to society’s economic development and

general wellbeing, the private sector is one of the risk shareholders and, as such, shares

both the consequences of disaster risk and an inherent responsibility to act in reducing

this risk. The risk sensitivity of private sector investments, thus, is important for the very

survival of both businesses and the society at large.

Proponents of the shared responsibility discourse have called for a new ‘social contract’14

for disaster management activities (McLennan and Handmer 2014). Shared responsibility is a

rights-based approach to DRM in the sense that it implies the recognition of a set of rights

of all stakeholders and a subsequent obligation and accountability amongst these actors.

The term has also been coined as a ‘joint responsibility principle’ which implies that

“national and local public authorities, the private commercial sector, agricultural and

industrial, non governmental organizations, individuals and the media have a joint

responsibility regarding prevention in the face of disaster risk and regarding an efficient

contribution in the face of emergency situations.” (Prieur 2009, p. 17).

14 In this context, social contract is understood as the different pillars of society agreeing, explicitly or

tacitly, to the different roles and responsibilities that each pillar plays, including surrendering certain

freedoms and rights to the authority of the government in exchange for protection of their remaining

rights or freedoms.



57

Accountability and the principle of shared responsibility are at the core of the discourse on

private sector involvement in disaster risk management. A culture of accountability improves

the effectiveness of governance and service delivery for all stakeholders. The four pillars of

society (businesses, government, nonprofit organizations and community) should be

accountable to one another for their own actions and different interactions within the DRM

framework. An accountability framework requires a shared responsibility to ensure efficient

utilization of available resources and foster partnership in the form of reward flows between

stakeholders (e.g. taxes/subsidies, CSR funds, public contracts, salaries, aid, etc.).



58

Table 2.3. Accountability framework of all stakeholders in DRM

From

/To BUSINESSES GOVERNMENT NONPROFITS CONTRIBUTION

TO SOCIETY

BU

SIN

ESSES

Maximize profits,

increase value of equity

(from management to

shareholders)

Guarantee business

continuity (from

management to

shareholders, customers,

insurers, etc.

Provide a safe working

environment

(management to

employees)

Pay taxes and abide by

law

Regulatory compliance

Fulfillment of

contractual

responsibilities (PPP)

Information sharing,

risk disclosure

Responsible

business

practices (social,

environmental)

Provision of CSR

funds or in-kind

contributions

Strategic long-

term partnerships

Job creation

Safe environment

“Duty of care”

Relief support

and humanitarian

assistance

Risk disclosure

GO

VERN

MEN

T

Providing an enabling

environment for DRM

investment (regulation

and incentives)

Provide good quality and

resilient public goods,

services, infrastructure

Provide/enhance financial

flows

Enhance technology

development and

transfer

Transparency and

information sharing

Financial and technical

support and

collaboration (national,

provincial and local

governments, ministries

and agencies)

Information sharing

and knowledge transfer

between government

bodies

Provision of aid

funding

Provide good

quality and

resilient public

goods, services

and infrastructure

Transparency

Provide

protection

Provide good

quality and

resilient public

goods, services

and infrastructure

Provide aid

funding and

supplies

Transparency and

information

sharing



59

NO

NPRO

FIT

S

Proper use of CSR

funding (efficiency and

effectiveness)

Act as Watchdog

Transparency

Proper use of aid

funding (efficiency and

effectiveness)

Act as Watchdog

Transparency

Collaboration,

avoid duplication

of actions

Transparency

Social protection

and humanitarian

aid

Proper use of

donations

(efficiency and

effectiveness)

Transparency

RISK SHARING -- REWARD FLOWS -- ENVIRONMENT

In table 2.3, the main actors have been tabulated against each other in order to reflect the

varying interrelationships between each of them in terms of accountability. Nonprofits15 can

act as a “watchdog” to ensure the accountability of public and private sectors.

Simultaneously, they need to be accountable in the use of the funding received from

businesses, community and government, not only in the financial sense but also in terms of

effectiveness and efficiency of the activities for which the funds are used.

The four sectors also interact with one another in terms of environmental accountability,

which is necessary to maintain and sustain a healthy environment and avoid building further

risk. Damaging the environment can contribute to climate change, which will in turn

increase the frequency and severity of disasters.

The table above demonstrates the complex interrelationship of shared risk and responsibility

among stakeholders. Ultimately, it argues that failure to properly engage in DRM can lead

to businesses exacerbating risk for wider society as well as the environment. For example,

bankruptcy or financial disruption because of a natural disaster will have implications for

employees and suppliers, which can then have broader knock-on effects on the community.

Failure to provide a safe working environment for employees can cause the direct or

indirect loss of human lives; business disruptions during and after a disaster can cause the

unavailability of goods and services in a specific area/region; irresponsible consumption of

natural resources without any accountability can cause environmental damage, contribute to

15 Refers to civil society organizations (CSOs), non-governmental organizations (NGOs) and

international organizations (IOs)



60

climate change and thus increase the likelihood of future disasters; and irresponsible and/or

high-risk investments can lead to man-made disasters, e.g. financial crisis, oil spills,

deforestation, etc.



61


Investing in DRM has been proven to yield economic benefits, which is the ultimate goal of

any business. By investing in and making business more resilient, companies simultaneously

increase societal resilience. However, because the benefits of risk-sensitive investments are

not immediately evident, investing in something that yields benefits only in the case of a

relatively unlikely event is always a difficult business proposition, furthermore opportunity

costs need to be considered as resources allocated for risk reduction cannot be used

elsewhere in the business. Therefore, an argument has to be made that risk-sensitive

investment is no longer just about business survival but also about competitiveness and

long-term viability.

Risk sensitivity has to be integrated throughout the business cycle through a risk treatment

strategy, which will determine how much risk to avoid, accept, mitigate and transfer in order

to optimize business operations and remain competitive. To this end, it is important to

consider the application of industry standards that provide rules and guidelines for risk

management, adoption of business continuity plans, and undertaking risk financing and

transfer strategies. Small and medium enterprises (SMEs) should obtain special support from

public and private stakeholders since while they are an integral part of the economy they

are also the most vulnerable to disasters.

3.1 Drivers for business engagement in disaster risk management: an

issue of business management accountability.

To understand the different motivations behind business engagement in DRM requires a

thorough comprehension of the structure of business organizations and the way business

decisions are made. In this regard, stakeholder theory provides a useful framework that

includes business ethics, moral values and politics, to explain corporate behaviors beyond

economics.

Companies have diverse sizes and structures, ranging from sole-proprietorship companies or

individual traders to transnational corporations and holdings. All organizations are subject to

influences from a range of business stakeholders, i.e. organizations, groups or individuals

who hold different interests in the company (Post, Preston and Sachs 2002). Broadly, these



62

can be classified into three main groups, internal business stakeholders; external business

stakeholders (or business partners); and external non-business stakeholders. Figure 3.1

presents these different business stakeholder groups in three tiers, considering their degree

of interest in the company and their proximity to the management team.

Figure 3.1. Stakeholders’ influence in business DRM

Source: Author’s construction

The survivability and legitimacy of the corporation as an institution, or in other words, its

"license to operate" within society, depends not only on its success in generating economic

profits but also on its ability to meet the expectations of the different stakeholders who

contribute to its existence and success (Post, Preston and Sachs 2002). For these reasons,

the management of the interface between the different (and often competing) demands of

an organization’s different stakeholders in relation to its strategic goals is key in the strategy

making process and thus significantly affects decision-making (Ackermann and Eden 2011).

Decision-making takes place at different levels within a business organization depending on

the nature of the decisions to be made. Long-term, strategic decisions about major

investments or direction of future growth are usually made by either the Board of Directors

in large companies, or by company owners in smaller organizations. Tactical and short-term

strategic decisions are made by the executive management team. Lastly, employees are also

increasingly expected to make micro-decisions related to their own tasks, responses to

Tier-3

Non-business stakeholders

Tier-2

Business partners

Tier-1

Internal stakeholders

• Government

• Community

• NGO/CSO/IGO

• Customers

• Suppliers

• Creditors

• Shareholders/owners

• Management

• Employees



63

customers or specific business process improvement within their competences. While

decision-making increasingly happens at all levels within a business, in the context of DRM

it is usually the executive management team and the risk managers (in some larger

organizations) that decide on DRM investment strategies and other major business risk

management-related decisions.

3.1.1 A proposed model of DRM decision-making

Although some might argue that the sole responsibility of managers is to make profits and

increase the value of the company for the shareholders – i.e. that ultimately “the business of

business is business” (Friedman 1962) - in fact, business managers have a wide range of

different responsibilities towards their stakeholders. Handy (1991) argued that managers are

the custodians of corporate assets, the value of which needs to be protected and enhanced

for a range of present and future stakeholders that might not be limited to company

shareholders.

Following this reasoning, our proposed model suggests that business engagement in

disaster risk management, regardless of the modality – to protect themselves, assist the

community/environment or support the government- derives from an inherent

relationship of accountability from managers to the different business stakeholders. In

what follows below, different relationships of accountability are explained. The main drivers

behind business involvement in DRM are tabulated against the different engagement

modalities in Table 3.1.

Management accountability to tier-1 stakeholders: Internal stakeholders.

Internal stakeholders are different groups or individuals who work directly within the

business, such as the shareholders/owners of the company, the executive management team

and the labor force/employees. Owners and shareholders are interested in maximizing the

value of the company as well as earning dividends and increasingly higher returns on their

respective investments. Employees, including managers, want to earn high wages, work in a

safe environment, develop their careers and, most importantly, keep their jobs.

Economic drivers



64

Investing resources in DRM has proven to yield economic benefits, which is the ultimate

goal of any business. As an example, according to UNISDR (2013b, p. viii) the utility

company Orion New Zealand Ltd. invested US$ 6 million in seismic protection that

ultimately saved the business US$ 65 million after the devastating impact of the

Christchurch earthquakes in 2010 and 2011. It is obviously less costly to invest in disaster

risk prevention and mitigation than to pay for the post-disaster losses.

When a business loses part of its capital, the recovery period is a long, painful one. As we

can see in the figure 3.2 (left), the required profits to return to pre-disaster capital levels are

exponential. If a business loses 10 per cent of its capital, it needs to make a profit of 11 per

cent, just to return to its pre-disaster capital level. However a loss of 50 per cent would

require a profit of 100 per cent to recover to the same level. It has to be noted that on

average across industries business operating margins stand at between 7 and 10 per

cent.1617 Similarly, when looking at the necessary time required to recover pre-disaster

capital levels (Figure 3.2 right), assuming that a company is making an average annual profit

of 10 per cent, it would take the business around three years to recover a 20 per cent

capital loss or around nine years to recover from a loss of 50 per cent.18

Figure 3.2. Required profit (left) and time (right) to recover pre-disaster capital levels

Source: Authors’ calculations

16 Margins by sector (US). Stern School of Business, New York University

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html

17 David Bianco: This should convince you that high profit margins are sustainable.

http://www.businessinsider.com/david-bianco-high-profit-margins-sustainable-2012-5

18 All the calculations have not taken into account the loss of income during the period when

business operations are disrupted; hence the time estimates are very conservative.

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html

http://www.businessinsider.com/david-bianco-high-profit-margins-sustainable-2012-5



65

A study conducted by the Institute for Business and Home Safety (IBHS)19 revealed that an

estimated 25 per cent of businesses do not reopen following a major disaster. Furthermore,

80 per cent of companies that do not recover from a disaster within one month are likely to

go out of business.20 These estimates suggest that adequate investments in DRM are key for

the survivability of the business.

Increased reputation and brand value are additional economic benefits yielded by different

types of business engagement in DRM that have a positive impact on long-term sales and

profits. DRM investments can facilitate access to more favorable financing conditions by

providing repayment assurance to creditors. These type of investments make businesses

more competitive before, during and after a disaster because of improved reputation,

preparedness and resilience, respectively. By preventing and reducing risks, particularly

extensive risk from small but frequent disasters, a business can be much more competitive

in the long run. In fact, businesses that have invested the most in risk management may

financially outperform their peers (UNISDR 2013b).

Finally, investing in DRM can generate new business opportunities both within and beyond

DRM. An example within the DRM context would be the participation in an emergency

agreement with the government in order to perform a specific task in the aftermath of an

emergency. An example outside the DRM context would be the identification of new or

previously overlooked market gaps, based on changing needs of the community after a

disaster. It has to be noted that, as disasters are on the rise and governments and

businesses are increasing their awareness of the risks posed by disasters, the demand for

DRM services from both the public and private sectors should increase steadily. Thus, this

might present a good business opportunity for both existing and new DRM service

providers to participate in increasing resilience.

In brief, when making DRM investment decisions, managers are influenced by internal

economic drivers such as:

Business survivability

19 “Open for Business”, Institute of Business and Home Safety. Available at

www.ibhs.org/docs/OpenForBusiness.pdf

20 Jonathan Bernstein, president, Bernstein Crisis Management, LLC in Director, June 1998, v51n11,

p44.

http://www.ibhs.org/docs/OpenForBusiness.pdf



66

Long-term costs saving through returns on mitigation investments

Enhanced reputation and brand image

Increased competitiveness and market share

New business opportunities

Box 3.1 The case of Maiya Co., Ltd -making economic benefits by Keeping up the

supply of food in disaster-hit areas

Maiya Co., Ltd is a locally based supermarket chain in Iwate Prefecture, Japan. In the wake

of the 2011 Great East Japan (GEJ) Earthquake, while other local stores and national

convenience store chains were closed due to shocks in supply chain, Maiya managed to stay

open for business to provide necessity products to community residents. Maiya secured

supplies in two ways. It established local community-based networks where trust-based

relationship provided aids in case of emergencies. It also participated in a national

association where over 200 small to medium local supermarkets provided backup supplies

to each other in times of disaster. Maiya kept supply of backup generators, fuel, floodlights,

and plastic tarps so that outdoor shopping spaces could be set up in the event of blackouts

and store buildings damages. Such supplies were periodically checked and replaced. During

the earthquake, Maiya continued to sell their products in disaster-hit areas and opened

satellite stores in temporary housing units where all the other stores were wiped out by the

tsunami. Maiya also reached the residents in temporary housing areas and isolated

communities using truck stalls loaded with a variety of fresh foods. In August 2011, Maiya

opened its first temporary retail space in Rikuzentakata City, where most buildings crumbled

during the earthquake. The temporary store thrived as people had nowhere else to go for

shopping. Maiya was able to open four additional stores by the summer of the following

year. Although only 10 of Maiya’s 16 stores survived during the earthquake, Maiya’s post-

disaster sales volume was equivalent to the previous year, with more revenues per store

than previous years.

Source: Adapted from UNISDR 2013h



67

Duty of care towards employees21

Organizational management and professional business literature have underscored the

relationship between levels of employee satisfaction and organizational success. There is

consensus that employee satisfaction can be directly correlated with greater financial

performance.

Duty of care for staff, traditionally a ‘soft’, intangible concept, has evolved to become an

important concern for senior executives who recognize its potential to benefit their

companies in the form of tangible, profit-enhancing outputs. The Corporate Leadership

Council (2003) noted “numerous studies support[ing] the idea that there exists a link

between employee satisfaction and customer satisfaction, productivity and financial results”.

Harvard Business Review (2013) underlined the role that company leadership plays in

engaging employees, generating improved customer satisfaction and business results.

Marketing Innovators’ (2005) explain that content employees engender satisfied customers,

solidifying their relationship with the organization. This ultimately manifests itself in the form

of greater profit as end-users spend more money with the service provider and is an aspect

which both large corporations and SMEs can capitalize on in order to gain a competitive

advantage over sectorial rivals.

For business engagement in DRM, organizational duty of care includes ensuring the

wellbeing of employees in the event of disasters - either natural or man-made. In fact,

failure to provide a safe working environment for employees can cause the direct or

indirect loss of human lives. Such considerations are often addressed in the Corporate Social

Responsibility (CSR) policies adopted by larger organizations. Arguably, for SMEs and more

closely knit businesses of a smaller scale, the close proximity of senior managers to their

workforce means that duty of care for staff is more implicit. Regardless of an organization’s

size, disaster risks create uncertainty and can exacerbate the conventional challenges which

businesses face when operating across highly interconnected national, regional and

international scales. As such, attempts by businesses to ensure employee wellbeing provide

dual benefits of enhanced financial performance as well as strengthening an organization’s

ability to cope with disasters by creating strong morale and long-term staff commitment,

which both contribute to business resilience.

21 Generally a duty of care arises when one individual or a group of individuals undertakes an activity

that has the potential to cause harm to another, be it physically, mentally or economically.



68

Managers’ compensation schemes: incentives that turn into DRM disincentives

Normally, an employee’s total economic compensation comprises of a basic salary plus an

end-of-the year bonus. While the share of bonuses on the total compensation of regular

employees and mid-managers’ is relatively low in most industries, executive managers’

compensation, however, are determined mostly by these extraordinary payments, which

naturally are taken into account by most people when deciding to join a new company. The

amount to be received as bonus is subject to a set of performance indicators, normally

related with how much profit the manager has brought to the firm within the year.

Prima facie, this compensation scheme, which is well extended in today business world,

seems fair; an individual gets rewarded proportionally to how well has he served the group

(company) within the year. However, while these function as individual incentives to increase

the profitability of the firm, these rewards can also serve as a disincentive for managers to

make decisions or undertake investments that will yield results only in a few years time

while presenting themselves as costs in the year in question. This could ultimately have a

negative impact on the long-term sustainability and future revenue of the company. This is

of particular relevance in terms of business engagement in DRM, since most risk reducing

investments might not produce tangible results for years to come.

For this reason, from the DRM point of view, compensation schemes should include not

only short-term quantitative performance indicators but also forward-looking qualitative

indicators, in order to avoid them serving as perverse incentives, i.e. benefiting the

company today but hindering its sustainability in the future.

Management accountability to tier-2 stakeholders: Business partners.

External business stakeholders, or business partners, are the different groups or individuals

who work with the business but not within the business, these are, customers, suppliers and

creditors. Creditors are interested in receiving timely payments from businesses in order to

retrieve the loaned capital plus a return on their investment in the form of interests.

Customers are interested in receiving goods and/or services from the company in a timely

manner and of certain quality as per contractual agreement. Similarly, suppliers are

interested in selling their goods and/or services to the company and getting paid on time.



69

In the supply chain context, both customers and suppliers are interested in a continuous

and timely flow of goods and services in order to avoid the disruption of operations.

Ensuring continuity of the supply chain and fulfilling contractual responsibilities

The high economic exposure and degree of interconnectivity among economies represent

challenges to the increasingly dispersed and fragmented production networks that aim to

operate in a ‘just-in-time’ fashion. Managers strive for ways to ensure that business

operations remain undisrupted and maintain an adaptive capacity to efficiently ‘bounce

back’ when faced by such disruptive events. These strategies include widely recognized

measures such as the formulation of Business Continuity and Emergency Management

plans, but also encompass approaches that help create a base of stability and resilience in

the face of threats to operational performance. Failure to maintain business operations

during a disaster can cause a bottleneck in the wider production network that could

ultimately lead to systemic failure. Investments in business resilience can increase reputation

and trust among customers and suppliers, especially in highly integrated production

networks, ultimately bringing more business to the company. In this regard, managers who

are accountable to their customers and suppliers in order to keep the network functional,

have an incentive to invest in DRM. Companies also have to fulfill their contractual

responsibilities with their business partners in order to avoid penalties and even costlier

court processes, as well as to avoid damage to their reputation for not being able to deliver

as per contract agreements.

Safeguarding goodwill to ensure future profits

Securing future sales, profitability and stability requires the establishment of solid long-term

relationships with customers that are based not only on mutually beneficial economic terms

but also on trust and integrity. Intuition tells us that if a company’s customers perform well

the company will also be more likely to perform well. In fact, maintaining organizational

reputation by being transparent and responsible with customers is likely to improve the

goodwill of a company in the long term. In this regard, managers face the challenge of

disclosing current risks to customers to whom they owe fiduciary responsibilities in order to

maintain a trusting relationship at the expense of potentially lower short-term profits for the

firm. As an example from the United States, in the recent 2007-2008 financial crisis, many

investment banks –institutions that are supposed to advise their clients on different financial



70

aspects- were undertaking proprietary trading. That is, trading with their own funds in

addition to their clients’ funds, and even taking opposite positions in the markets than the

ones that had been previously recommended to their clients. This obvious conflict of

interest was not disclosed to their clients and resulted in a U.S. Senate hearing at which

major bank CEOs were put under scrutiny for the actions of their respective organizations.

Ultimately this led to multi-million dollar settlements from these banks to the U.S. Securities

and Exchanges Commission. Regardless of the costly settlements, the real damage was in

the loss of reputation that these banks, which were traditionally considered principled

organizations, suffered. This case shows that, while it takes months to make millions, it takes

years to build a reputation.

Business accountability to tier-3 stakeholders: Non-business stakeholders.

External non-business stakeholders are different groups or individuals who are not directly

working within the business but are affected in some way from the decisions of these

businesses, such as the community, the government and non-profit organizations. The

government wants businesses to pay taxes, employ more people, abide by law, and

transparently and truthfully report their financial conditions. Nonprofit organizations serve as

moral and environmental watchdogs for businesses and strive to obtain CSR-related funds.

Meanwhile, the community wants businesses to produce quality products at reasonable

prices, generate employment and not degrade the environment or abuse existing natural

resources.

Legal/regulatory compliance

Legal compliance plays a key role in the involvement of the private sector in DRM. Each

business has to act, even involuntarily, within the given legal framework. The DRM activities

of a business must also comply with the firm’s legal responsibilities and obligations such as

codes of facilities, taxations and investment and operation conducts. For example,

compliance with building codes, specific safety-related or environmental regulations or even

fulfillment of contractual obligations in the case of PPP agreements is necessary in order to

operate legally. Non-compliance would directly threaten their survival with costly legal

punishments or lead to other government actions such as revoking specific licenses or



71

permits necessary to operate. Other negative impacts related to reputation and brand image

are also a risk. As such, the primary motivation of engaging in DRM activities may not

necessarily be profit-oriented but rather related to compulsory legal compliance.

Social and environmental responsibility

Businesses also have also incorporated social responsibility motives as part of their normal

operations. Businesses are part of society and prosper when society is healthy and resilient.

While national and local governments must undertake the primary responsibility for

protecting society, the private sector plays a crucial role in supporting the community.

Thus, the private sector is one of the four risk shareholders and is accountable for its own

share. By investing in and making business more resilient, businesses simultaneously

increase societal resilience.

Bankruptcy or financial disruption following a disaster event usually hasimplications for a

firm’s employees and business partners but can also have broader effects on the

community. Business disruptions during and after a disaster can cause the unavailability of

goods and services in a specific area or region. Irresponsible consumption of natural

resources or disrespectful practices with the environment can cause environmental damage,

contribute to climate change and thus increase the likelihood of future disasters.

Engaging in DRM and CSR activities may hence be necessary in order for a business to keep

its ‘social license to operate’, which is given by –and only by- society.

Table 3.1 is a summary of the discussion above. In the table, the three main drivers behind

business engagement in DRM (profit-making, legal compliance and socio-environmental

responsibility) are tabulated against the different modalities of engagement (protecting

themselves, assisting the community and supporting the government), with a sample of

specific actions within each modality.



72

WHY BUSINESSES ENGAGE IN DRM?

MODALITIES SPECIFIC ACTIONS ECONOMIC BENEFITS LEGAL COMPLIANCE SOCIAL/ENVIROMENTAL RESPONSIBILITY

PROTECTING

THEMSELVES

Structural mitigation

measures To reduce business liability by avoiding

risky investments

To enhance resilience of supply chains

To save assets by investing in risk

management rather than bearing the

after-event losses

To assure business continuity

To improve access to business financing

To comply with building codes

To comply with specific safety-

related regulations

To adhere to industrial/commercial

restrictions

To implement mandatory business

continuity plans

To fulfill contractual obligations

with business partners

To prevent or reduce loss of human lives (duty of

care with employees)

To reduce job destruction

To ensure continued supply of goods and services

Non-structural

mitigation measures

Risk-informed

investments

ASSISTING THE

COMMUNITY

Sharing business

continuity plan (BCP)

and awareness raising To improve sales, profitability and

security from the enhanced reputation

To secure or even broaden “license to

operate” with stability and avoiding

conflict

To gain from new business opportunities

in DRM and/or related areas

To comply with specific safety-

related regulations

To comply with environmental

laws

To protect human lives, ensure aid, goods and

services

To enhance society’s welfare

To mitigate the adverse potential of disaster risks

e.g.:

Mitigated environmental damage from

unsustainable natural resource consumption

Reduced risks from disasters

Mitigated impacts of climate change

Mitigated industrial/technological disasters

Improved preparedness based on better risk

information and risk disclosure

Availability of business assets and resources for

prevention, preparedness, response and

Corporate social

responsibility (CSR) after

disaster impact;

philanthropy

Risk-sensitive

investments



73

Table 3.1. Summary of the why’s and how’s behind business engagement in DRM

recovery

SUPPORTING THE

PUBLIC SECTOR

Public-private

partnerships (PPP); tri-

sector partnerships

(TSP)

To obtain business opportunities in

supplying goods and services and the

development of resilient infrastructure

To promote mutual accountability

To improve access to information,

knowledge and technology

To fulfill contractual obligations in

PPP and TSP agreements

To act as a responsible risk shareholder

To practice transparency

To provide expertise, goods and services

To contribute to emergency use of assets

Information sharing and

collaboration


5. Collaborative arrangements

74

3.2 Economic impact of disasters on businesses

When attempting to assess the economic impact of planned or implemented DRR measures,

a range of challenges related to data availability issues and most importantly, the inherent

uncertainty surrounding disaster probability arise. One the one hand, the availability of data

on disaster losses is scant and its reliability questionable, especially in terms of economic

losses. On the other hand, the current level of input detail required by the risk-probabilistic

models that are being developed makes it not only difficult but also very costly to obtain

reliable estimates of disaster impacts. A valuable marker is that of weather forecasting,

which is not (and probably will never be) an exact science in spite of the amount of

resources being poured on its development. In comparison, disaster risk probabilistic

models are still far behind in terms of prediction. As the only information of this nature that

is currently available comes from models such as GAR, HAZUS, CAPRA, RiskScape, etc., these

resources must be utilized whilst recognizing their limitations and the need to improve.

In order to properly assess the economic impact of disasters on businesses, direct impacts

(those resulting from direct damage or loss of assets) as well as indirect impacts

(externalities caused by the disasters that have an impact on the operations of a company,

affecting not its assets but its income) need to be considered (Table 3.2). Macroeconomic

impacts have also been considered (Mechler, 2005) although it can be argued that these are

a subset of indirect impacts.

Table 3.2. Different types of disaster impact on businesses

Type of

impact

Type of

loss Developments Impact for businesses

Direct Assets Destruction and/or

damage of:

Physical capital

Human capital

Loss of assets, decrease in book value

Potential decrease in goodwill value

Loss of human capital

Loss of cash reserves or increased

liabilities to rebuild/recover,

Potential bankruptcy

Indirect Income Destruction and/or

damage of:

Higher costs of production faced

Loss of suppliers



75

Public

infrastructure

Suppliers and/or

customers

Loss of customers

Business disruption, reduced

output/sales

Opportunity costs of recovery

expenditure

Loss of profits

Macro-

economic

Income

and

Efficiency

Reduction of

country’s output

(GDP)

Increase in

unemployment

Increase in

inflation

Reduced sales due to

o Lower economic activity

o Higher unemployment rate (lower

disposable income for consumers)

o Increase in prices discourages

demand

Increased production costs

o Workers demand higher nominal

wages to keep their purchase power

unchanged

o Increased price of local inputs

While direct impacts have been frequently calculated, indirect impacts are not commonly

assessed. Some illustrative examples of indirect economic impacts on businesses are:

In 1987, a major earthquake in Ecuador followed by mudflows and floods severely

affected the oil-exporting industry. The estimated indirect losses have been

calculated in approximately 165 million USD. Indirect losses comprised additional

costs of investing in an alternative pipeline, greater transportation and shipping

costs, cost of replacement oil export losses and lost profits (ECLAC 2004).

In 1994, business disruption losses from the Northridge earthquake in California

amounted to USD 6.5 billion. (CACND 1999).



76

In 1995, the indirect economic losses for businesses after Kobe earthquake reached

an approximate figure of USD 100 billion (CACND 1999).

The cost of not investing in DRR measures prior to a disaster that ends up materializing is

clear. However, due to the low likelihood of significant disasters happening, the benefits of

DRR investments are, ex-ante, very unclear to risk managers. Kunreuther (1996) coined this

phenomenon as the ‘natural disaster syndrome’. It is the attitude before a disaster of most

homeowners, private businesses, and the public sector, who usually do not voluntarily adopt

cost-effective loss reduction measures. The main reasons, which are all interconnected, can

be summarized as 1) the underestimation of the probabilities of disaster occurrence; 2) a

short time horizon or ‘myopic behavior’22; 3) budget constraints; and 4) interdependences

with neighbors, which is the adoption of a passive attitude until someone else takes the

lead or benefits are duly demonstrated (Kunreuther 2006).

The existing literature on the actual economic impact of implementing DRR measures is, at

best, scarce (Gilbet and Kreimer, 1999; Mechler 2005; DFID 2005; Suarez and Linnerooth-

Bayer, 2011; Vorhies 2012). While limited research has been undertaken on both the costs of

natural disasters and on the costs and benefits of disaster mitigation investments, and

virtually no research has included the business perspective. Although most of us have heard

in several occasions the famous stanza of “each dollar spent in risk mitigation produces

savings of 7 dollars when a disaster strikes”, citing as sources either the World Bank or the

World Meteorological Organization, there is actually no publication providing evidence for

these figures. In fact, the World Bank has stopped endorsing them (Kelman and Shreve

2013).

The truth is that strategies and mitigation measures for reducing risk have not been

implemented at the level agreed upon in the HFA. One of the main causes is the simple fact

that businesses face resource constraints and thus it becomes very risky to invest in

something that yields benefits only in the case of a relatively unlikely event. There is also a

difficulty to reconcile the opportunity cost, as resources allocated for risk reduction cannot

be used elsewhere in the business. Hence, businesses are, understandably, more likely to

22 Myopic behavior occurs when economic agents focus on the cost of the product only when

determining how much they are willing to pay to invest in a protective measure, not taking into

account the expected benefits over more than one year.



77

invest in projects that yield more certain benefits (ESCAP 2013a, Suarez and Linnerooth-

Bayer 2011).

Therefore, it is likely that risk mitigation investments which target the risk posed by small-

scale high-frequency events will have a higher benefit-cost ratio than investments targeting

the reduction of risk from large-scale low-frequency events, and hence are more likely to be

acceptable to business stakeholders.

3.3 The business approach to risk management

With disaster-related losses on the rise and increasingly inter-connected economies,

business resilience is no longer just about survival, but about competitiveness in an

increasingly complex market environment. In this regard, adequate risk assessments need to

be performed in order to optimize the risk treatment strategy of firms and for them to

remain competitive.

The business risk management cycle

Risk management is not a new concept for businesses, especially for relatively big

companies with well-defined risk governance structures and even designated risk managers.

The typical business risk management cycle, which comprises the following five stages, can

be easily adapted to the DRM context:

1. Hazard identification and analysis

This is the information gathering stage where the risk manager collects information on

potential hazards, the likelihood of their realization and their potential effects on the

business.

2. Risk assessment and evaluation

In this stage the exposures of the company to the specific disasters are identified and the

vulnerabilities analyzed. Risk is then effectively quantified so that relevant decisions can be

made.

3. Identification of risk bearing capacity



78

The risk manager proceeds to assess how much risk the company can bear with its own

resources, both current and future.

4. Risk treatment strategy

In this crucial stage, the risk manager makes a decision about how much risk will be

avoided, mitigated, transferred and accepted in order to design the risk treatment strategy.

This is ideally prioritized after undertaking a cost-benefit analysis (CBA) on each of the

different options available.

5. Implementation of the strategy and monitoring

In this last stage, the risk treatment strategy is implemented following the priorities set by

the CBA. Monitoring and evaluation of the strategy should be done periodically to ensure

its validity in accordance with changing internal and external factors of influence.

Risk assessment and the importance of risk information

Regardless of the strategy followed, a sound risk assessment is the cornerstone to

effectively design business DRM processes and strategies. However, the lack of data and the

inherent uncertainty surrounding disaster probability make informed decision-making

difficult. This is compounded by the poor quality and reliability of the data that is available.

Furthermore, if a firm attempts to obtain the data first-hand, this can prove to be a very

costly activity.

Adequate access to risk information may lead to greater private sector investments in DRM

as it can enable businesses to make informed risk-sensitive decisions (UNISDR 2013c). This

is particularly crucial to ensure reductions in, and control of, disaster risk (UNISDR 2013c).

Thus, a critical barrier to DRM investments by business is the lack of adequate risk

information and the difficulty to quantify economic benefits from the management of such

risks. Chapter 4 explores this issue in depth and provides several recommendations for

governments to enhance the availability, accessibility and affordability of risk information.

Risk treatment strategies: avoid, accept, mitigate or transfer

After an initial risk assessment, businesses make decisions about their risk treatment

strategy, specifically how much risk they want to avoid, accept, mitigate and transfer in



79

order to optimize their operations so that the achievement of business objectives becomes

more likely (Figure 3.3).

Figure 3.3 Risk treatment strategies

Businesses can choose to directly avoid risk by limiting their exposure and making risk-

informed investments. Examples of risk avoidance can range from not investing in risky

financial products, not investing in disaster-prone areas, to not engaging in business with

potential clients with a high-risk profile. However, as pointed out earlier, availability,

accessibility and affordability of risk information is key in this process. More often than not,

issues of asymmetric information and risk data unavailability make this process difficult.

Risk acceptance is a feature that distinguishes businesses from DRR practitioners, who only

focus on the negative consequences of risk and the need to reduce it. Businesses instead

define risk as the effect of uncertainty on organizational objectives. It is clear that in this

definition, uncertainty can generate either losses or gains from risk. However, the level of

risk acceptance should be determined by the firm’s risk appetite and not by information

gaps or lack of awareness. It should also be limited by law in order to avoid moral hazard-

related problems. When risk has been accepted, companies budget the risk into their

operations and proceed to finance it should losses end up materializing - either with their

own cash reserves or through external financial institutions.

•Structural mitigation

•Non-structural mitigation

• Insurance

•Financial markets

•Can serve as incentives for mitagation

• To be determined by the risk apetite of the firm, not by information gaps

• To be limited by law/regulations

• Avoid risky investments or disaster-prone areas

• Not engaging in business with a non-resilient supplier

Risk avoidance

Risk acceptance

Risk mitigation

Risk transfer



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Should businesses choose to mitigate part of the risk assessed, they can opt for

implementing structural and non-structural mitigation measures. Structural measures refer

to “any physical construction or application of engineering techniques to achieve hazard-

resistance and resilience in structures or systems” (UNISDR 2009c). Examples of this are

building retrofitting, acquisition of special equipment, etc. In contrast, non-structural

approaches include [company] policies, awareness raising, training and education (UNISDR

2009c). These may entail emergency management plans, business continuity plans or risk

communication strategies and other standard operating procedures. Risk mitigation

measures should ideally be conducted after undertaking a sound cost-benefit analysis (CBA)

in order to make the most of the limited available resources.

Businesses can also chose to transfer the remaining risk to insurance companies or the

financial market through insurances and other risk finance and transfer instruments. This

topic is discussed at large in section 3.7 of this chapter.

Cost-benefit analysis of risk treatment strategies

Cost-benefit analysis (CBA) is a practical tool to assess DRM-related investment decision-

making during the design of the risk treatment strategy. Mechler (2005) proposes two

methodologies for the CBA of implementing mitigation measures. The first is a forward-

looking method (risk-based). This method combines data on potential hazard, actual

vulnerability to risk and risk reduction and is more rigorous but more resource-intensive in

terms of data required and time expended. The second is a backward-looking method

(impact-based), which builds on past disaster damages for assessing risk and is more

pragmatic and easier to implement but less rigorous in nature.

While the ideal approach would be to use the forward-looking method, the extensive

resources required to carry out this method make it unfeasible for most companies,

especially SMEs. The second approach, however, could be feasible provided that the

historical data needed is made publicly available at a reasonable cost. The DRM measures to

be reviewed through CBA can be easily identified based on the risk from specific types of

hazard which the company is exposed to. For these reasons, governments should provide

support and information to encourage businesses, especially SMEs, to better understand

and assess their disaster risk (Box 3.2).

Box 3.2. Simple listing: Quick CBA method.



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CBA could be technically complex and require considerable resources, especially in terms of

human capital and time. Hence, it is usually unfeasible for SMEs to conduct it. To tackle this

issue, the US Federal Emergency Management Agency (FEMA) has provided guidance to

SMEs on how to undertake, instead, a purely qualitative CBA. The method proposed by

FEMA is called “simple listing.” It consists of only three steps:

1. Listing of identified actions per hazard;

2. Identification of benefits and costs; and

3. Assign priorities and implement actions subject to available resources

This method is best used when it is not possible nor appropriate, to conduct a quantitative

review of benefits and costs. Each identified action has a unique advantage or disadvantage

that can subsequently be used for prioritization. Source: FEMA 2007

Source: FEMA 2007

3.4 Industry standards for risk management

Following the definition of the International Standards Organization, a standard can be

described as: “(a) document, established by consensus and approved by a recognized body,

that provides, for common and repeated use, rules, guidelines or characteristics for activities

or their results, aimed at the achievement of the optimum degree of order in a given

context.” (ISO/IEC Guide2: 1996). In other words, industry standards are established

procedures, agreed upon a group of recognized experts, which provide an optimized

systematic approach for a specific process and/or its products.

Standards assure minimum levels of quality, safety, reliability, efficiency and

interchangeability. Their use and implementation is usually voluntary, and organizations can

choose to implement all or part of a published standard, or simply use them as a

benchmark of best practices.23 Standards can also help businesses to maintain

23 Marc Siegel. Standards to Enhance Organizational Resilience: Security, Preparedness, and Continuity

Management. http://disaster-resource.com/newsletter/subpages/v256/meettheexperts.htm

http://disaster-resource.com/newsletter/subpages/v256/meettheexperts.htm



82

competitiveness, performance and resilience in the event of a disaster, both in terms of

physical capital/assets (e.g. building/construction standards compliance) and in terms of

management processes (e.g. risk management standards).

Industrial standards can be classified in 3 groups according to their geographical scope:

national, regional and international.

National standards

Most countries have a national industry standards organization that is in charge, not only of

issuing their own standards, but also of monitoring and helping in the implementation of,

and harmonization with, international standards.

For obvious reasons, it is beyond the scope of this publication to analyze the different

national standards related to DRR and DRM across the Asia-Pacific region. However, it is

important to note that while the adoption of international standards is voluntary, the

implementation of national standards and/or codes might be required by law in some cases.

Hence, national standards and codes provide governments with a useful tool to ensure

that businesses meet a certain minimum standard of resilience to prevent exacerbated

losses in the event of a disaster, by either mandatory requirement or embedding them as

part of incentive schemes.

An example of the utilization of standards as a resilience building incentive mechanism

could be to include a certain industry standard certification as a requirement in a public

procurement process. On the normative side, another example is the use of building codes.

In most countries, in order to receive a construction permit, the design of the building

needs to meet certain minimum criteria for earthquake resilience established by the

government. These criteria can vary across the different regions or districts of a single

country, according to the specific region’s estimated hazard exposure, usually calculated by

the government using historical data and made publicly available.

Box 3.3. Building codes in Japan



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Japan, as a seismically active country, has some of the most rigorous earthquake building

standards in the World. In 1981, it introduced the “shin-taishin” (New Earthquake Resistant

Building Standard) amendment into the former “kyu-taishin” building code, setting a new

(higher) minimum earthquake-resistance standard. The amendment establishes that in case

of the often-occurring mid-size earthquakes (Richter magnitude 5-7), the building should

suffer no more than a slight amount of cracks and should continue to function normally,

and in case of a large earthquake with a Richter magnitude 7 or higher and a Shindo scale

of upper 6 or higher, the building should not collapse.

Currently, “kyu-taishin” buildings still represent about 20-30 per cent of the total number of

buildings nationwide. These buildings are still saleable but tend to have lower price tags

than “shin-taishin” buildings. This is a good indicator that the real estate market is working

efficiently since the risk premium of non-compliant buildings is reflected in the price of the

assets. Similarly, buildings that have been built with even more modern and resilient

methods not required by law - like the base-isolation system “menshin” which can stand

earthquakes of higher magnitudes - have the highest market prices.

The positive outcome of the enforcement of this new code is clear. In the 1995 Hanshin

Earthquake, only 0.3 per cent of the “shin-taishin” buildings suffered serious damage, while

8.4 per cent of the “kyu-taishin” buildings suffered serious damage.

Source: JPC 2014

Regional standards

In the Asia-Pacific region, there are two regional standards organizations, namely the Pacific

Area Standards Congress (PASC) and the ASEAN Consultative Committee for Standards and

Quality (ACCSQ). However, neither of these organizations develop specific industry

standards. They act as a forum to discuss international standards at the regional level in the

case of PASC, which recommendations later on are elevated to the ISO, and also to

harmonize national standards and establish mutual recognition arrangements among ASEAN

members, in the case of ACCSQ. With the advent of the ASEAN Economic Community in

2015, ACCSQ may have an increasing role in the setting of standards across the 10 member

countries.



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International standards

There are different international standards organizations which address various different

issues, however, the most relevant to this study, due to its international recognition and

specific standards published on disaster risk management, is the International Organization

for Standardization, also known as ISO. ISO is a voluntary membership organization

composed by 163 national standards organizations (one member per country) that, to date,

has published more than 19,500 standards.24 Its structure guarantees that the best practices

worldwide are incorporated into the new standards published, with some member

organizations leading the development of the standards where they have more

expertise/experience in. For example, in the development of the ISO 31010 standard (“Risk

Assessment Techniques”), it was the Joint Standards Australia/Standards New Zealand

Committee which promoted an international standard for risk management, taking as a first

draft their then-national standard AS/NZS 4360:2004.

Among the existing ISO standards, two groups can be distinguished: those standardizing

DRM procedures (ISO 22301, ISO 31000, etc); and those standardizing quality and resilience

levels of physical capital (e.g. concrete properties, ductility of iron pipes, etc). While the

implementation of the second group of standards plays its role only during the mitigation/

prevention phase of the DRM cycle, the first group is also present in the response and

recovery phases. Table 3.3 contains most of the relevant international standards related to

disaster risk management procedures.

Table 3.3. Risk and disaster management-related ISO standards5

ISO number Name

ISO 22300 Business continuity management systems – Terminology

ISO 22301 Business continuity management systems – Requirements

ISO 22313 Business continuity management systems – Guidance

ISO 22315 Mass evacuation – Guidelines for planning

ISO 22320 Emergency management – Requirement for incident response

ISO 22322 Emergency management – Public warning

24 ISO official website, accessed on January 15, 2014: http://www.iso.org/iso/home/about.htm

http://www.iso.org/iso/home/about.htm



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ISO/PAS 22399 Guideline for incident preparedness and operational continuity

management

ISO/IEC 24762 Guidelines for ICT technology disaster recovery services

ISO/IEC 27031 Guidelines for ICT readiness for business continuity

ISO 28000 Specification for security management systems for the supply chain

ISO 28841 Guidelines for simplified seismic assessment and rehabilitation of concrete

buildings

ISO 28842 Guidelines for simplified design of reinforced concrete bridges

ISO 31000 Risk management – Principles and guidelines on implementation

ISO 31010 Risk management – Risk assessment techniques

ISO Guide 73 Risk Management – Vocabulary (not a standard per se)

The uptake of DRM-orientated international standards means the adoption of standardized

operating procedures that have been developed and agreed-upon by experts at the global

level. It presents numerous benefits for both businesses and public organizations. Following

structured and systematic processes, organizations can manage risk and uncertainty in a

proactive manner, as well as mitigate and quickly recover from unavoidable disruptions

caused by different types of disasters. International standards can also fill in the gaps of

national standards in some countries with less developed standardization systems, as we can

see in the example provided in Box 3.4.



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It is not only large organizations that can benefit from the adoption of international

standards; SMEs can also improve their resilience in the same way as larger organizations.

Some of the specific benefits for SMEs are:25

The adoption of business practices of excellence used by large corporations

An increase in the efficiency of management processes

An increase in credibility towards big customers

The possibility to open new business opportunities

An increase in reputation / brand name

The adoption of a “common language” across an industry sector at the global level

25 ISO, “10 good things for SMEs” http://www.iso.org/iso/10goodthings.pdf

Box 3.4 International standards also work for less developed countries

The ISO 28841 “Guidelines for simplified seismic assessment and rehabilitation of

concrete buildings” international standard has been specifically developed for countries

that do not have national building codes already in place.

The development of these codes frequently requires having in-depth data on the

characteristics of the different regions across the country, including physical,

meteorological, geological, seismic, etc. This data is very costly to obtain and maintain.

For this reason, most developing countries do not have a collection of such data, due to

the lack of human, technical and economic resources.

This international standard can provide sufficient information on its own to allow

designers to use it without supplementary, external data and without the use of

sophisticated calculation tools, in the case of simple structures. Also, it can be used

before an earthquake to assess a building's vulnerability, as well as after the event to

decide on what repairs need to be made to ensure a safe structure.

Source: ISO website (www.iso.org)

http://www.iso.org/iso/10goodthings.pdf

http://www.iso.org/



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Businesses look towards such standards to obtain a framework for action and to gain

recognition of their effort in achieving DRM. Standards also improve reputation and provide

businesses with competitive advantage.

Although these benefits are attractive, getting an ISO certification is a costly process in

terms of human and economic resources. A Monash University survey (2007) found that

Australian businesses spend an

average of eight months to implement

ISO 9001 with minimum startup

consultancy expenditure of

approximately AU$ 5,000 excluding

taxes for smaller companies and AU$

3,500 certification fees to be paid

annually.26

These costs can be prohibitive for

smaller businesses. Alternative

schemes such as “do-it-yourself”

packages that are ideal for SMEs can

be purchased for less than US$ 1,000.

Such customized packages only

include the essential services and thus

remove the unnecessary cost and

complexity of implementing the full

standards. This reduces the recurring

cost of certification (annual fees) while

still providing them with a competitive

edge. Companies could calibrate their

needs and choose to be just “ISO-compliant” (conforming to the requirements of a BCM

standards); “ISO-aligned” (developing an in‐house BCM approach which is consistent with,

modeled on, or has related elements to, BCM standards); or “ISO-certified” (being fully

26 Mapwright Consultants, “ISO 9001 - How Long and How Much?”

http://www.iso9001consultant.com.au/FAQ-how-long.html. These numbers are just indicative and

should be taken as a back of the envelope calculation.

Box 3.5. What businesses think about ISO

22301, the international standard for BCM

In 2012 the Business Continuity Institute (BCI)

published a two-part survey on the adoption of

BCM Standards and ISO 22301. The main

findings regarding the businesses views on the

standard are:

85% of respondents felt the main

advantage of the ISO was to be found in

providing a common language for

international working across customers,

suppliers and internally.

Those based in Europe, Asia, Middle East

& Africa are positive on ISO in terms of

its brand benefits and their likely

adoption of it. North American

respondents showed lower levels of

intent to adopt.

67% of respondents will seek to align to

ISO 22301 over the next three years

ISO 22301 will lead to much higher levels

of certification. 67% of certificate holders

in 2015 do not hold one today.

Comply, certify or align? The main findings on

the adoption of international standards for DRM

were:

57% of responding organizations (BCI

members) have developed an in‐house

BCM model aligned to one or more BCM

international standards.

17% of them are BCM ISO compliant.

13% of them are BCM ISO certified.

Source: BCI (2012)

http://www.iso9001consultant.com.au/FAQ-how-long.html



88

audited and possessing a certificate of compliance with the standards issued by an

accredited certification body). In Box 3.5 we can see the views of the private sector towards

the adoption of international standards on DRM, as well as some indicative figures of the

actual adoption modalities.

The number of certifications on international standards for DRM is still low among

businesses compared to the adoption of other standards like ISO 9001 (quality) or ISO

14001 (environmental sustainability). We can appreciate this fact by just looking at the ISO

annual report, where no certification on DRM standards is reported. This might be explained

by the fact that ISO 9001 or 14001 are required contractually in many cases, and also since

they give companies better image/reputation. On the other hand, a number of countries

around the world have started to adopt ISO 22301 to replace their existing national

standards on BCM. Also, the adoption of the ISO 31000 framework by governments in the

Asia-Pacific region has recently increased. As of 2013, India, Japan, Malaysia, New-Zealand,

Russia, Singapore, Thailand and Turkey had adopted ISO31000 as a framework for DRM.27

International, national and private sector-led industry standards have the potential to be

used by companies to increase resilience of their business partners and thus reduce their

own risk. For instance, suppliers located in disaster-prone areas or facing certain operational

risks could be required to meet these standards under the terms of their contracts in order

to ensure supply chain continuity and resilience. Standards and certifications can also be

used by insurers and banks to reduce the risk profile of their clients by offering them

discounted premiums and interest rates, respectively, should they have risk management or

other safety-related certifications.

New standards in the tourism sector

With the growing importance of tourism worldwide, any disruption to arrivals can seriously

undermine business competitiveness and sustainable development. A single disaster event

has the potential to cause widespread damage and economic disruption, affecting private

and public investments in tourism destinations, and the country’s image and reputation,

while posing a threat to the lives of tourist, workers and surrounding communities

27 http://g31000.org/about-iso-31000/

http://g31000.org/about-iso-31000/



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(GIZ/GIDRM, UNISDR &PATA 2014). The United Nations Global Assessment Report (GAR) in

2013 (UNISDR 2013b) has found that the hotel industry is usually able to cope with low

impact hazard events, but disasters of more extreme severity are often poorly managed.

Many hotels do not have the systems and processes in place to reduce their risk to disasters

or be prepared if and when they occur. The implementation of effective disaster risk

management through certification programmes and voluntary rating systems were one of

the recommendations raised in the GAR (UNSIDR 2013b).

Two of such initiatives are ‘Tsunami Ready’ by the Bali Hotels Association and the Ministry

of Tourism in Indonesia; and the recently launched ‘Hotel Resilient’ Initiative by Deutsche

Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH within the framework of the

Global Initiative on Disaster Risk Management (GIDRM), the UN Office for Disaster Risk

Reduction (UNISDR) and the Pacific Asia Travel Association (PATA). This interesting trend of

private sector-driven initiatives showcases the increasing market value that business

resilience could bring in terms of gaining customers’ trust and interest, as companies are

deciding to invest more resources in standards and certification programs.

Box 3.6 Hotel Resilient Initiative

Tourism is one of the fastest-growing sectors in the Asia-Pacific region but also one of the

most exposed. In many countries, the tourism industry plays an important role in advancing

development and makes a significant contribution to the local, national and global

economy.

In order to improve the management of disaster and climate risks and to strengthen the

resilience of the tourism sector in the Asia-Pacific region, the Deutsche Gesellschaft für

Internationale Zusammenarbeit (GIZ) GmbH within the framework of the Global Initiative on

Disaster Risk Management (GIDRM) is collaborating with the United Nations Office for

Disaster Risk Reduction (UNISDR) and the Pacific Asia Travel Association (PATA). The ‘Hotel

Resilient’ Initiative aims to develop internationally recognised standards for hotels and

resorts. These will enable hotel owners to reduce the degree to which their businesses, as

well as tourists and neighbouring communities, are exposed to risks associated with natural

and man-made hazards.



90

By complying with these standards, hotels, resorts and tourism destinations can

demonstrate their disaster risk management capacities and the safety of the hotel site to

potential customers, insurers and financiers. ‘Hotel Resilient’ builds on strong partnerships

with government representatives from the respective government agencies for tourism and

disaster risk management, with the private sector (e.g. hotel associations, hotels, resorts and

tour operators) and with civil society in the current focus countries of Indonesia, the

Maldives, Myanmar, the Philippines and Thailand.

Source: GIZ/GIDRM, UNISDR & PATA 2014.



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3.5 Business continuity management and planning

Business continuity management or BCM is “an organization-wide discipline and a complete

set of processes that identifies potential impacts which threaten an organization. It provides

a capability for an effective response that safeguards the interests of its major stakeholders

and reputation” (Goh 2009, p.20). The first international standard for BCM is “ISO 22301 –

Societal security – Business continuity management systems – Requirements”. The main

objectives of the standard include: (1) supporting the holistic management in the

organization; (2) identifying potential threats to operations of the organization; and (3)

coping with business disruption by implementing business continuity plans (BCP). The

process of the standard is based on the “Plan-Do-Check-Act” (P-D-C-A) cycle as seen in

figure 3.4 below.

Figure 3.4. PDCA cycle applied to BCM

Source: International Organization for Standardization

The business continuity plan, or BCP, which is the main managerial instrument of BCM, is a

set of “prior arrangements and procedures that enable an organization to respond to an

event in such a manner that critical business functions can continue within planned levels of

disruption” (Goh 2009, p.22). The end result of a BCP is an emergency action plan. The plan

comprises clearly defined and documented procedures and information for use when

disaster occurs. Documented procedures guide organizations to respond, recover, resume



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and restore to a predefined level of operation following disruption.28 Three case studies on

BCPs can be found in annex 1.

In the event of a disaster, having a BCP in place is of utmost importance since it not only

helps to protect the lives of employees, clients, suppliers and their family members, but also

minimizes the impact on the business by enabling them to responding to crises more

effectively. BCPs ensure the continuity of business operations under strenuous

circumstances. This is key to maintaining a competitive edge at all times, since disasters can

drive a business to bankruptcy not just because of asset damage and destruction but, more

importantly, through loss of income due to disrupted operations. It also helps to maintain

reputation by sustaining contractual requirements with clients and partners during difficult

times.

Other additional benefits that BCPs can bring about are a substantive reduction of the cost

of recovery, both in economic and temporal terms; an improvement in organizational

culture and management ability to respond to any crisis in an appropriate and timely

manner; and in some cases, helping to comply with legal requirements.29

However, SMEs usually find the adoption of a BCP to be challenging for a number of

reasons:

Inadequate access to risk information and shortage of long-term business

perspective;

BCM and BCP have not been embedded into organizational culture;

Lack of good understanding of the BCP process such as the confusion with ‘incident

management’ or a disaster recovery plan for ICT system; and

Lack of resources for the development, consulting and training on proper BCP.

SMEs that are typically most exposed to disaster risks are found to be least capable of

developing and adopting BCP. Lack of awareness among the management team is another

key challenge despite the general acceptance that BCP can improve long-term resilience

and competitiveness.

28 Typically BCP covers resources, services and activities required to ensure the continuity of critical

business functions.

29 Some countries such as United Kingdom have a national regulatory framework on BCP. BCP might

be used as a restrictive normative or regulatory measure by advanced economies.



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In order to overcome these obstacles, governments should provide appropriate incentives

and support, especially to SMEs, through different public policy instruments such as

taxation, and subsidies. Working with business groups and chambers of commerce to build

the capacity of SMEs to develop their own BCP has proven to be effective as the example of

the Singapore Business Federation shows (see case study 3 in annex 1). Also, SMEs can

equip themselves to develop simple BCPs through, for instance, the guidebook on BCP for

SMEs published by APEC (2013) in collaboration with ADRC.30

Industrial parks and area-wide business continuity

Two major disasters which struck the Asia Pacific region in 2011, the Great East Japan

Earthquake and Thailand floods, affected industrial agglomerations where numerous

businesses from the same sectors and supply chains were clustered together. These

disasters affected geographical areas where automotive production is concentrated, severely

disrupting vehicle part supplies on a worldwide scale (Ando and Kimura 2012). Furthermore,

in Thailand where it is estimated that around 43% of the world’s Hard Drive Disk (HDD)

production in 2010 took place (Development Bank of Japan 2012), the Chao Phraya floods,

which inundated HDD suppliers and factories concentrated in the affected zones led to

worldwide price increases and product shortages in the sector. These events underlined the

impact that disruption to a single area of commercial activity can have on wider national,

regional and global economies and partner enterprises due to the highly interconnected

nature of businesses and their supply chains (Komori et al. 2012). Moreover, these disasters

emphasized the lack of integration and coordination which existed between the Business

Continuity Plans (BCP) or Business Continuity Management Systems (BCMS) of the impacted

organizations. This was true even in cases where the affected enterprises had close business

relations and shared commercial concerns (Baba et al. 2013). The impacts of these disasters

heightened awareness of the need to integrate and link the DRM provisions of different

organizations operating in related areas of businesses, thereby helping to safeguard wider

sectorial global supply chains.

An approach put forward to encourage more integrated DRM planning between businesses

is that of area-wide Business Continuity Planning (BCP) in industry agglomerated areas

(Baba et al. 2013). ‘Area BCPs’ typically propose coordinated damage mitigation measures

30 The guidebook is available at: http://publications.apec.org/publication-detail.php?pub_id=1449

http://publications.apec.org/publication-detail.php?pub_id=1449



94

and recovery actions between stakeholders (including companies, local community

members, government administrations and infrastructure providers) within a particular locale

where businesses are clustered such as an industrial park. This is with the aim of facilitating

more effective, holistic business continuation in the area in case of a disruptive event. By

understanding the risks and impacts that affect a particular geographical area, a place-

specific common strategy of risk management can be formulated between relevant local

actors. Under Area BCPs, external resources and infrastructure (i.e. utilities and services such

as water, energy, transport and communication independent of business operations but

essential for their continuation), wider local disaster management plans and the BCPs of

individual organizations can be integrated under a single all-encompassing area-wide

strategy (JICA, 2013). This requires dialogue and coordination between various stakeholders

- the basic structure of this approach is illustrated in figure 3.5 below.

Figure 3.5 – Basic structure of an Area BCP

Source: adapted from Baba et al. 2013

Box 3.7 JICA initiative: “Natural Disaster Risk Assessment and Area Business Continuity

Plan (BCP) Formulation for Industrial Agglomerated Areas in the ASEAN Region”

JICA have sought to disseminate the Area BCP approach in collaboration with the ASEAN

Coordination Centre for Humanitarian Assistance on Disaster Management (AHA Centre).

February 2013 saw the launch of a study: “Natural Disaster Risk Assessment and Area

Business Continuity Plan Formulation for Industrial Agglomerated Areas in the ASEAN

Region”. JICA describe the approach as a “scalable cross sector coordination framework of

disaster management for business continuity” (JICA, 2013).



95

Under the project, Regional BCPs will be prepared for selected industrial agglomerated

areas in Indonesia, the Philippines and Vietnam, helping stakeholders in each of the selected

areas to agree upon a coherent and integrated framework of mitigation measures and

recovery activities. Following the application of this area-wide resilience approach in each of

the locations mentioned above, JICA’s aim is to further engage with the private sector to

disseminate the concept of Area BCPs across more countries in ASEAN and beyond.

JICA propose that the Area BCP approach holds a number of benefits including:

encouraging organizations to improve their own BCPs, promoting cooperation and

communication among local enterprises and members of supply chains and helping to

integrate the DRM planning efforts of local stakeholders.

Source: JICA

3.6 Global Value Chains and DRM

Global value chains (GVC) are production and supply networks consisting of multiple

companies operating in various locations across borders and exposed to varying levels of

disaster risks. Whereas prima facie these risks and the direct consequences of their

manifestation are borne by the affected individual companies, disaster risks always affect

GVCs as a whole.

Challenges faced: disruptions

Harsher and more frequent disasters make GVCs more vulnerable to disruptions with

increasing frequency and more serious consequences (Wagner et al 2010). From the

viewpoint of the functioning of a GVC, the severity of the disasters is measured by the

severity of the disruptions they cause. These disruptions refer to anything that interrupts or

otherwise impedes the process of making, delivering or servicing the end product of the

GVC. As such, disruptions can refer to issues such as the following non-exhaustive list of

disruption types (Table 3.4):

Table 3.4. List of most common GVC disruptions

DISRUPTION TYPE DESCRIPTION

Demand disruption Disruptive changes in the estimated demand for the outputs of

the GVC caused by e.g. exchange rate fluctuations.



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Upstream supply

disruption

Disruptions in acquiring essential inputs for the GVC including

commodities, raw materials and labour inputs.

Process disruption Disruptions in the value-adding and managerial activities which

limit GVC capacity to produce or deliver goods of certain quality

or quantity, or in a desired time.

Control disruption Disruptions in the enforcement or creation of procedures, rules

and systems through which the GVC governs the process of

production e.g. management of buffer stock sizes, multiple-

stockpiling system and transportation of perishables.

Financing disruptions Disruptions to access to reliable and timely financing through e.g.

the stock and bond markets, which limit the GVCs capacity to

operate.

Inventory disruption Disruptions on upholding, accessing or utilizing an inventory of

inputs or end products.

Information

disruption

Disruptions on accessing, collecting and transmitting strategic,

operational and financial information for decision making among

corporate functions as well as GVC players.

Source: Authors’s contruction

Any of these disruption types, manifesting together or alone, can have severe negative

impacts on the entire GVC. Renesas, a multinational auto-part company producing

microcontrollers which was hit by the 2011 earthquake in Japan, incurred losses of up to

US$ 615 million due to disruptions in production capacity and disrupted access to electricity

(ESCAP 2013a). The disruptions reverberated across several global automobile manufacturers

including General Motors, Honda, Mazda, Nissan and Toyota which all had to shut down

several assembly lines due to the disrupted access to essential inputs which were solely

supplied by Renesas.



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Box 3.8 The impact of natural disasters on supply chains.

The impact of natural disasters on a supply chain is illustrated by Figure 3.6 below.

When a disaster hits, supplier A suffers from indirect losses in terms of destruction of

physical assets, recovery expenditure and lost income. If the disaster severely hits public

infrastructure, supplier A is likely to have indirect losses due to either damaged

distribution facilities or disrupted power supplies.

For supplier A, either direct damage or indirect losses can result in production and

distribution suspension and subsequent weak financial conditions and possible layoffs.

Therefore, the indirect losses of supplier A may cause an additional burden on the

government due to lost tax revenue. Damage to financial institutions and insurance

companies will be in the form of rising non-performing loans and a surge of

compensation to private entities for their disaster losses.

The production suspension of supplier A or the damage to the distribution facilities can

cause indirect losses to both upstream and downstream supply chain partners. The

negative impact can be transmitted to the whole supply chain and affect the firms

involved, regardless of their geographical locations. At the same time, consumer markets

may experience price fluctuations with the shortage of final products due to the

production suspension caused by supply chain disruption. After disasters, supply chains

often experience delays, missed deliveries and even supplier defaults. Disasters can make

controlling the supply chain operation difficult, due to disruptions in communications

systems, destroyed equipment and lost information.

The product shortage of the downstream partners of supplier A and of the end market

may create an opportunity for supplier B who produces the substitute of supplier A’s

product. This is more likely when the recovery pace of supplier A is slow and supplier B

is flexible and able to compensate for the supply shortage quickly. In the long run, if

supplier B is considered to be more disaster resilient, the partners of supplier A may

permanently turn to supplier B and result in a business loss for supplier A. However, if

supplier A is the single source in the market and halts the provision of products due to

a disaster, its downstream partners may have no choice but to wait for its recovery. In

such situations the effects can be international, as was the case with the Kobe

earthquake in 1995 which left companies in San Francisco without access to parts and

components.

The effects of delays and disruptions can be felt in the long term, should other

competitors who were able to avoid the disaster’s negative effects be able to gain



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Figure 3.6 The impact of natural disasters on supply chains

Source: ESCAP 2013a

GVC responses to increasing disaster risks

There are a number of strategies available to strengthen the resilience of GVCs. In many

cases, these different strategies are used simultaneously to enable greater flexibility for the

private sector and the government in tailoring their responses to disaster risks. These

strategies include the following (Table 3.5):

Table 3.5. Common strategies adopted by GVCs against disruption.

STRATEGY CONCRETE ACTION

Avoidance and

minimization of risks

Relocating factories and production and logistics nodes; exiting

vulnerable markets or delaying entry into such markets; retracting

vulnerable products; withholding investment decisions; increasing

investment in prevention and preparedness

Postponement of key

activities

Delaying resource allocation to ensure flexibility of outputs; delaying



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market entry and facility construction

Speculative risk

management

Assessing foreseeable risks and assuming certain risks in hope of

gaining competitive advantages; seeking early movers advantage;

investments in speculative R&D

Hedging risks Preparing for various scenarios by e.g. diversifying input sources,

product offerings and output markets; developing multiple supply

sources and warehousing; purchasing insurances

Internalizing risks Integrating risks into the GVC through vertical and horizontal mergers,

i.e. acquisition of key suppliers and business partners

Distributing risks Acquiring insurances; offshoring, outsourcing and contracting

production; various other functions

Monitoring Assessing and updating GVCs’ perceived risk levels through surveys,

research, etc.; developing GVC wide ICT systems

Actively shaping the

operative environment

Engaging in dialogue with policy makers; PPP initiatives; collaboration

with suppliers and customers; policy advocacy through business

associations, etc.

Facilitating recovery Developing business continuity plans; acquiring insurances; upholding

buffer inventories; developing redundant suppliers, channels and

distributions; and multiple production nodes

Source: Adapted from Manuj and Mentzer (2008).

As GVCs grow in terms of geographical coverage and the complexity of the used inputs and

produced outputs, so does their exposure to disasters (Manuj and Mentzer 2008). Hence,

successfully preparing for disasters and effectively protecting the entire value chain requires

moving from an individual company based actions towards a consolidated GVC–wide

approach. This means internalizing the various levels of disaster risks facing the individual

nodes of the GVC and strategically protecting them as a single unit of operations in a

concerted approach.

APEC's recent efforts on enhancing resilience of business and global supply chains through

its Emergency Preparedness Working Group, is one of the major regional improvements on

private sector emergency preparedness. This has included the organization of workshops on

GVC resilience, the development of the SME BCP guidebook discussed earlier and several

training-of-trainers workshops on BCP for SMEs. In the future, a guidebook on SMEs and

Global Value Chains could be a useful tool to develop guidelines that take into account the

differences between SMEs and transnational companies and help them enhance their

coordination within the overall context GVCs.



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Box 3.9. Disruption in global value chains (GVCs): the case of Renesas, Japan

Disruptions can have severe negative impacts on entire GVCs. In the case of Renesas, a

multinational auto-part company producing microcontrollers that was hit by the 2011

earthquake in Japan incurred losses of up to US$ 615 million due to disruptions in the

production capacity and disrupted access to electricity (ESCAP 2013). The disruptions

reverberated across several global automobile manufacturers including General Motors,

Honda, Mazda, Nissan and Toyota which all had to shut down several assembly lines due to

the disrupted access to essential inputs which were solely supplied by Renesas.

Source: ESCAP and ADPC (2014a), page 21.



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3.7 Disaster risk finance and transfer for businesses

Financial risk sharing mechanisms help in mitigating the financial and economic impacts that

may be caused by disaster events by activating financial flows during or after a disaster

event. They include a variety of instruments broadly categorized into risk financing and risk

transfer.

Risk financing tools

Disaster risk financing is the retention of risks combined with the adoption of a specific

financing strategy to ensure that the appropriate funds are available to meet financial needs

in the event of a disaster (OECD 2012). Businesses can establish it either internally, through

the accumulation of reserve funds for future use, or externally, from the financial markets

through pre-arranged credit facilities and other financial instruments. The banking sector,

capital markets and international lending institutions are the main sources of risk financing.

The main risk financing tools available to businesses include cash reserves, contingency

capital, financial derivatives, catastrophe bonds, loans and post-disaster financial aid. At the

core of risk management, risk financing addresses the specific problem of how to align a

company’s willingness to take risks with its ability to do so. How well an organization

manages its ‘risk’ capital (i.e. cash and contingent) is a good predictor of its competitiveness

and long-term success.31

Risk transfer tools

Disaster risk transfer involves the shifting of risks to others who, in exchange for a premium,

provide compensation when a disaster occurs thus ensuring that any financing gap that

might emerge is partially or fully covered (OECD 2012). Insurance and reinsurance

companies are usually the ones bearing the risk, which they pool and diversify, further

distributing the risk to third parties. Capital markets provide an alternative source as we

have seen before with catastrophe bonds or CAT bonds which are involved in extreme

hazard events and are both risk transfer and risk financing tools.

There are many different types of insurance that can be classified attending to the modality

of their payouts (e.g. indemnity-based or parametric/index-based), or by their economic

significance in terms of amounts insured (e.g. micro-insurances). In principle, cost-effective

31 Harvard official website: http://rmas.fad.harvard.edu/faq/what-risk-financing

http://rmas.fad.harvard.edu/faq/what-risk-financing



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investments for structural disaster risk mitigation are preferable to insurances since they

increase the value of assets while making businesses more resilient to disasters. This fact can

lead to a suggestion that only after cost-effective investments have been made to reduce

potential losses, should companies consider investing in risk transfer instruments to cover

the residual risk. This view, however, is not comprehensive since it assumes that insurance is

merely a measure of risk sharing. Considering insurance as a mere option to mitigation

investments overlooks the fact that post-disaster liquidity enables quick recovery of

operations that can save lives and livelihoods provided that the use of the received payouts

are used in risk-sensitive investments. This view also overlooks the propensity of well-

designed insurance programs to provide incentives for structural disaster risk mitigation

investments and other measures that ultimately reduce disaster risks (Suarez and Linnerooth

2011). For a practical example of insurance working in DRM, see annex 2 where the

experience of Mercy Corps Indonesia in the implementation of micro-insurances is

presented.

There are a number of benefits associated with the use of risk financing and transfer tools.

In addition to providing financial protection to businesses, they minimize potential costs by

reducing risk across the DRM cycle and/or transferring risk to other actors (e.g. insurance

companies, other businesses) that might be in a better position to absorb them. These tools

can be crucial for early recovery since the provide financial liquidity in a timely manner,

which can help in reducing potential long-term losses. Furthermore, if used appropriately by

their issuers (banks and insurance companies) they can be used as an incentive to

encourage investments in structural and non-structural risk mitigation.

Any ex-ante risk financing and transfer should be based on a deep understanding of a

company’s risk exposure; a thorough cost-benefit analysis of the potential mitigation efforts

and different types of instruments; and an assessment of the internal financial capacity to

accept the risk strategically. The extent to which business is, or might be, unable to absorb

and recover from losses for a defined level of disaster risk is usually referred to as the

“resource gap” or “financial gap.” When risk financing and transfer instruments, or other

DRM measures, are not in place, this gap translates into financial vulnerability (OECD 2012).

The current situation: low insurance penetration



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Insurance adoption is extremely low in the Asia-Pacific region. From 1980 to 2012 the share

of insured losses over the total losses represented only 9 per cent compared to 45 per cent

in the United States, 44 per cent in Australia/Oceania or 28 per cent in Europe, as is

showcased in figure 3.7. The picture did not improve significantly in 2013-2014. Asia-Pacific

is clearly lagging behind the other regions, aside from Africa.

Figure 3.7. Insured losses as a share of total losses, 1980-2012, 2013 and 2014.

Source: Authors construction with data from MunichRe NATCAT Service

Insurance markets in the Asia-Pacific region are typically characterized by low insurance

penetration rates32. Across Asia in general, penetration of non-life insurance is lower than 2

per cent. This is markedly lower than the global level of just under 3% (The World Bank,

2012)33. As illustrated in table 3.6, insurance penetration rates for countries in the Asia

Pacific region are significantly lower than levels for developed markets in North America and

Europe and advanced economies. Furthermore, the majority of ASEAN Member States sit

below the Asia regional average for non-life insurance penetration of 1.55 percent of GDP

(World Bank, 2012).

Table 3.6. Non-life insurance penetration for selected countries (the ratio of direct non-

life insurance premiums from domestic sources to GDP for 2011)

32 Insurance penetration is understood as the ratio of premium underwritten in a particular year and

country in relation to the GDP of the country in that year.

33 Non-life insurance refers to a form of 'general' insurance concerned with protecting the policy

holder in the event of loss or damage which results from a specific risk. Common types of non-life

cover include home, motor, health, travel, business, agricultural, fire, aviation and engineering

insurance (Insurance Council of Australia, 2015).



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Global

Rank Country Value

1 Netherlands 9.49

2 South Korea 4.59

3 United Kingdom 4.53

4 Switzerland 4.48

5 United States 4.42

13 Singapore 3.15

14 Australia 2.95

24 Japan 2.23

33 Malaysia 1.78

35 Thailand 1.74

45 China 1.20

49 Vietnam 0.84

52 India 0.73

54 Indonesia 0.55

56 Philippines 0.46

59 Pakistan 0.30

60 Bangladesh 0.23

Source: adapted from World Economic Forum (2012)

Nonetheless, a number of South-East Asia’s growing economies have seen insurance

penetration rates increase markedly in recent years. Across a sample of ASEAN states (which

included Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam) the number

of premiums for non-life insurance policies grew by 7.1% in 2011 (World Bank 2012).

Notably, Thailand saw its insurance penetration rate rise from 2.6% in 2000 to 4.20% in 2009

(Office of Insurance Commission, 2010). Furthermore, in 2011 the country’s non-life

insurance market grew by 15% from the previous year. Beyond ASEAN, in the wider Asia



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Pacific region, the number of non-life insurance premiums in China rose by 20% in 2011

(Eder and Grimm 2012).

It should be noted that in the majority of ASEAN Member States, forms of non-life

insurance such as standard homeowner insurance do not cover catastrophic events i.e.

disasters. Estimates indicate that less than 10 percent of property damage policies include

cover for ‘catastrophic perils’ although policies can be extended to cover such eventualities

depending on additional premium being added to the policy. Specific to disaster risk,

disaster microinsurance is a form of cover which is gaining credence in the South-East Asia

region. A product designed specifically for low-income populations, it is a form of non-life

insurance for property, financial assets, or livelihoods that is specifically designed to pay out

upon occurrence of a disaster. Disaster microinsurance remains in its infancy in the Asian

Pacific region. According to a qualitative World Bank (2012) survey, microinsurance is most

obviously under development in The Philippines where country experience was labeled as

‘strong’ and in Indonesia where it was ranked as ‘moderate’. In Thailand and Vietnam

activities were deemed to be at a ‘limited’ level. Microinsurance was present to a lesser

extent in Cambodia, Lao PDR, Malaysia and Myanmar where experience was ‘very limited’.

Challenges in insurance adoption

Risk financing and transfer instruments are good tools to manage the residual risk after

avoidance and structural risk mitigation strategies have been conducted. However, risk

financing and transfer tools “may or may not reduce risk” (Warner et al 2009). There is a

common misconception that insurance is the panacea of risk management and adaptation.

In reality insurance can fail to reduce risk and to advance adaptation unless it is

implemented properly, in a functional market, and in combination with other risk mitigation

measures. This has notable implications on how businesses and governments should

approach insurances and other risk financing and transfer tools.

In order for risk financing and transfer instruments to be effective it is a necessary condition

that financial markets work properly. Market failures commonly prevent economic agents

from reaping the benefits of risk transfer instruments.

OECD (2012) identifies the three most common market failures involving insurances:



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Insurability of disaster risk: Disaster risk may be uninsurable or hard to insure due to

expected high frequency, high level of severity and high degree of correlation

among hazard events. While risk reduction investments can increase insurability,

some extreme risks may never become insurable in reasonable economic terms

without public support

Asymmetric information: Information asymmetries in the markets can create

problems of moral hazard and adverse selection.34 Such problems can be expected

to be more limited in retail insurance markets given that insurers will typically have

an informational advantage. However such problems may arise in reinsurance and

capital markets. In addition, retail consumers may lack the capacity to optimize

financial strategies, may exhibit myopic behavior (e.g. systematic underestimation of

risks keeping a short-term mentality) and be influenced by incentives that

discourage risk transfer (e.g. expectation of aid), all of which may lead to inadequate

demand for coverage

Pricing, continuity of coverage and speed of compensation: It is common to observe

gaps in coverage; sustained excessive pricing disconnected from underlying risks;

lack of historical data; slow administrative procedures for compensation and other

problems

There are two pricing modalities in the insurance market: risk-based and flat rate pricing,

each with its own advantages and limitations. A risk-based pricing approach can be more

beneficial to the society as a whole through optimizing the benefit-cost balance.

Governments can also subsidize insurance where insurability problems appear.

3.8 Corporate social responsibility and Shared Value

Corporate social responsibility (CSR) has emerged as an inescapable priority for business

practitioners (Porter and Kramer 2006). Through CSR, businesses fulfill their social

obligations and in so doing obtain reputation and a de-facto societal “license-to-operate.”

CSR can also open windows for new business opportunities, for example, through enhanced

34 Moral hazard is a term used in economics to describe the behavior of an economic agent who

takes on higher levels of risk because he knows that the eventual losses will be borne partially or

totally by others. Adverse selection refers to the problem that insurers face when trying to properly

distinguish between individuals’ or businesses’ risk profiles due to a lack of sufficient information.



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brand image or strengthened engagements with the communities in which businesses are

based.

The participation of businesses in the response phase after a disaster, when not oriented

towards the protection of their own assets, has been usually conducted through CSR

activities. Examples of these activities include provision of company donations in cash or in

kind, debris clearing by construction companies, deployment of employee volunteers,

lending of machinery or equipment for public works. As one of the four pillars35 and risk

shareholders of the society, businesses would need to move their CSR activities beyond the

response phase and deepen their involvement in DRM by moving towards risk prevention

and mitigation with a perspective of accountability.

Global value chains are also changing the paradigm of CSR. An interesting case is that

incidents such as the 2013 Rana Plaza building collapse in Dhaka, Bangladesh, with more

than 1,100 victims, have led to a shift from company-individual thinking towards supply-

chain thinking in order to increase social responsibility throughout the GVCs. Thus, best

practices in supply chain management are increasingly applied in the CSR context. Wieland

and Handfield (2013) suggest that companies need to audit supply networks and that

supplier auditing needs to go beyond direct relationships with first-tier suppliers.

Box 3.10. Two examples of CSR-based partnerships working in disaster prevention and

preparedness

Case 1: Animasia and MERCY Malaysia partnership -- Enhancing Disaster Preparedness of

Schools Through Popular Cartoon Characters

Animasia Studio Sdn. Bhd (Animasia) is a major animation service provider in Malaysia. In

2008 Animasia partnered with MERCY Malaysia, a non-profit organization, to enhance

students’ disaster preparedness through the School Preparedness Program. The program

consists of a school preparedness workshop for students and a disaster risk reduction

workshop for teachers. Animasia’s popular ‘Bola Kampung’ characters were used as

ambassadors of the program. Using the creative ideas and artwork designs by Animasia,

MERCY Malaysia developed materials to help students build disaster preparedness. Thanks

to the popularity of the ‘Bola Kampung’ characters, the programs not only impressed the

students, but also influenced wider audiences as the information was shared with the

students’ family and friends. The partnership attained huge success where business

35 Other three pillars include governments, nonprofits and communities.



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Shared Value can be defined as “policies and operating practices that enhance the

competitiveness of a company while simultaneously advancing the economic and social

conditions in the communities in which it operates”

- Porter and Kramer (2011), Harvard Business Review Online

cooperated with NGO to achieve great values and profound influence beyond financial

profits.

Case 2: AXA Group and CARE International –Partnership for disaster prevention

Since 2011, the AXA Insurance Group has joined forces with CARE International, the

international humanitarian NGO, to help vulnerable populations better prepare for climate-

related risks. This partnership aligns with AXA's corporate responsibility policy, whose

flagship is Risk Research and Education. AXA and CARE have chosen to work together on a

series of programs to raise awareness and act on disaster prevention. These programs target

communities that are particularly exposed to these type of risks in developing economies

and aim to reduce the human and economic impact of natural disasters. Activities include

campaigns to raise public awareness on risks, early warning systems, trainings to reinforce

communities’ response capacity and the planting of mangroves (a natural barrier limiting

the impact of a disaster). They are being implemented in Benin, Indonesia, Madagascar,

Mali, the Philippines and Vietnam.

Creating Shared Value

As has been emphasized throughout this study, disasters and their negative impacts are a

pressing social issue. Typically, intergovernmental organizations, national governments and

NGOs have been responsible for addressing major social problems of this nature. However,

in many cases, the resources and funding derived from tax revenue, donors and

philanthropic funding on which these actors rely, is no longer proving sufficient to tackle

the prevalent problems and challenges which we face - this is especially true for large scale

problems such as significant disaster events. This trend has been exacerbated by the

implementation of fiscal austerity measures in a pressing global economic climate and, in

turn, has led to a reformulation of the way we seek to manage contemporary challenges

and concerns.



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Seminal business strategists have made the case that there is a more significant role that

businesses can play in tackling the key social challenges we face at local, national and

global levels. Notably, Porter and Kramer (2011) have proposed the idea of ‘Shared Value’

(defined below). This concept is underpinned by the premise that societal needs can be

addressed with a business model, at a profit, thus proving mutually beneficial for businesses

and wider society.

In practical terms, ‘Shared Value’ can help overcome the problem of scarcity of resources

which governmental and NGO actors have faced. In theory, by tapping into the innovation,

productivity and organizational capacity of commercial organizations - specifically the

wealth generated by businesses when making profit - identified solutions can be

operationalized at scale to cope with social problems more effectively and efficiently. This

has helped promulgate the idea that commercial organizations can play an important role in

DRM activities.

It should be noted that businesses playing a role in addressing social problems is not a new

concept and can be seen to have evolved over time, graduating from organizations offering

philanthropic donations to worthy causes and volunteering drives, to more structured CSR

initiatives emphasizing compliance with community standards along with commitment to

good corporate citizenship and sustainability initiatives. Nonetheless, Porter and Kramer

(2011) acknowledge that their Shared Value approach faces a number of challenges,

including how to bridge the disconnect between commercial organizations and wider

society in a climate where it is often perceived that social performance and economic

performance are at odds with one another, or require tradeoffs between one another.

Porter (2013) propounds that the ‘conventional view’ is of businesses contributing to the

social woes we face rather than providing solutions. This aligns with the perspective that the

actions and practices of commercial organizations often lack risk sensitivity and can create

and exacerbate the likelihood of disaster events occurring due to a focus on short-term

profit rather than long-term good. CSR activities have illustrated the proactive role business

can play in terms of contributing positively to social causes, including disaster management.

However, there remains an underlying skepticism that CSR activities represent attempts by

organizations to create or rebuild reputational capital or compensate for activities that may

have negative social or environmental effects or contribute to disaster risk. This is indicative

of the fact that the present climate represents a low point for business in general - revealed

by lack of public confidence in key organizations, institutions and service providers. To this



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regard, the Edelman ‘Trust Barometer’ - an annual survey designed to track trust and

credibility - found that fewer than one in five people trust business leaders to tell the truth

when confronted with a difficult issue (Edelman 2013).

Shared Value principles can help counter these beliefs, as it is fundamentally underpinned

by the idea that business can derive profit from solving social problems rather than causing

social problems, i.e. there does not need to be a trade-off between social progress and

economic efficiency. The key challenge is to tap into the power of business to solve

pressing, contemporary social needs, however, Shared Value may also hold the added

benefit of businesses regaining the general trust and confidence of their customers and

wider society.

In view of business engagement in DRM, organizations have increasingly begun to address

the issue of disasters - both natural and

manmade - via CSR initiatives, business

continuity plans and emergency

preparedness measures, and provisions

which attempt to safeguard their

workforces. However, eminent theorists

such as Twigg (2002) argue that

companies are far more likely to support

one-off relief initiatives in the wake of high

profile disasters than engage in long-term

mitigation and preparedness projects. CSR

values employed by businesses have

typically been centered on ‘doing good’

via policies focused on citizenship,

philanthropy and sustainability and are

often initiated in response to external

pressure to conduct such activities with an

agenda determined by external

considerations.

Empirical research shows that CSR

activities are kept separate from profit

maximization, with their scope and impact

Box 3.11 Shared Value initiatives, actions

and strategies

NewWind’s ‘Wind Tree’

Launched in late 2014, NewWind Energy

Solutions has developed a product called

the “Wind Tree”, which harnesses wind

power to generate electricity, while having

a minimal impact on the local environment.

The artificial ‘tree’ offers a more

aesthetically pleasing, silent alternative to

conventional wind turbines (cables and

generators are integrated into the leaves

and branches) whilst requiring very low

wind speeds to generate energy.

Tesla Motor’s ‘open source patent

movement’

In June 2014, Tesla Motors - a global

leader in electric car manufacturing and

sustainable transport methods - shared its

patents for electric vehicle development

free of charge. This enabled other car

manufacturers to utilize its technology,

thereby encouraging faster innovation in

the electric motor industry “to accelerate

the advent of sustainable transport by



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limited by budgetary constraints. Conversely, CSV - which aims to address social issues with

a business model - marks a departure from CSR as its value is based on both economic and

societal benefits. Furthermore, it maintains a focus on joint value creation between the

company and the community within which it operates. CSV is an integral factor for the

company to compete effectively within its sector. As such, unlike CSR policies, CSV plans are

internally generated, company specific and may include actions such as a company

transforming its procurement practices in order to increase the quality and yield of its

production output.

There is an overriding view that the private sector can go further than short term projects

(such as disaster response or relief) adopted under CSR and instead engage in programs

that help bring about longer-term positive social change including risk reduction and

preparedness. Some commentators have gone so far as to state that CSR is now “obsolete”

(Forbes 2012), with Shared Value approaches now taking precedence. Some specific

initiatives and projects of CSV being embraced by major companies are presented in Box

3.11, demonstrating positive benefits that derive for businesses and wider society alike.

Findings outlined by the GAR2013 (UNISDR 2013b) revealed businesses are gradually

becoming more effective at identifying, analyzing and managing disaster risks. Formulating

risk-sensitive strategies and actions to make an active contribution towards DRM represents

a key area of market potential, which businesses can benefit from. Organizations can

endeavor to enhance their profits whilst simultaneously creating meaningful Shared Value

which benefits wider society by contributing to risk reduction efforts in view of not only

response, but also preparedness, mitigation and more importantly, by “deconstructing risk.”

While the appropriate enforcement of legal frameworks is the first step, private sector

awareness and acknowledgement of their important role in society is a necessary condition

to increase the risk sensitivity of business investments. Otherwise more sophisticated actors

will inevitably identify legal loopholes in order to maintain irresponsible behaviors that may

save them costs in the short term at the expense of other more responsible stakeholders.

3.9 Limitations of SMEs engagement in DRM

While disasters impact the society at large, when they strike, vulnerable groups like the

poor, children, women, the elderly, and people with disabilities are disproportionally

affected. Similarly, in the business world, the impact of disasters on small and medium-size

enterprises (SMEs) is of particular concern.



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SMEs, which represent the backbone of the region’s economy and provide livelihoods for

approximately 60 per cent of the labor force, suffer from delays in operation, losses in

inventories and decline in sales in the face of disasters (ESCAP 2012, APEC 2014). On the

other hand, their lack of resources, knowledge, planning and experience lead to tremendous

constraints in terms of their ability to quickly bounce back from the devastation caused by

disaster events (ESCAP 2013). For example, ten months after the Great East Japan

Earthquake and the subsequent tsunami in 2011, one-third of SMEs were yet to restart their

businesses (Government of Japan 2012).

Transnational companies, and to a certain extent larger companies operating at the national

level, have relatively better coping capacities that equip them to deal with disasters more

effectively due to their generally sophisticated and adequately resourced risk management

and business continuity plans. In addition, the wide geographical dispersion of their assets

and activities, while increasing their exposure to hazards in the first place, also allows them

to have greater flexibility to mitigate risks by relocating part of their operations from one

risk-exposed location or country to a safer one, provided that they have adequate resources.

In comparison, SMEs, including micro enterprises are more vulnerable to disasters because

of their greater concentration of business activities, lesser capacity and resources and

limited access to disaster risk information. SMEs are typically less diversified in their supply

and customer bases, with weaker compliance with norms and regulations (e.g. operations in

informal settlements; lack of social protection for their employees) (ILO 2012), which can

exacerbate their vulnerability. Lack of policy, incentive schemes and support can prevent

them from implementing DRM measures. Furthermore, protective measures that help SMEs

following disasters are limited, and the damage in physical facilities complicate further

relocation of operations and recovery.

Challenges associated with SME involvement in DRM, in addition to the obstacles that

businesses in general are facing, include information and awareness gaps between SMEs

and large corporations; lack of economic resources to implement DRM systems; lack of

trained human resources/skills necessary to implement DRM systems.

Only 13 per cent of SMEs in APEC economies have a BCP, while 47 per cent are not even

aware of what a BCP is (ADRC 2012).36 SMEs need to increase their awareness of their own

vulnerabilities; if they understand the negative impacts of disasters, this may lead to more

36 The survey considered as SMEs companies with less than 300 employees.



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aggressive protection measures. SMEs typically have inadequate access to risk information,

and are often unclear about the distinction between business continuity plan and

‘emergency management plans’. The SMEs also lack adequate resources to implement

potentially expensive risk mitigation measures and to equip their staff on proper BCP. This

creates the paradox where SMEs which are typically most exposed to disaster risks are

found to be without BCM/BCP integrated into their business culture.

While SMEs do not have abundant resources that they can pour into disaster risk reduction

efforts (Ingirige & Wedawatta 2014), there is a need for SMEs to be proactive and treat risk

reduction with urgency since their operations may be significantly disrupted by disaster

events. In order to optimize the use of their limited resources, SMEs could center their

efforts in non-structural risk mitigation measures that focus on low-impact high-frequency

events, which usually provide higher benefit-cost ratios than structural mitigation

alternatives targeted at high-impact low-frequency events.

In this regard, SMEs could greatly benefit from other stakeholders’ support to overcome

these challenges by enhancing their risk awareness and building their DRM capacities. While

public support is essential, and thus discussed in detail in chapter 5, business-to-business

solutions, either pro-bono or market-based, present themselves as good complementary

support to SMEs in this endeavor. Big companies usually have good standard operating

procedures (SOPs) in place that have been already tested, which can serve as a model for

SMEs when trying to design their own SOPs. Additionally, businesses understand their peers

better than government officials or NGOs since they speak the ‘same language’ and have

similar motivations, with large businesses often serving as a source of inspiration for SMEs.

With regards to the pro-bono solutions, forming part of their CSR initiatives, large

companies could provide training in disaster risk management, e.g. BCP design and

implementation, risk assessment, etc., to small SMEs that may (or may not) be part of the

same supply chain. With regards to market–based solutions, larger SMEs might be in a

position to be able to pay for DRM services provided by specialized companies and

consultants. However, the DRM curriculum and tools would need to be adapted to the SME

context since complex risk management systems such as ISO 22301 are often too difficult to

understand and even unnecessary for small organizations who might not be interested in

being ISO-certified.



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3.10 Private sector representation in DRM forums and frameworks

International, regional and national forums provide an opportunity for the private sector and

other stakeholders to understand each other’s needs and thereby work together in DRM

and in increasing the resilience of communities. While the private sector is increasingly

being recognized as a main stakeholder in DRM, it is still underrepresented in DRM forums

and frameworks at all levels, with current representation usually limited to occasional

interventions of dedicated business leaders to speak up about business resilience. This may

contribute to the current low presence of businesses in DRM frameworks at all levels. In

fact, the private sector is often mentioned in the different frameworks (if at all) as a passive

participant or stakeholder without a clear role or responsibility.

To address this underrepresentation, the private sector needs a stronger and more united

voice in the different multi-stakeholder forums at the international, regional and national

levels. This can only be accomplished by having organized private sector DRM reference

groups participating in these forums regularly in order to advance the agenda of private

sector involvement in DRM and ensure that the business view is taken into account by the

different stakeholders, especially the government. For instance, during the first ISDR Asia

Partnership (IAP) meeting of 2014, a representative from the Government of Australia

pointed out the need for direct private sector in DRM policymaking. In fact, businesses are

in a very good position to detect bottlenecks in regulatory frameworks, offer insights in the

way they manage DRM and provide other feedback that can be useful to policymakers.

In this regard, there is no need to ‘reinvent the wheel’ since DRM task forces or reference

groups could be established within existing structures at the regional and national level,

following the example of the UNISDR Private Sector Advisory Group (PSAG) and the DRR

Private Sector Partnership (DRR-PSP).

At the international level, the Disaster Risk Reduction Private Sector Partnerships (DRR-PSP)

is a global partnership between UNISDR and members of the private sector seeking to

mobilize action to reduce disaster risks. DRR-PSP hosts an interactive exchange between

partners from key industries including financial services, telecommunications, construction,

and support services. Members of DRR-PSP are active in four working groups to leverage

resources and increase coordination in DRM: Making Cities Resilient Campaign Working

Group, Global Assessment Report Group, Global Platform Working Group and Regional

Working Group. In December 2010 the Private Sector Advisory Group (PSAG) was



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established in order to provide guidance on private sector engagement. Members of the

PSAG include business leaders who believe in the benefits of preventative action and seek

to use their expertise, in collaboration with UNISDR, to increase resilience across the world.

Business networks and associations such as chambers of commerce and industry are ideal

avenues to initiate new initiatives, lobbying, information gathering, research, and setting

industry standards among others37 that would otherwise be too complex, costly or time-

consuming if attempted individually by each of their members. Establishing reference

groups with a focus on DRM at the regional and national levels could:

Promote new perspectives, good practices and standards;

Recruit and promote champions or change agents;

Increase accountability of both the private and public sectors;

Facilitate experience sharing and disseminate good practices among their members;

Facilitate access to disaster risk information and capacity building to their members;

Increase the relevance and influence of the private sector in DRM

DRM reference groups could be established within existing regional business networks and

associations, and be connected to one another. Such groups could bring the private sector’s

perspective and influence into the high-level multi-stakeholder inter-governmental regional

dialogues and policymaking. These groups could include the business advisory councils of

UNESCAP (EBAC), APEC (ABAC and CEO summit) or ASEAN (ASEAN BAC). The ideal

candidates to push forward these reference groups would be current members that are

considered “champions” in DRM within the business advisory councils (BACs) with proven

experience in improving resilience to disasters.

Box 3.12 ESCAP Business Advisory Council advancing the regional DRM agenda

The particular case of the ESCAP Business Advisory Council (EBAC) is a prime example of

how such regional forums foster the gradual embracement of DRM by business. Established

among leading businesses in a wide range of industries and sectors in 2004, EBAC is the

only region-wide multi-stakeholder business forum that promotes ethical and responsible

business practices and provides business perspectives on development issues to

governments. Through a periodical Asia Pacific Business forum (APBF) EBAC ensures that

37 Based on Bovet (1994); Eby (1995); and Stybel and Peabody (1995).



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markets, commerce, technology and finance in Asia Pacific region advance in ways that

benefit economies and societies everywhere.

Following through the Rio+ 20Conference on Sustainable Development, in 2012, EBAC set

up a Sustainable Business Network to address the issues of environmental sustainability and

social inclusiveness in business. Acting as a force of change it mobilizes businesses to

comply with existing global business norms such as the United Nations Global Compact,

Global Reporting Initiative, OECD Guidelines for Multinational Enterprises, and ISO 26000.

Through this Network members advocate to governments the requirements for an enabling

policy environment for corporate sustainability; promote exchange of best practices among

businesses; and addresses issues of M-SMEs.

The Network established a task force on Inclusive and Sustainable Trade and Investment

under which the issue of DRM and climate change is being dealt with. Through capacity

development and policy dialogues, including with local chambers of commerce and industry,

members from private sector support productive job creation, reduction of poverty, and

engagement of marginalized group in society and in the economy particularly in

underdeveloped regions such as the Least Developed Countries (‘LDCs’), Landlocked

Developing Countries (‘LLDCs’), and Small Island Developing Countries (‘SIDs’). Such a

commitment to these marginalized communities inevitably led the task force to consider

incorporating DRM into its formal discourse for the first time at the 6th Asian Ministerial

Conference on Disaster Risk Reduction. Subsequently at the 11th Asia Pacific Business Forum,

held in Colombo, Sri Lanka in November 2014, the task force further embedded DRM issues

into the forum’s agenda. In this conference the task force decided to take up the challenge

of addressing DRM and climate change as its central focus. This holds the potential to

provide critical impetus for more solid private sector engagement in DRM in the Asia Pacific

region.

At the national level, the reference groups could be established within the local chambers of

commerce and business associations. The paradigm shift process could influence national

and local regulations by infusing opinions and absorbing the perspective of the members.

Such reference groups would also be especially helpful for SMEs, particularly in accessing

DRM information, building capacity in risk assessment, BCP adoption, etc. or for

governments to provide clear information about monetary and non-monetary incentives.



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4. Public sector approaches to business engagement in DRM

As the reduction of disaster risk increasingly becomes a common concern for all,

Governments find it necessary to develop, nurture and further enhance the role and

contributions of all stakeholders, including the private sector. This requires the strong

commitment and involvement of political leadership at all levels in creating the necessary

conducive and enabling environment. Governments need to support businesses in

enhancing their resilience as well as to put in place policy and institutional arrangements to

ensure risk-sensitive investment and business practices. This chapter will discuss the main

responsibilities of governments towards the private sector in the context of DRM and

showcase the degree of inclusion of the private sector in international, regional and national

DRM frameworks. Following this the different options will be discussed for establishing an

enabling environment for greater private sector engagement with a set of potentially useful

tools. Finally, the chapter will argue how different windows of opportunity can help

overcome the challenges that DRM policymaking poses.

4.1 Government’s role and responsibilities on business participation in

DRM

Governments are responsible for securing a basic set of rights for their citizens. Although

there are variations across different cultures and nations, the rights to life and safety are

recognized by most governments.38 In the context of DRM, it is widely accepted that

governments are expected to take the lead in reducing the risk of disasters faced by society

and enhance resilience to ensure the wellbeing of their citizens.

Playing the role as one of the key facets in society, businesses supply vital goods and

services, are a major source of employment, and generate wealth and public revenue,

therefore being a major source of social cohesion. However, involvement of the private

sector in DRM is still limited, which emphasizes the role that governments need to play in

establishing a suitable environment for enabling businesses to integrate disaster risk into

their investment decisions and management practices. It has to be noted that a bankrupt or

disrupted business after a disaster does not only mean that a businessman has lost some of

38 The rights to life and security are recognized in Article 3 of the Universal Declaration of Human

Rights, ratified by most countries.



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its capital; it ultimately transforms into wider economic and social problems through

unemployment and unavailability of vital goods and services. Governments therefore have

the responsibility of ensuring business resilience.

To this end, governments could advocate for the advent of disaster risk-reducing practices

by business by:

Incentivizing their investments in resilience and risk-reduction;

Establishing boundaries and limits on risk-creating business investments and

operations; and

Leading, coordinating and supporting disaster response and recovery efforts.

Since poor governance can exacerbate risks faced by both businesses and society,

governments also need to be held accountable for inefficiencies, poor management and

dishonest practices in the implementation of their duties. As any other public service,

integrity, transparency, adequate allocation of funds for the implementation of plans and

programs and being participatory or consultative in decision making, are crucial to good

governance. Furthermore, governments should concentrate efforts to guarantee the

continuity of critical public infrastructure and services during or immediately after a disaster

in order to reduce the indirect losses frequently borne by both businesses and the

community.

4.2 Policy frameworks for the engagement of businesses in DRM

Their main purpose of DRM policy frameworks is to establish a set of principles and long-

term goals that can serve as the basis for making rules and defining roles in pursuit of a

common vision of societal resilience. They are not intended to be compilations of specific

binding prescriptions, but flexible tools that help to frame and contextualize the different

set of challenges that countries face in pursuit of managing disaster risk. They also facilitate

clear articulation of responsibilities across public and private stakeholders, including

business. This section presents an overview of the currently active global and regional (Asia-

Pacific) DRM policy frameworks, as well as a selection of national frameworks to showcase

regional differences in terms of private sector participation.



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4.2.1 International level: The Hyogo Framework for Action (2005-2015)

The international policy framework in engaging the private sector in DRM has evolved over

time. The International Framework of Action for the International Decade for Natural

Disaster Reduction of 1989 (IDNDR) recommended national policy measures “to mobilize

the necessary support from the public and private sectors.”39 The Yokohama Strategy for a

Safer World at the first World Conference on Natural Disaster Reduction in 1994 built on

this progress, calling for “integration of the private sector in disaster reduction efforts

through promotion of business opportunities.”40

The Hyogo Framework for Action (HFA), with UNISDR as focal point and facilitator of its

development and implementation, is the global blueprint for disaster risk reduction efforts

for the 2005-2015 decade. The framework recommends broader engagement by urging

governments to “promote the establishment of public–private partnerships to better engage

the private sector in disaster risk reduction activities; encourage the private sector to foster

a culture of disaster prevention, putting greater emphasis on, and allocating resources to,

pre-disaster activities such as risk assessments and early warning systems” (UNISDR 2005,

p11). That is, it calls on public-private partnerships as a means for resource mobilization.

However, the important role of the private sector for DRM and building resilience has not

been sufficiently recognized in the HFA. In fact, only half the countries assessing progress

against the Framework have regularly reported on active engagement with business on

DRM (UNISDR 2013a).

The HFA is due to conclude in 2015. Against this background, the post-2015 framework for

DRR is charting more specific measures to realize public-private partnerships, and for the

private sector to consider integrating DRM in their business models in order to pre-empt

new risk and reduce existing risk through business investments41. Of the four priority areas

for action presented in the post-2015 framework (Box 4.1), three specifically highlight the

39 United Nations General Assembly Resolution A/RES/44/236. Annex B, section 3, paragraph c.

http://www.un.org/documents/ga/res/44/a44r236.htm

40 United Nations Economic and Social Council substantive session of 1994. E/1994/85 section 9,

paragraph (p). http://www.un.org/documents/ecosoc/docs/1994/e1994-85.htm

41 To increasingly involve the private sector in disaster risk reduction by mobilizing resources through

core business arrangements for joint actions, sustainability/corporate social responsibility, philanthropy

and knowledge transfer, UNISDR created a Disaster Risk Reduction Private Sector Partnership Working

Group (http://www.unisdr.org/partners/private-sector).

http://www.un.org/documents/ga/res/44/a44r236.htm

http://www.un.org/documents/ecosoc/docs/1994/e1994-85.htm

http://www.unisdr.org/partners/private-sector



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role of the private sector. In terms of understanding disaster risk (priority area 1) reference

is made to the importance of building capacity of the private sector and promoting

partnerships with other stakeholders for experience sharing and exchange of good practices,

as well as engaging in educational campaigns.

Priority area 2, strengthening governance and

institutions to manage disaster risk, calls for the

further development of national and subnational

frameworks of laws, regulations and public policies

to guide the both the public and private sector to

enhance relevant mechanisms and initiatives for

disaster risk reduction, transparency and

accountability. This may include developing quality

standards, including certifications and awards for

disaster risk management.

Public and private investment in disaster risk

prevention and reduction through structural and

non-structural measures are considered essential to enhance economic, social, cultural and

environmental resilience (priority area 3). The tools and mechanisms for risk transfer, sharing

and retention and financial protection for both public and private investment in order to

reduce the fiscal impact of disasters may be considered. Strengthening disaster resilient

private investments through disaster risk prevention and reduction measures in critical

facilities and physical infrastructures including standardization of building codes to enhance

safety.

With the more explicit inclusion of public policies that provide incentives and opportunities

for risk sensitive private investment, including those from business that would also generate

the corresponding voluntary commitments, the post-2015 framework offers a more active

platform for engaging the private sector in DRM.

4.2.2 Regional level

At the regional level, DRM policies are discussed at the Asian Ministerial Conferences on

Disaster Risk Reduction (AMCDRR) and the ESCAP Committee on Disaster Risk Reduction.

Box 4.1: Post-2015 Framework for

DRR - Priorities for Action

1. Understanding disaster risk;

2. Strengthening governance and

institutions to manage disaster

risk;

3. Investing in economic, social,

cultural and environmental

resilience;

4. Enhancing preparedness for

effective response, and

building back better in

recovery and reconstruction.



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ESCAP Committee on Disaster Risk Reduction

The ESCAP committee which convenes every other year, is charged to provide countries,

particularly the high risk low capacity countries including the LDCs, LLDCs, and SIDs, with

policy advice, technical assistance and institutional strengthening as well giving stronger

participation and collective actions in the global forum.

Consisting government officials both from the disaster management discipline and other

related key sectors; the committee is supported by the secretariat’s division on Information

and Communications Technology and Disaster Risk Reduction. As ESCAP consists of

representatives of ‘whole government’ of member States, the committee takes the DRM

issues to formally interface with other more established sectors including development

planning and financing, transportation, statistics, space technology, the environment and

trade and investment, many of which have long traditions of public-private partnership.

In the aftermath of the Indian Ocean Tsunami, member States of the regional commission

decided to use its convening power as a forum for its member States to promote mutual

supports in the implementation of the HFA in Asia Pacific region. A number of regional

legislations were ratified calling member States, UN organizations and other institutions to,

among other, recognize the unique roles of private sector and support regional cooperation

in DRM in various fronts. More recently, public-private partnership in DRM under trade and

investment found new impetus. In the recent 11th Asia Pacific Business Forum, held in

Colombo in November 2014, under the ESCAP Business Advisory Council (EBAC), Task Force

on Inclusive and Sustainable Business decided to sharpen its focus into disaster risk

management and climate change.

As a formal forum of the UN, ESCAP is responsible to develop the Asia Pacific sustainable

development framework through an annual multi-stakeholder forum called Asia Pacific

Forum on Sustainable Development (APFSD). In its last session in 2014, countries in the

region included disaster risks among the top development priorities. In this context, public-

private partnership in DRM will be working as an integrated part of the rest of the

innovative partnership and sustainable financing for development.



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Asian Ministerial Conferences on Disaster Risk Reduction

The AMCDRRs are regional gatherings organized jointly by UNISDR and a different Asian

country every two years, which bring together a range of relevant stakeholders from Asia-

Pacific countries, including Ministers and other officials, to discuss DRM policies and

coordinate regional efforts in strengthening disaster resilience. They have also provided an

effective platform for the exchange of ideas, innovations and best practices related to

disaster risk management in the region. Each conference addresses specific themes through

technical sessions. The joint political declarations yielded by these gatherings over the past

decade provide an effective summary of the issues and themes most relevant for the

stakeholders in the region. Therefore, a review of these political commitments can help

chart which aspects of the public sector role in increasing business resilience have been

acknowledged at the regional level and where improvement can still be realized.

At the 1st AMCDRR in Beijing in 200542, key outcomes were clearly shaped in accordance

with the original HFA, which had been established earlier that same year as a

comprehensive 'blueprint’ for global DRM initiatives. The conference served the purpose of

promoting the HFA plan and sought Asia-Pacific Governments’ commitment and actions to

implement disaster risk reduction, including through

increased collaboration and the strengthening of

existing key regional cooperation mechanisms.

Significantly, at this conference, it was acknowledged

that DRM should be a multi-scalar, inter-disciplinary

endeavor which requires coordination and

collaboration from a variety of stakeholders.

However, engagement with business was not

highlighted as a specific priority in the final

summary of proceedings in Beijing.

As such, the 2nd AMCDRR held in New Delhi,

India in 200743 - which was used as an opportunity

42 First AMCDRR, Beijing, China, 2005:

http://6thamcdrrthailand.net/6thamcdrr/Portals/0/Downloadable/PrevAMCDRR

43 Second AMCDRR, New Delhi, India, 2007: http://6thamcdrr-

thailand.net/6thamcdrr/Portals/0/Downloadable/PrevAMCDRR/DelhiDeclaration.pdf

Box 4.2. Asian Ministerial

Conferences for DRR and Key

Themes

1st AMCDRR held in Beijing,

China, 2005 - HFA established

2nd AMCDRR New Delhi, India,

2007 - HFA reaffirmed

3rd AMCDRR, Kuala Lumpur,

Malaysia, 2008 - “Multi-

stakeholder Partnership for

Disaster Risk Reduction: From

National to Local”

4th AMCDRR in Incheon, Korea,

2010 - “Disaster Risk Reduction

through Climate Change

Adaptation”

5th AMCDRR in Yogyakarta,

Indonesia, 2012 -

http://6thamcdrrthailand.net/6thamcdrr/Portals/0/Downloadable/PrevAMCDRR

http://6thamcdrr-thailand.net/6thamcdrr/Portals/0/Downloadable/PrevAMCDRR/DelhiDeclaration.pdf

http://6thamcdrr-thailand.net/6thamcdrr/Portals/0/Downloadable/PrevAMCDRR/DelhiDeclaration.pdf



124

to reaffirm the commitment of governments in the region to the HFA - was significant as

the conference declaration explicitly stated the importance of encouraging innovative

Public-Private Partnerships (PPPs) in order to strengthen disaster risk reduction. This

referenced a regional acknowledgement of the need to include business as part of DRM

processes in some form, which had not been present in the outcomes of the first AMCDRR.

In Delhi, it was suggested that a suitable environment for such PPPs could be fostered

within specific countries via targeted corporate social responsibilities as well as sustained

business continuity, practices and opportunities for investment in disaster risk reduction.

In 2008 the importance of PPP for disaster risk reduction was again emphasized at the 3rd

AMCDRR in Kuala Lumpur, Malaysia.44 This was in line with the conference theme of

“Multi-stakeholder Partnership for Disaster Risk Reduction: From National to Local”. PPP was

underlined in regards to corporate social responsibility and business continuity plans, to

promote fiscal policies that enhance disaster risk management, including micro-credit and

micro-finance schemes and to encourage the establishment of multi-stakeholder

mechanisms. The need to create an enabling environment for the development of

catastrophe risk insurance markets that provide financial incentives for disaster risk

reduction was also stressed in the conference declaration thereby examining the role the

public sector can play in engaging businesses in DRM processes.

Whilst considerations relevant to business resilience had been acknowledged at the previous

two conferences, in 2010, Incheon, Republic of Korea, the 4th AMCDRR45 conference

theme of “Disaster Risk Reduction through Climate Change Adaptation” evidently directed

attention towards other areas of concern as it was not explicitly referenced in the

conference declaration.

In 2012 in Yogyakarta, Indonesia the 5th AMCDRR46 marked the establishment of private

sector stakeholders’ group as one among several sectoral groups of specific characteristics.

The private sector stakeholders’ group endorsed its term of reference and short term plan

44 Third AMCDRR, Kuala Lumpur, Malaysia, 2008: http://6thamcdrr-

thailand.net/6thamcdrr/Portals/0/Downloadable/PrevAMCDRR/KualaLumpurDeclaration.pdf

45 Fourth AMCDRR, Incheon, Republic of Korea, 2010:http://6thamcdrr-

thailand.net/6thamcdrr/Portals/0/Downloadable/PrevAMCDRR/IncheonDeclaration.pdf

46 Fifth AMCDRR, Yogyakarta, Indonesia, 2012: http://6thamcdrr-

thailand.net/6thamcdrr/Portals/0/Downloadable/PrevAMCDRR/Yogyakarta.pdf

http://6thamcdrr-thailand.net/6thamcdrr/Portals/0/Downloadable/PrevAMCDRR/KualaLumpurDeclaration.pdf

http://6thamcdrr-thailand.net/6thamcdrr/Portals/0/Downloadable/PrevAMCDRR/KualaLumpurDeclaration.pdf

http://6thamcdrr-thailand.net/6thamcdrr/Portals/0/Downloadable/PrevAMCDRR/IncheonDeclaration.pdf

http://6thamcdrr-thailand.net/6thamcdrr/Portals/0/Downloadable/PrevAMCDRR/IncheonDeclaration.pdf

http://6thamcdrr-thailand.net/6thamcdrr/Portals/0/Downloadable/PrevAMCDRR/Yogyakarta.pdf

http://6thamcdrr-thailand.net/6thamcdrr/Portals/0/Downloadable/PrevAMCDRR/Yogyakarta.pdf



125

of work. The group focused on the role of risk transfer particularly insurance under the

overall theme of the Conference: “Strengthening local capacities for disaster risk reduction”

did not prioritize business DRM specifically, although the value of PPPs was reiterated (as it

had been in the AMCDRR’s of 2007 and 2008). The value of such partnerships was

promulgated in terms of local risk assessment and financing and promoting investment in

social and physical local infrastructure by supporting sufficient financing for local

communities. This represented the recognition of the need to adjust priorities for greater

public investment in prevention rather than response and recovery; develop schemes for

micro-insurance and pooling of financial resources and risk; and to promote regional

exchange and collaboration to enhance local resilience.

As the last regional inter-governmental meeting in Asia before the completion of the HFA,

in January 2015 and the 3rd World Conference on Disaster Risk Reduction (WCDRR) in

March 2015, the 6th AMCDRR held in Bangkok in June 201447 provided a unique

opportunity for Asian DRM organizations and practitioners to shape the post-2015

framework for DRR, the successor arrangement of the HFA. The key conference theme was

“Promoting Investments for Resilient Nations and Communities”. This was supported by

three sub-themes: Sub-theme 1 - Enhancing Resilience at Local levels, Sub-theme 2 -

Improving Public Investments for Disaster and Climate Risk, Management to Protect and

Sustain Development Gains and Sub-theme 3 - Private Sector Role: Public & Private

Partnership for Disaster Risk Reduction. As such, in line with these guiding themes, business

DRM featured more prominently in the final declaration and outputs of this conference than

at any of the previous AMCDRRs particularly in regards to sub-theme 3.

At the 2014 AMCDRR, PPP’s - a concept relevant to Business Resilience DRM - were again

highlighted, illustrating the means by which Disaster Risk Reduction could be used to

encourage a shift from response-oriented actions to risk-informed investments as part of

the business process. The need to increase dialogue amongst all stakeholders to identify

barriers and opportunities to build an enabling environment for public-private and other

partnerships was also raised. Improving public investments for disaster and climate risk

management so as to protect and sustain development gains was another suggestion

47 Sixth AMCDRR, Bangkok, Thailand, 2014: http://6thamcdrr-

thailand.net/6thamcdrr/Portals/0/Final%20Bangkok%20Declaration%20-6%20AMCDRR%20-

final%2026%20June-0800%20hours.pdf

http://6thamcdrr-thailand.net/6thamcdrr/Portals/0/Final%20Bangkok%20Declaration%20-6%20AMCDRR%20-final%2026%20June-0800%20hours.pdf





126

raised. Strategies for achieving this included encouraging risk-sensitive investments with

accountability measures in development plans across sectors, strengthening the capacity of

institutions to develop, analyze and use risk information in development planning and

implementation; and considering the benefits of financial protection strategies in order to

promote resilient public investments, especially in high risk areas.

Significantly, discussions at the Bangkok Ministerial Conference marked a more nuanced

approach and consideration of business DRM at a regional level, moving beyond a need to

foster and encourage the use of PPPs discussed at the previous AMCDRRs. Notably, there

was a recognition that business engagement in DRM holds the potential to create a positive

or negative impact in view of disasters, i.e. it can either reduce or exacerbate risk levels

within a society. As such, the need to focus not only on risk reduction alone, but also the

avoidance of creating further risks via more informed, risk-sensitive investments was a

pertinent issue raised at the conference.

It was also recognized that the vulnerability of businesses to losses resulting from disasters

needs to be addressed through concerted actions brought about by the post 2015

framework for DRR. In Bangkok, DRM which encompasses business, was framed as a

pertinent regional issue particularly relevant to Asia: there were calls for the post-2015

framework to focus on micro, small and medium enterprises (MSMEs) in the developing

world, which bear a greater risk of losses from extreme events. As such, the need to devise

policies and encourage practices to ensure the survival of such enterprises was seen as an

important area of consideration. Improved risk information sharing between the private,

public and non-government sectors (including academia) was also seen as an important

step that needs to be taken. This includes making risk information comprehensible and

communicable in standard form for other stakeholders as well as SMEs.

Later in 2014, discussions and recommendations from the Ministerial conference were

further taken forward to two forums. In September 2014, ESCAP conducted a regional

workshop on the use of space technology and GIS for disaster risk reduction. One particular

session was dedicated to delve to the broader discussion on the role of private sector in the

utilization of science and technological innovations in business and DRM.

In November 2014, ESCAP Business Advisory Council (EBAC) held the 11th Asia Pacific

Business Forum. This periodical event was attended by business leaders and stakeholders



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and governments who jointly shape the pathway of trade in investment in Asia Pacific in

respond to the opportunity presented by the post-2015 sustainable development. A side

event on Business and Disaster Management was organized as a platform for business

community, government officials, UN agencies, regional organizations and donor community

to exchange views regarding the role of private sectors in DRM. The forum served as a

momentum building from Asia to Asia Pacific to the World Conference in Sendai. In

addition to putting ore substance to the recommendations from the previous forums, the

Side event also witnessed the Task Force on Inclusive and Sustainable Trade and Investment

of EBAC making bold decision to sharpen its focus into disaster risk management and

climate change, and even considered changing its name to reflect the new focus.

Having explored the progression of business-orientated DRM via a review of outputs

derived from the different regional forums and events, it is clear that this aspect of

strengthening resilience is increasingly being recognized as an important regional priority in

Asia-Pacific. Despite relatively slow progress over the past decade, this has developed from

a relatively basic recognition of the value of PPP’s acknowledged at earlier conferences

towards more nuanced strategies which involve businesses, public sector and non-

government organizations as well as academia as part of inclusive DRM policy making

processes. In particular, the need for greater participation of private sector members on

national and other multi-sectorial platforms, marked a key juncture in the move towards the

promotion and establishment of more comprehensive and holistic strategies for engaging

Asia-Pacific businesses in DRM in more proactive and meaningful ways.

4.2.3 National level: Varying degree of involvement of the private sector in

national DRM frameworks across Asia-Pacific

This section discusses the different national institutional frameworks employed by countries

in the Asia-Pacific region in view of private sector engagement in DRM activities. Focusing

on the examples of Australia, Pakistan as well as The Philippines, the strengths and

weaknesses of the current provisions and systems in each of these national contexts is

considered to provide an overview of the different approaches which have been adopted

across the region.

Pakistan



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Pakistan’s Disaster Management architecture is based on a hierarchical, top-down system

(illustrated in figure 4.1) with clear designated structures and authorities at each level.

Principally, the National Disaster Management Authority (NDMA) administers all decisions

and funding concerning natural disasters (Ainuddin et al. 2013). Disaster policies and

strategies originate from the NDMA which serves as the facilitating agent for coordinating

the various players involved in disaster mitigation and response including District Disaster

Management Authorities (DDMAs) and Provincial Disaster Management Authorities (PDMAs)

with whom initial responsibility for alerts and warning dissemination at a local level lies.

Figure 4.1: Structure and mechanism of disaster risk management

Source: Ainuddin et al. (2013)

The key national actors involved in DRM activities in Pakistan are the Government, NGOs

and civil society groups. Presently, the private sector plays little, if any role in disaster



129

management activities administered by the national government. This clear lack of

engagement of the private sector, means Pakistan is missing out on key benefits that can be

derived from public-private collaboration. Rather than emanating from the national DRM

framework put in place by the Government, the limited, localized examples of Private sector

engagement in DRM in Pakistan have come about as a result of the efforts of NGOs present

in Pakistan. Increasingly, such organizations have sought to influence the national system via

their advocacy activities in order to encourage the introduction and implementation of

structures and mechanisms to foster the participation of businesses and commercial

organizations in the future.

Greater private sector engagement in DRM activities holds the potential to address some of

the fundamental problems which currently hinder the country’s framework and provisions

for dealing with disasters including a general lack of awareness and knowledge in relation

to hazards, vulnerability and preparedness measures as well as limitations of resource

capacity, funding and skilled human resources. By sharing process flows, organizational

skills, and other techniques that can strengthen competencies in DRM, the private sector

can help address current knowledge and proficiency gaps. Furthermore, opportunities exist

for the media industry to communicate and educate the masses on disaster preparedness

strategies (Athukorala p. 35). Other business prospects include providing specialized

equipment including disaster simulators, early warning systems, and 3D modelling

technology to strengthen the country’s DRM capabilities. Without addressing these issues, it

is a struggle to build the capacity of disaster management teams and empower local

communities to build robust disaster prevention programs. Another key weakness is lack of

coordination across the different players involved in Pakistan’s disaster management

(Ainuddin et al. 2013).

Looking forward, The NDMA and Government of Pakistan has acknowledged that financial

risk mitigation measures should be an important part of the National Disaster Risk

Management Framework (CDKN, 2012). Pakistan has a well-developed insurance, banking

and microfinance system. By engaging with these sectors strategies to cover insurance for

life, food security, housing, small businesses, crops and livestock in the event of disasters

can be devised and may contribute to faster recovery thus reducing the long-term impact of

disasters in Pakistan.



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The limitations and gaps in Pakistan’s DRM framework represent opportunities for the

private sector to collaborate and contribute to disaster management in the country. The

Government must play a role in facilitating public sector engagement with the private sector

in key industries such as telecommunications, logistics and transportation so as to provide

the support that is needed for improved coordination and collaboration. It is likely this will

require a reformulation of the country’s existing DRM framework including legislative and

regulatory reforms so as to facilitate proactive and meaningful engagement between

business and the public sector in Pakistan in view of Disaster Management activities.

Box 4.3. Cambodia moves towards a more comprehensive Disaster Management legal

framework

The Cambodian Government has taken steps towards strengthening Disaster Management

provisions in the country, including a greater acknowledgement of the role which non-

governmental actors and the private sector can play in the prevention and response to

disasters. A new 10-chapter draft legislation concerning Disaster Management

arrangements, prepared by the National Committee for Disaster Management (NCDM), was

approved by the country’s Council of Ministers in January 2015 and will now be sent to the

National Assembly for consideration.

Disaster management activities in Cambodia are currently organized in accordance with the

Royal Decree on the Establishment of the National Committee for Disaster Management

which dates back to 2002. The new draft law signals a greater commitment to disaster

management efforts at a national level. It also promises to provide stronger mechanisms for

disaster management and will enable NCDM to improve and strengthen its authority down

to provincial and district levels. To date, disaster management activities in Cambodia have

almost exclusively involved government and ministerial agencies, giving little consideration

to the role which the private sector can play in such efforts. Significantly, the new laws

recognize that disaster relief societies, NGOs, and the private sector can also play a valuable

role in Disaster Management activities.

Source: Naren and Wright (2015) and Amin et al (2011)

Australia



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In recent years Australia has highlighted numerous examples of how the private sector can

contribute more actively to risk reduction efforts across the country’s multi-tiered disaster

management framework which encompasses commonwealth (national), state level as well as

district and local governments. Notably, in December 2009, the Council of Australian

Governments (COAG), the peak intergovernmental forum in Australia, agreed to implement

a whole-of-nation, resilience-based approach to disaster management. This was formalized

by way of the National Strategy for Disaster Resilience adopted in February 2011, based on

the perspective that a resilience-based approach is “not solely the domain of emergency

management agencies; rather, it is a shared responsibility between governments,

communities, businesses and individuals” (Council of Australian Governments, 2011).

The value Australia has placed on the role of business in DRM activities is illustrated by the

Trusted Information Sharing Network (TISN). TISN forms part of the Critical Infrastructure

Resilience Strategy which is aimed as safeguarding the delivery of essential services such as

power, water, health, communications systems and banking. This business–government

partnership provides a forum where partners from the private and public sector can share

vital information on security issues relevant to the protection of critical infrastructure and

the continuity of essential services in the face of prevailing hazards. The scheme established

in 2003, has helped foster an environment whereby major operators of critical infrastructure

from the private sector (detailed in Figure 4.2) can partner with relevant government

agencies (Attorney-General's Department, Department of Health, Department of Agriculture,

Department of Infrastructure and Regional Development, Department of Communications

and Department of Industry) in order to develop strategies and techniques to assess and

mitigate societal risks whilst strengthening the resilience capacity within businesses

themselves. By building confidence and cooperation between public and private

stakeholders on mutual concerns, TISN acts as an important forum via which businesses can

engage with and inform the actions of relevant government agencies.

Figure 4.2 Critical Infrastructure Resilience Strategy.



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Source: Australian Government (2010)

Conventional Public-Private Partnerships (PPP) have also been applied to good effect for

Disaster Management endeavors in Australia, with their value in developing community risk

awareness and providing essential services having been acknowledged by the Australian

Government. In exploring the role of PPPs in DRM, Bajracharya et al., (2012) cite recent

initiatives from Queensland’s Gold Coast of community-based, bottom-up business

engagement in community resilience building measures. One such example was the

masterplanned residential community of Varsity Lakes (with a population of approximately

8700 people). This commercial venture, took advantage of inputs from a range of private

and public sector actors including non-profit local community group ‘Varsity Lakes

Community Limited’ (VLCL), Gold Coast City Council disaster managers and support from

NRMA insurance company and the local council to develop local disaster management

strategies for the community with the goal of creating a safe and secure community from

the ‘ground up’. Specific actions included the production of a local disaster management

guide and checklist for collating a household emergency kit. The success of these efforts led



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to Varsity Lakes being certified as an ‘International Safe Community’ by the World Health

Organization (WHO).

Significantly, as acknowledged throughout this study, the task of building effective disaster

resiliency at national, regional and local levels cannot be left to governments alone. To

achieve more holistic disaster resilience, there is a need for strategic partnerships between

the public sector, academia, business and communities. The Australian Government has

clearly identified that the private sector can play a key role in developing resilient

infrastructure and, in doing so, provide tangible inputs into national DRM planning. By

utilizing relevant legislation, mechanisms and incentives to consolidate and formalize the

important role of businesses, Australia can build on the progress it has already made in

engaging the private sector in key DRM processes.

Box 4.4 Regulations for effective DRM in Fiji

Tourism is a primary economic activity and a driver for many Small Island Developing States

(SIDS), but it is also vulnerable to external factors such as natural disasters. Appropriate

regulations addressing resilience standards is hence necessary, in order to ensure the

protection of human lives and economic assets, as well as to ensure the sustainability of the

sector and of its contribution to the national economy.

The National Disaster Council of Fiji has developed guidelines and standards to help

regulating DRM processes and to incentivize tourism actors to build above the codes.

According to Fiji’s 2011-2013 HFA report, the standardization through law brings the

confidence of international donors. For example, Fiji’s NDMO promotes a strict enforcement

of building zones ensuring coastal sub-division is above tsunami and storm surge levels.

Different agencies and technical departments work together to calculate hazard thresholds

in order to develop planning impacts and DRM policies. Another concrete example comes

from the Water Authority of Fiji, whose policy on development of rural water resources

ensures a secured provision of safe water to rural communities. Crisis management systems

are also developed for all actors, to minimize impact and facilitate recovery. Municipalities

represent a good example since they are required to incorporate DRM in their planning, as

requested by the Ministry of Local Government of Fiji.



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In any case, regulation benefits both the public and private sectors thanks to “systematic

and strategic approaches to improving DRM” since “managing the destination image” in the

can prove challenging in the aftermath of disaster events (Mahon et al. 2012).

Source: Based on National Disaster Management Office (2012) and UNISDR (2013d)

The Philippines

Private sector involvement in DRM activities in the Philippines is well established, having

been fostered and consolidated by way of collaborative efforts as well as legislation

implemented by the Filipino Government. The country’s 1987 Constitution acknowledges the

critical role of the private sector in the country’s development which has progressed to

encompass the role such organizations can play in terms of disaster risk management at a

national level. The high frequency of disasters in the Philippines and the tendency for

business operations to be interrupted by such occurrences has meant that many large

Filipino businesses have longstanding involvement in disaster related activities. The

Corporate Network for Disaster Response (CNDR), formed in 1990, is an example of a

private sector forum focusing on emergency response and Disaster Preparedness. Similarly,

the Philippine Development Forum (started in 2004) a stakeholders’ policy forum which

focuses on key development agendas has acknowledged that disaster mitigation and

climate change adaptation measures are critical to sustainable development and national

security. This group have endeavored to work alongside government agencies, local

government units and development partners to establish MOUs and partnerships with

various stakeholders in order to initiate DRM and CCA projects. Taxation benefits offered by

the government have also encouraged large organizations to engage in CSR and

philanthropic activities, although in view of disasters this has traditionally focused on relief

and recovery efforts.

Notably, the country’s National Disaster Risk Reduction and Management Council

(NDRRMC) formed in 2010 requires one representative from the Private Sector, signaling the

inclusion of the private sector as a legitimate partner in disaster management alongside the

public sector. Disaster Prevention, Mitigation and Recovery capacity building Projects were

cited as ‘preferred activities’ under the 2011 Investment Priorities Plan of the Government

initiated Philippine Public-Private Partnership Program. Activities conducted under the



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guidance of the national PPP Center were designed to encourage businesses to invest and

develop infrastructural development programs in particular areas of national priority.

Notable PPPs used for disaster management purposes include the ‘SMART Infoboard’ which

was developed via a collaborative effort between The Philippines Government and SMART

Communications. The emergency communications tool allows various government agencies

such as the National Disaster Risk Reduction and Management Council (NDRRMC),

Department of Science and Technology-Philippine Atmospheric, Geophysical and

Astronomical Services Administration (DOST-PAGASA), the Philippine Information Agency

(PIA), and the Office of Civil Defense (OCD) to send free SMS alerts across their respective

disaster preparedness networks and wider communities. SMART also developed the

Batingaw smartphone App in cooperation with the country’s Office of Civil Defense and the

NDRRMC which aims to raise Public DRR awareness and build personal and family

preparedness by providing basic information on how to reduce vulnerability during

disasters.

Via the OCD, the NDRRMC has agreed a number of MoUs with the private sector with a

focus on improving response operations. Project DINA (Disaster Information for Nationwide

Awareness) and the formation of the Intelligent Operations Center (established by The

Department of Science and Technology and IBM) which serves as a central point of

command for disaster management in the Philippines are both initiatives which came about

under such agreements. The Office of the Presidential Assistant for Rehabilitation and

Recovery (OPARR), the agency charged with management of rehabilitation, recovery and

reconstruction following large disaster events (having been created following Typhoon

Yolanda) actively engage with the Private Sector and Non-Government Organizations’ which

are supporting rehabilitation projects. In doing so, the OPARR endeavors to help sustain

these collaborative efforts through regular consultations and information exchanges with

private sector partners.

The Philippines has established an effective framework of legal regulations, incentives and

mechanisms to encourage greater private sector engagement in DRM activities, particularly

in terms of encouraging Filipino Businesses to focus on longer term, strategic preparedness

measures for disasters as opposed to merely providing short-term relief assistance.



136



137

4.3 Public policy options to create an enabling environment for

business engagement in DRM

Involvement of the private sector in DRM is still limited and fragmented, and insurance

penetration for disaster risks at the private sector is extremely low, particularly in developing

countries (SELA 2013). The present condition strongly suggests that an enabling

environment (figure 4.3) may need to be developed for enabling business to invest more

and better in DRM. In particular, a combination of a sound legal and regulatory framework,

together with fiscally sustainable economic incentives should be used by the public sector

to encourage business to work on DRM (SELA 2013). Also, promoting a culture of financing

and insurance in DRM in order to transfer the risk that cannot be avoided, mitigated or

accepted, is of capital importance, together with the provision of better and easier access to

disaster risk information. Furthermore, evidence shows that SMEs would need special

support to enhance their resilience. Following, these proposals are explored.

Figure 4.3. An enabling environment for greater engagement of businesses in DRM

4.3.1 Legal and regulatory frameworks

Addressing disaster risks requires decisive action from a range of stakeholders engaging in

various initiatives aiming to increase resilience (Takao and Rajib 2012). More often than not,

the government is in the driver’s seat steering these initiatives forward through funding,

designing and implementing DRM activities. The government also leads the development



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and enforcement of the legal and regulatory frameworks within which the stakeholders

operate.

Whereas legal and regulatory frameworks vary from country to country depending on the

overall political system, risk levels, status of the economy, institutional capacities and other

factors, basic components of an enabling environment could be drawn to avoid prescribing

a one-size-fits-all framework (UNISDR 2009). Table 4.1 below provides the legal and

regulatory components in DRM.

Table 4.1. Components of an enabling legal and regulatory environment for business

engagement in DRM

Stakeholder Objective, goal and expected result Instruments

Business Align public and private interests and

promote DRM

Incentivize DRM activities, such as

investments in infrastructure

Prescribe safe standards for conducting

business including obligations to

develop business continuity plans

Incentivize training on DRM related skills

Promote preparedness and mitigation

through e.g. increasing insurance

penetration rates

Building codes

Corporate laws

Land use laws

Tax codes

Restriction on

industrial/commercial zones

Labour law

Safety regulations

Public-private

partnership (PPP)

Enable PPP projects and related

activities such as procurement and

public services

Incentivize PPP through subsidies, tax

rebates etc.

Public administration laws

(e.g. procurement)

Tax codes

Corporate laws

Labour law

Source: Authors’ construction



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The majority of countries in the Asia-Pacific have made commendable progress in

establishing legal frameworks for DRR (ESCAP and UNISDR 2012). Understandably, certain

countries are pushing ahead with more far-reaching improvements than others. The

coverage of legislative frameworks and it’s effective implementation often hinges on the

lack of knowledgeable implementation of practical actions as opposed to other attributes

such as bureaucratic delays and so on (ESCAP and UNISDR 2012).

Regulatory instruments

The most direct way to empower agencies with new responsibilities and mobilize

stakeholders to ensure investments are risk sensitive is through legislation. Guidance can be

sought from other fields where policies and regulations are better established, such as

energy, transport and climate change (UNESCAP 2013). Implementing rules or DRM

objectives as a legal instrument guarantees that a project will reach operational level and

increased levels of performance as stated within a certain timeframe (Leontescu and Svilane,

2012). It is important to note that enforcement of regulations can be a challenging issue to

address when infrastructure and practices are already in existence, they can, however, be

particularly effective in newly established or rebuilt structures in the disaster recovery

process (Sudmeier-Rieux et al 2013).

This section provides a non-exhaustive list of the most common regulatory instruments used

by legislators.

Building codes

In most countries, governments establish building codes based on sound engineering and

architectural principles for ensuring public safety. In order to receive a construction permit,

the design of the building needs to meet certain minimum criteria for earthquake or other

disaster resilience standard. These criteria may vary across different regions in one country

according to the specific estimated hazard exposure usually calculated by the government

using historical data and information that has been made publicly available.



140

While enforcement of new building compliance standards can be challenging to address in

existing infrastructure, these policies can however be particularly effective in newly

established or rebuilt structures in the disaster recovery process (Sudmeier-Rieux et al 2013).

Additionally, it is also of great importance that building codes are not only enacted in local

and national legislation but also properly enforced. For this, adequate resources need to be

made available by the public sector in order to have an adequate body of building

inspectors and certifiers.

Box 4.5 Building codes in Japan

Japan, as one of the most seismically active countries in the world, has some of the most

rigorous earthquake building standards. In 1981, it introduced the “shin-taishin” (New

Earthquake Resistant Building Standard) amendment into the former “kyu-taishin” building

code, setting a new (higher) minimum earthquake-resistance standard. The amendment

establishes that in case of the often-occurring mid-size earthquakes (Richter magnitude 5-7),

the building should suffer no more than a slight amount of cracks and should continue to

function normally, and in case of a large earthquake with a Richter magnitude 7 or higher,

the building should not collapse.

Currently, “kyu-taishin” buildings (old) still represent about 20-30 per cent of the total

number of buildings nationwide. These buildings are still saleable but tend to have lower

price tags than “shin-taishin” buildings. This is a good indicator that the real estate market

is working efficiently since the risk premium of non-compliant buildings is reflected in the

price of the assets. Similarly, buildings that have been built with even more modern and

resilient methods not required by law, like the base-isolation system “menshin,” which can

stand earthquakes of higher magnitudes, have the highest market prices.

The positive outcome of the enforcement of this new code is clear. In the 1995 Hanshin

Earthquake, only 0.3 per cent of the “shin-taishin” buildings suffered serious damage,

compared to the 8.4 per cent of the “kyu-taishin” buildings.

Source: Adapted from JPC (2014)

Land use planning



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Regulations which support stronger zoning and land use are a key to DRM. These can

include population density control; site selection and development controls; open space

preservation; and government land acquisition in hazardous areas (ADPC 2011). Although

regulations may be in place, policies are not always properly enforced. It has to be noted

that weak enforcement institutions or divergent political interests may undermine

enforcement efforts (Sudmeier-Rieux et al 2013).

Safety and resilience standards

Governments generally prioritize critical infrastructure and sectors that are crucial for the

country’s economy and national security, for example, agriculture, energy, public health,

finance and banking, water and irrigation, communications, transportation and security. In

this regard, governments could enforce regulations that require all critical national

infrastructures to adopt a BCP. As such, there should be a governing body in each sector to

ensure that businesses have the required BCP in place.

Also, in sectors where the high-risk nature of the activities could cause potential man-made

disasters, governments could issue specific regulations to request that companies purchase

mandatory liability insurance (e.g. chemical, energy and waste management).

Corporate law and business risk information disclosure

Businesses share the responsibility to provide information pertaining to potential and actual

risks which may impact their own enterprise and wider society. Companies need to become

increasingly sensitive to a growing social demand for improved accountability and more

transparent disclosure practices. Businesses need to share the information on the

investments they make in risk prevention and reduction as well as the losses they have

suffered from disasters.

Box 4.6. DISCO Corporation -- Providing reassurance of stable supplies to customers by

disclosing risk information

DISCO Corporation is a manufacturer of Precision Processing Tools and equipment. It has a

large market share in the global market and plays an important role in the supply chain of

the semiconductors manufacturing industry. DISCO conveys information about disaster risk



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and provides the latest damage situation to both customers and stakeholders in case of

disaster, through its website and other means. It also shares its supply chain assessment

standards with the public. If DISCO’s supply becomes unstable and risky, its customers will

receive the information promptly and look for a second supplier to avoid loss. In addition,

to reduce risk in times of disaster, DISCO Japan has built office centers in Tokyo and

Hiroshima. If one of the centers suffers a disaster, other offices will be prepared to perform

the function of customer support. When disaster strikes, DISCO has a planned system in

place to redeploy all of the country's customer engineers to ensure the emergency repair

for customers and equipment in the disaster affected area.

Source: Adapted from UNISDR and ADRC (2007)

Owning and disclosing risk information is the first step towards risk reduction. Business

regulators are increasingly requiring businesses to disclose hidden risks (UNISDR 2013b).

Risk disclosure is a key issue that needs to be addressed with the right policy mechanisms.

The challenge of enforcement

Despite the range of regulatory instruments available for risk governance, creating the most

appropriate structure with the correct regulation is a challenge in itself. Even when laws or

new regulations are enacted that clearly map the conduct and responsibility expected from

the private sector, acceptance and implementation may be slow. This situation is likely to be

further hampered, particularly in developing countries, if there are faults within the laws

themselves such as outdated regulations or a lack of government enforcement capabilities.

Several challenges are therefore associated with engaging the private sector in disaster risk

governance.

Firstly, laws must be backed by suitable implementation regulations in order to clearly state

what behavior is expected or prohibited, especially where there is a lack of clarity on the

circumstances in which the provision is applicable (see Box 4.7). For instance, does the law



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have scope throughout the entire disaster management cycle, or does the provision merely

implicitly refer to the emergency response phase? In Indonesia, many policies are

formulated in the context of disaster response which conveys misleading signals to decision

makers who believe that disaster programs only consist of emergency response and post-

disaster reconstruction activities (UNISDR 2014). Secondly, a lack of awareness of the

relevant laws applicable to the private sector may further hinder the uptake of DRM

activities. Thirdly, there is likely to be much reluctance on the part of the private sector to

disclose information, which in turn makes monitoring, and enforcement very difficult.

Fourthly, the lack of a predictable allocated budget dedicated to monitoring and

enforcement activities can also be a significant constraint. For example, in Bangladesh

financial bottlenecks in addition to inadequate staffing and lack of resources have prevented

the implementation of its sound DRM policies and frameworks (UNISDR, 2014). Finally, there

may also be gaps in technical knowledge and information management that limit the

implementation and monitoring of a targeted and effective compliance program. As a result,

few businesses may be aware of the DRM regulations they are required to adhere to, which

has been the case in Indonesia (Box 4.7)

Box 4.7: Indonesian DRM Regulations for Private Sector

Indonesian Law 24/2007 (BNBP, 2007) provides the opportunity for the private sector to

participate in DRM particularly in three specific DRM functions:

(1) Business institutions shall adjust their activities to disaster management policy;

(2) Business institutions shall come under obligation to submit a report to the government

and/or agency in charge of disaster management and to transparently inform the public

thereof;

(3) Business institutions shall come under obligation to consider the humanitarian principles

in performing their disaster management economic functions.

Violation by the private sector is punishable by imprisonment or fine as well as cancellation

of business permit or revocation of the company’s legal status.

Source: Law of the Republic of Indonesia 24/2007 on disaster management, BNBP (2007).



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Sound institutional frameworks: A benchmarking tool

Developing an enabling institutional framework requires deep and honest political

commitment in addition to vast quantities of time. Bearing in mind that the concept of

DRR/DRM was only introduced to mainstream government agendas during recent years, the

general pace of development thus far has been impressive. As mentioned in the 2009 GAR,

the majority of governments report that they have made good progress in developing

supportive legislative frameworks for DRM and found an overall improvement in capacities,

policy, legislation, plans and mechanisms for the reduction of mortality risk, in particular for

weather-related hazards as stipulated by the HFA.

Despite these steps, assessing the state of enabling DRM institutional frameworks in the

Asia-Pacific will require more than an analysis of self-proclaimed status reports concerning

HFA obligations. A fully-fledged enabling institutional framework requires assessment of

various indicators such as compliance with key international conventions, progress under

HFA, existence of DRM related institutions, presence and coverage of building codes and

land use laws, history of established ad hoc measures, among others.

The following table is presented to illustrate how countries fare in light of institutional

arrangements for DRM, and provides the basis for action. Countries with relatively low

scores should focus on the drafting and promulgation of DRM-friendly laws and

establishment of institutions. Countries with mid-range scores could do well with ensuring

enforcement and implementation and working towards aligning laws further along long-

term DRM policies. Countries with high-end scores would best contribute in focusing on

being drivers for international cooperation through sharing best practices and experiences,

and ensuring that the regulatory framework including corporate and tax codes are aligned

with DRM policies.

Table 4.2 Institutional frameworks’ benchmark tool scoring system and

recommendations

Country group Recommended actions

Countries with limited

institutional frameworks

Score 0-0.59

Join international communities, treaties and workshops

to learn best practices and experiences.

Draft and promulgate updated core laws such as land

use and building code laws



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Establish basic institutions such as Ministry Departments,

focusing on DRM

Countries with established


Score 0.60-0.79

Ensure efficient enforcement of existing laws

Align legislative framework with DRM policies, including

drafting and promulgating DRM specific laws

Further enhance institutional framework with dedicated

units working on private sector development and DRM

Countries with strong


Score 0.80-1

Further enhance legislative framework and create

incentives for private sector to engage in DRM through

tax code, corporate laws and business continuity

standards

Drive international cooperation and actively seek out

opportunities to share information and experiences

Strengthen financing frameworks for businesses to invest

in DRM as well as providing incentives for the private

sector to engage in DRM

Methodology

The proposed benchmarking tool uses a points-based system to calculate a weighted index

score (1 being the highest, 0 being the lowest) for each of the eight countries considered

under the assessment, which is based on 15 key indicators of national institutional

framework strength which each range from 0 to 10 points. The weighting given to each of

the indicators (1 to 4) was based on their bearing on the strength of a country’s institutional

framework in view of DRM with particular value placed on factors signifying private sector

engagement.

The theme ‘Progress under HFA’, based on self-assessment reports submitted by each

country, took into consideration six indicators. Firstly, the HFA reports were considered

qualitatively in terms of references to private sector and whether these indicated ‘Active

engagement (10 points)’, ‘Future plans for private engagement (5 points)’ or ‘no mention’ (0

points) of private sector engagement. Next, the self-assessment scores of the HFA priority

areas considered most relevant to national institutional frameworks were selected and

weighted according to their applicability to private sector engagement (listed in table 4.3



146

below). PA4-CI3 was weighted highest due to its relevancy in helping to gauge the level of

private sector engagement in each country. Since the HFA indicators range from 1 to 5, the

tool multiplies the reported score by 2 in order to be consistent with the rest of the

components of the index.

Table 4.3 - HFA Priorities for action considered under the assessment tool

HFA Priority for

action

Description Weighting

Priority for action 2,

Core Indicator 1

(PA2-CI1)

National and local risk assessments based on

hazard data and vulnerability information are

available and include risk assessments for key

sectors.

3


Core Indicator 1

(PA3-CI1)

Relevant information on disasters is available and

accessible at all levels, to all stakeholders

(through networks, development of information

sharing systems etc)

3


Core Indicator 4

(PA3-CI4)

Countrywide public awareness strategy exists to

stimulate a culture of disaster resilience, with

outreach to urban and rural communities.

1


Core Indicator 1

(PA4-CI1)

Disaster risk reduction is an integral objective of

environment related policies and plans, including

for land use natural resource management and

adaptation to climate change.

2


Core Indicator 3

(PA4-CI3)

Economic and productive sectorial policies and

plans have been implemented to reduce the

vulnerability of economic activities

4

Aside from the HFA self-assessment scores, the indicator ‘Scope of involvement in

international agreements, working groups etc. on DRR’ took into consideration whether

countries were signatories of relevant agreements/treaties, were part of working groups, had

hosted either the WCDRR or AMCDRR and are members of regional-multilateral

organization which takes action on DRM - each factor being worth 2.5 points, with a

maximum possible score of 10. This indicator was given a relatively high weighting of 3 due

to its direct significance to DRM provisions at the national level.



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Two further indicators related with national institutional representation considered the

existence of dedicated Ministries, government offices, working groups specialized in firstly,

DRM and secondly, SME development/support (specialized ministries scored 10, agencies 6,

departments 4 and centres 2, respectively). The next indicator explored ‘Permanent or

temporary ad hoc business oriented DRM measures since 2010’ in the case of each country

with more than one measure scoring 10 points, one measure scoring one point and no

measures equalling zero points. The significance of these three indictors meant that they

each carried a high weighting of 4.

The number of permanent or temporary ad hoc Business oriented DRM measures since

2010 in each country was also used as an indicator. Countries with more than 1 measure

scored 10, 1 measure: 5 points and none: 0 points. This indicator also carried a weighting of

4.

The Amount of members in UNISDR’s Disaster Risk Reduction Private Sector Partnerships

(DRR-PSP) formed the basis of another indicator: countries with more than five members

gained 10 points, 1-5 members 5 points and one member 2 points. This indicator bore a

weighting of 3 on the framework scores.

The theme of legislation encompassed four indicators. These took into account whether

countries had specific laws on land use (weighting 3), building codes (weighting 3) and DRM

(weighting 2). An indicator considering each country’s score in the enforcement of

regulation index was also included, carrying a significant weighting of 4.

Analysis

Annex III contains a matrix that provides a broad assessment of the various components of

institutional frameworks from the viewpoint of China, Japan, Nepal, the Philippines, Thailand,

Maldives, Sri Lanka and Viet Nam, using the previously described benchmarking tool. The

matrix can be used to derive insights of the status of the enabling environment for business

engagement in DRM. To facilitate comparison, a score is calculated for each country in the

matrix.48 Table 4.4 provides a summary of the total scores achieved by each country.

48 The matrix contained in Annex III, including the scores, should be taken only as an indicator of

overall progress. In many categories further examples of implementation can be found, depending on

the set of definitions used for an enabling institutional framework. The matrix is intended to broadly



148

Table 4.4 Results of benchmark analysis on institutional frameworks of selected Asia-

Pacific countries

Country Index Score

Japan 0.90

Thailand 0.68

Philippines 0.63

Nepal 0.52

China 0.73

Maldives 0.60

Sri Lanka 0.78

Viet Nam 0.66

Source: Authors’ construction

Japan gained the highest index score of the countries assessed under this tool whilst Nepal

was found to have the weakest institutional framework of the sampled countries.

Under the criteria assessed, the institutional frameworks of many countries did not differ

markedly from one another in terms of scope of involvement in international agreements,

existence of relevant laws and codes and business oriented DRM measures initiated since

2010. A significant proportion of scoring for Progress under HFA was based on self-

assessment reports, which reflected the overall picture provided by the other indicators.

Nonetheless, background research (Annex III, country tables) revealed that the scope and

nature of business orientated measures varied significantly from country to country with

some national governments having implemented initiatives of their own accord, whilst

others relied heavily on support from international partners and agencies in terms of these

interventions.

Significantly, there was a variance between countries in view of the enforcement of

legislative instruments. Unlike the majority of other sampled countries, Japan can be seen to

have consolidated its comprehensive DRM framework with strong enforcement of legislation

and codes, marking it apart from the others in the region.

assess the existing institutional and legal frameworks at the national level, and it can be augmented in

further studies delving more deeply into specific legal provisions and their case-by-case enforcement.



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Even in the case of countries such as Thailand, which scored fairly highly across all other

indicative areas of the benchmarking tool, legislation and regulatory enforcement was a

clear area of weakness. Japan, on the other hand, was an example of a country where a

sound institutional framework was backed up by strong regulatory enforcement and

therefore scored highly under this indicator which carried significant weighting.

Sri Lanka’s index score was boosted by the presence of specialized ministries for disaster

management and small enterprise development as well as stronger regulatory enforcement

than many of its neighbors. Japan meanwhile had a specialized agency related to DRM

whereas countries such as Thailand and the Philippines with mid-range scores both had

departments/councils related to disaster management. The absence of a specialized ministry

or department in the case of Nepal and the Maldives underlined the need to strengthen the

DRM provisions in both countries, whilst China and Vietnam - which also lacked such

dedicated institutions – can look to build upon their existing Disaster Management Center

provisions.

It can be argued that active private sector engagement in DRM is a useful marker of the

level of sophistication of institutional frameworks - Japan the highest overall index scorer -

possessed the highest number of partnerships under UNISDR’s Disaster Risk Reduction

Private Sector Partnerships (DRR-PSP) by some way, whereas two of the lowest scoring

nations, the Maldives and Nepal had none. It should be noted that this indicator is based

on just one international initiative and be expanded to consider other private/public sector

collaborations at the regional and national level for further relevant insight. For instance, the

Philippines has three major private sector initiatives, the Corporate Network for Disaster

Response (CNDR), Philippine Disaster Recovery Foundation (PDRF) and Philippine Business

for Social Progress (PBSP), as well as the ‘Top Leaders’ networking forum, which were not

considered under this assessment tool. In the case of Nepal which also gained no points

under the ‘References to private sector’ of the HFA reports indicator (in comparison to all

other countries reporting a degree of ‘active private sector engagement in their

assessments) there is a clear need for progress in fostering private sector engagement in

DRM.

The findings of the matrix above should be taken as abstract indicators of overall progress,

giving insights on what are the chosen implementation methods and tools rather than

providing a thorough analysis of the status of the enabling framework. In the case of all



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selected countries, further improvements to the legal framework can, and should, be made.

Table 4.2 above reveals the respective recommendations for countries with limited

institutional frameworks (Scoring 0-0.59), those with established institutional frameworks

(0.60-0.79) and countries with strong institutional frameworks (0.80-1).

Broadly speaking, countries with lower ranking index scores such as Nepal and Maldives

should focus on improving the basic institutional DRM structures at the national level and

further engage with the international community to build up general resilience. Mid-ranked

countries (Sri Lanka, China, Thailand, Viet Nam, Philippines) can look to refine their DRM

frameworks by ensuring the efficient enforcement of existing laws, aligning legislative

frameworks with DRM policies and establishing/strengthening dedicated units working on

DRM as well as private sector/SME development. Countries with already strong institutional

frameworks (in the case of this pilot study, Japan) can look to further enhance legislative

frameworks and create incentives for private sector to engage in DRM through tax code,

corporate laws and business continuity standards. Countries at this stage of development

can take responsibility for driving international cooperation. They can also actively seek out

opportunities to share information and experiences, strengthen financing frameworks for

businesses to invest in DRM as well as providing incentives for the private sector to engage

in DRM in order to build on their comprehensive institutional frameworks.

5.3.3 Incentive schemes

Monetary and non-monetary incentives have great potential to stimulate private sector

engagement in DRM across Asia-Pacific. As new business investments continue to be made

with increasing risks or being constructed in hazard prone areas, governments are

increasingly recognizing the need to encourage the private sector to incorporate DRM into

their business process. This presents an opportunity for strengthening existing incentive

mechanisms and identifying new ones both in terms of monetary and non-monetary (Tables

4.5 and 4.6).

Profitability is critical for attracting private partners, thus economic incentives can be used to

encourage the private sector to incorporate DRM into business practices (UNISDR 2013b). A

wide range of monetary incentives would aim at engaging businesses by either making their

DRM investments more affordable or by conditioning the reception of certain funds to pre-

investing in DRM to meet certain minimum standards of resilience. The range of non-



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monetary incentives, on the other hand, is generally limited to quality standards, including

certifications and awards for DRM to public procurement and contracts.

Monetary Incentives

In the context of DRM and public policy, monetary incentives are money-based rewards

given to stakeholders for positive behaviors towards increasing societal resilience They can

take the form of direct transfers or reductions in dues to the government (i.e. taxes). A wide

range of monetary incentives can be used to encourage and direct business investments in

resilience; some of them are presented in the following table and analyzed below.

Table 4.5. Selected monetary incentives for DRM engagement

Monetary

Incentives

Description

Business Tax Includes tax credits, deductions and exemptions made available to

businesses that invest in DRM including through the construction of

resilient buildings.

Sales Tax Sales tax incentives typically provide an exemption from, or refund of,

the national sales tax for the purchase of a DRM system/measure (e.g.

warning system, maintenance of evacuation routes, signs and shelters).

Property Tax

Incentives include exemptions, exclusions, abatements and credits.

Such incentives may apply to the additional cost of a resilient building

(e.g. earthquake proof).

Rebates

Rebates to promote the installation of disaster resilient features (e.g.

flood proofing, IT back-up systems)

Subsidies, grants

and soft loans

Subsidies, grants and soft loans are offered to encourage the adoption

of disaster preparedness practices (e.g. education and training in

evacuation procedures) and the use of disaster risk reduction system

(e.g. warning system, maintenance of evacuation routes and vehicles,

signs and shelters).

Loans

Loans provide financing for the purchase of DRM systems or

equipment. Low-interest or zero-interest loans available for integrating

disaster resilient programs and practices into businesses.



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Post-disaster

financial aid

Aid targeted to individuals and companies that have been greatly

affected by a disaster event. The objective is to relieve immediate

suffering and facilitate recovery and reconstruction.

Taxation

Tax relief measures are granted to address distributional concerns or as a means of shifting

incentives in favour of expenditures on key inputs in DRM, e.g. a certain percentage of a

companies’ corporate tax could go towards a disaster fund. In order to promote the

desirable business behaviours, government may raise taxes for buying or renting land or

buildings in high-risk areas. This will necessitate risk-sensitive land use planning and a good

risk mapping/assessment. Reducing taxes could encourage buying or renting resilient

infrastructure and facilities as defined by

the prevailing building codes and/or

standards and as certified by proper

inspection and certification. Giving tax

rebates could be an attractive incentive to

businesses that have invested in structural

or non-structural risk mitigation measures.

Disincentives include imposing tax

penalties or fines for underinvestment in

risk reduction and/or risk increasing

actions.

Due to the exchange-rate and currency

risk associated with PPP arrangements,

projects tend to be more prevalent in

developed countries with credible,

predictable and stable macroeconomic

conditions (Hammami et al. 2006). For

instance, Japan (Box 4.8) uses a

combination of regulation and tax

incentives to encourage investments in

Box 4.8: Advantageous Loan Rates and

DBJ BCM Ratings Encourage DRM

Investment in Japan.

The Development Bank of Japan (DBJ) was

the first in the world to offer a nationwide

‘DBJ business continuity management (BCM)

rating’, which is awarded to companies that

develop effective disaster preparedness and

business continuity measures in the event of

a disaster. DBJ offers a suite of DRM-related

products, such as earthquake-proofing of

facilities, preparation of IT backup systems

and financial incentives for disaster risk

reduction related investments. These private

companies then undergo an auditing

process of their existing DRM and business

continuity measures, the results of which can

be used in corporate publicity, such as press

releases, outlining their disaster

preparedness initiatives.

The DBJ BCM rating has been proven to be

a practical tool for reducing resistance

against DRM investments in Japan. Since the

inception of the DBJ evaluation program in



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earthquake mitigation and special tax deductions for post-disaster reconstruction. Following

the 2010-2011 floods Australia was able to make a speedy recovery because it had pre-

existing PPPs which encouraged mitigation and recovery measures by requiring businesses

to apply for concessional loans to minimize future losses (UNESCAP, 2013).

Subsidies, grants and soft loans

Some measures in disaster risk management could be resource intensive, and subsidies,

grants and soft or interest-free loans may spur private sector engagement. Subsidies may

be used as stimulation for the construction of safe infrastructure and encourage local

businesses to invest in disaster resiliency and risk reduction allowing for rapid reconstruction

following a disaster. Examples of subsidies are grant subsidies and/or partial cost grants for

assessing, strengthening and retrofitting vulnerable housing, building and facilities. Subsidies

can drive safer standards in high-risk areas. Construction companies can be given subsidies

to decrease the cost of resilient building supplies. Given public subsidies, banks and

insurance companies can support low-income communities more with insurance, savings

and credit schemes that favor them. Also, governments could require small companies to

implement simple BCM before receiving a subsidy or grant, providing them with training

and information beforehand.

Post-disaster financial aid

In the aftermath of disaster events, especially the larger, more dramatic ones, the

international community, the government and fellow concerned citizens usually make

substantive donations to relieve the suffering of thousands or millions of affected citizens.

Many of them are entrepreneurs who might have suffered substantial losses in their

microenterprises.

The biggest part of the post-disaster aid is usually directed, however, to the recovery

reconstruction efforts. Such financial aid, should be strictly controlled and be delivered on

the condition that these address risk-sensitivity in order to ensure that further risk won’t be

created. In this regard, information campaigns and appropriate audits need to be conducted

during the pre and post-delivery of the funds.



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It has to be noted that, providing aid to companies that had been adopting irresponsible

risk behaviors may not reduce underlying risks, hindering accountability, and allowing moral

hazard problems to persist. The recent global financial crisis is an example of how certain

governments have involuntarily reinforced risk-insensitive behaviors by bailing out financial

institutions that had directly contributed to the increase in risk that triggered the disaster.

While seeming reasonable to avoid short-term collapses, this kind of policy is unfair to, and

undermines the competitiveness of, other compliant businesses that behave responsibly,

hence having a negative impact for long-term economic efficiency. In brief, it is more

reasonable that those who contribute to generate losses bear the costs of, at least, their

own losses.

Non-Monetary Incentives

Beyond macroeconomic conditions, both the institutional quality and the regulatory

environment matter for investors; weak institutions and poorly enforced regulations create

high risk which decreases incentives for investors to join PPPs. Thus non-monetary

incentives such as strong institutions and effective rule of law are critical for securing PPP

arrangements (Hammami et al. 2006). However, this is challenging for developing countries,

where compliance issues can be problematic and enforcements costs higher. For these

countries, there is a greater need to combine regulatory measures with more active

interventions aimed at appropriately incentivising private agents (UNESCAP, 2013).

Table 4.6. Selected non-monetary incentives for DRM engagement

Non-Monetary

Incentives

Description

Public Procurement

and Contracts

This tool can also be used an incentive to encourage business DRM if

incorporating certain DRM or resilience requirements into the tender

is done in a non-mandatory manner, with companies with DRM

systems or certifications in place scoring higher in the procurement

process.

Certification

Schemes and

Certification schemes can help promote DRM activities, reward

performance and increase organisational visibility. Existing schemes in



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Awards other sectors, e.g. environmental sustainability, can be expanded to

incorporate DRM.

Technical Assistance

and Transfer of

Resources

The provision of technical assistance, and transfer of knowledge and

skills, can benefit both partners. This may create new business

opportunities we well as encourage the development of innovations

responding to the emerging needs and societal expectations

regarding DRM.

Reputation An improved reputation or enhanced public reputation may be

obtained by participating in or promoting DRM activities, e.g.

certificate schemes, DRM-related CSR.

Business

Opportunity

DRM presents unique opportunities for private companies to increase

their profits and/or to create goodwill amongst the general public.

Public procurement and contracts

Public procurement and public contracts can also serve as an incentive rather than a

normative tool to engage the private sector in DRM. By building in certain optional

requirements into the tender or contract related to the company resilience, businesses

would need to meet certain DRM standards or have certain international or national

certifications in order to achieve higher scores in a points-based system. This would ensure

that the private sector would need to meet basic DRM standards before being able to bid

on a project, incentivizing their investment in the early phases of the DRM cycles, especially

when large public contracts are at stake.

Certification Schemes and Awards

The adoption of certification schemes, similar seals of approval and international standards

can help promote the development of DRM in PPPs. Similar certification programs already

exist in different sectors, for instance, energy-efficiency building, forestry and sustainable

tourism (Johanesson et al. 2013; FM Global, 2010; Mahon et al. 2012). These could be

expanded to include DRM, which may be an important co-benefit of such schemes. For

example, an urban sustainability certificate could be expanded to include an assessment of

drainage, run-off capacity, flood risk and heat absorption (UNISDR 2013b). Similarly, award



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programs can be used to recognize achievements in reaching performance objectives,

business productivity improvements or innovation in DRM in exchange for a minor outlay of

resources or creating loyalty to an institution. Such schemes can be used as a marketing

tool and to raise organizational visibility. By investing in certificate and award schemes,

businesses may see faster growth and greater returns on investments, as these strategies

are becoming increasingly recognized and valued by customers (e.g. Box 4.9).

Technical Assistance and Resource Exchange

In some situations, actors in public and private sectors may have knowledge and skills

beneficial to one another. For instance, a public company may have the technical resources

to design and implement DRM strategies which can be exchanged with private company’s

marketing assistance. This exchange offers both parties the opportunity to explore potential

Box 4.9 ‘Tsunami Ready’ Certification Encourages PPP in Disaster Risk Reduction,

Indonesia

In order to improve the tsunami preparedness of the hotel industry the Indonesian

Ministry of Culture and Tourism (BUDPAR) has cooperated closely with the Bali Hotels

Association (BHA), a private sector association of over 120 star-rated Hotels, to develop

the ‘Tsunami Ready Toolkit’.

The toolkit is geared to assist hotels prepare for tsunamis. It consists of a compilation of

self-assessments, standard operating procedures, background information and the

creation of a common standard for evacuation route signs to be used within private hotel

grounds. In addition, the toolkit includes a checklist consisting of 6 categories

(information sources and interpretation, evacuation procedures, evacuation route and

shelters, community relations, cooperation and post tsunami preparedness) which enables

hotels to assess their state of preparedness. ‘Tsunami Ready’ hotels are then certified if

they meet the tsunami safety standards for the hotel industry as outlined in the toolkit.

Certified hotels were awarded with a logo and listed on the ‘Tsunami Ready’ website.

In April 2011, the AYANA Resort and Spa in Bali became Indonesia’s first fully certified

‘Tsunami Ready’ hotel. Being ‘Tsunami Ready’ can be used as both a competitive

advantage and marketing tool, and as such many other hotels have since followed suit,

including The Hard Rock Hotel, The Haven Seminyak, Sanur Paradise Plaza Hotel & Suites.

Anantara Seminyak Bali Resort & Spa, and the Marriott Courtyard Nusa Dua.

Source: The Tsunami Ready Toolbox, Alexander Kesper, Ministry of Culture and Tourism

Republic of Indonesia, Bali Hotels Association, Centrum fur Internationale Migration und

Entwicklung, 2008



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future business opportunities, tap into emerging markets, and can also encourage the

development of innovations responding to the emerging needs and societal expectations

regarding DRM.

Reputation

Additional non-monetary incentives could also include an improved reputation, enhanced

public reputation or an increase in prestige and legitimacy obtained through philanthropic

actions, working with respected organizations and participating in DRM activities (e.g. DRM

certificate and award schemes) or even the conventional CSR activities in community

disaster preparedness, response relief and recovery. As consumers become more

demanding, adopting measures or initiatives and demonstrating compliance to safety

standards to enhance reputation make good business sense. Clients’ safety can be a

powerful marketing tool to gain a competitive edge through a positive corporate reputation.

If there are no complications from other factors, many consumers would prefer to do

business with a company that demonstrates reputation for promoting greater customer

care.

Post-disaster Business Opportunities

It is becoming increasingly acknowledged that DRM may present unique opportunities for

private companies to increase their profits and/or to engage in corporate citizenship, which

may have positive effects on communities where the business operates.

In the pre-disaster context, making proactive, risk-informed decisions and investments can

help to limit disaster damages and losses, improve business continuity, reduce uncertainty

and provide new business opportunities. Through the creation of new adaptive solutions,

businesses may be able to reach new markets, innovate and strengthen their market

position. Pre-disaster products and services that strengthen resilience could include the

development of communication systems for disaster warnings and response processes,

weather indexed agricultural insurance, and emergency response training programs. For

example, The Get Airports Ready for Disasters (GARD) program is a joint venture between

UNDP and Deutsche Post DHL. It is designed to identify and fix bottlenecks which may arise



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related to the delivery of aid, and prepare airport workers for disasters, teaching them to

cope with potential surges in air traffic in order to make aid delivery faster and more

efficient. So far the initiative has been implemented in disaster-prone countries including

Bangladesh, Indonesia, Nepal, and the Philippines training more than 300 people in over 21

airports (UNDP, 2014).

Post-disaster business opportunities offers the opportunity for companies to engage in

corporate citizenship. For instance, following the 2011 Tohoku Earthquake in Tokyo, Apple

stores invited residents into the stores to watch the news, e-mail their families and recharge

their devices. Where possible, stranded employees and their families were invited to sleep at

the stores, or given paid hotel rooms and private transportation. Such actions may only

have a minor impact but this gesture of goodwill is unlikely to be forgotten. This may give

companies a competitive advantage where proactive actions are highly valued (Diermeier

2011).

Following the Thailand floods of 2011, highly optimized manufacturing businesses based on

‘just-in-time‘ business models, such as Nissan and Toyota, experienced huge problems

associated with disrupted global supply chains. However, this opened up new opportunities

for companies based elsewhere, e.g. the UK. Other business opportunities identified in post-

disaster response to the increase of extreme weather events and growing exposure to

disaster risk include the development of new crop insurance products or the construction of

disaster resilient infrastructure (Brinded 2013). At Toronto’s World Conference on Disaster

Management (2013) additional suggestions from speakers included sending in temporary

mobile homes, especially in remote communities, or deploying mobile charging stations to

disaster sites for the public to use (Profit 2013).

5.3.5 Role of the public sector in insurance and reinsurance

Disaster risk financing and transfer instruments, as previously analyzed in chapter 3, pose

big challenges ahead for governments. Nevertheless, insurance is a powerful instrument to

effectively incentivize the private sector to invest in DRM. Some examples for promoting a

culture of financing and insurance in DRM are presented below.



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Addressing market failures

In order to help alleviating market failures, governments can intervene in insurance markets

in different manners. Some role options are listed from lower to higher involvement of the

public sector in insurance markets:

• Becoming a backstop liquidity provider

for insurance companies by prearranged

loans in order to relieve potential financial

pressure that insures may face when

making payments to the insured after

severe disaster losses;

• Acting as a guarantor by guaranteeing all

or part of the liabilities arising from

disaster risks, usually with an upper limit

after which the responsibility is passed

onto risk or policy holders;

• Acting as a reinsurer in order to provide

support to national insurance companies

that cannot obtain reinsurance at a

reasonable cost in the national or

international markets; and

• Undertaking the role of a direct insurer when the private sector is unable or unwilling

to provide insurance. While there is no risk sharing, the latter undertakes the marketing,

premium collection and payment claims duties on behalf of the government by using

their existing distribution network for efficiency reasons.

Address issue of asymmetric information

The availability of reliable and consistent data on hazards, exposures and vulnerabilities is of

fundamental importance to reduce uncertainties and lower the cost of risk financing and

transfer tools. Often, these data are not shared between research institutes, private

companies (e.g. insurers), state agencies, local governments and end users. Communication

Box 4.10 Public-Private Catastrophe-

Risk Fund (Thailand)

The 2011 Thailand floods proved to be

one of the world’s most costly in terms

of insurance payouts. Premium rates

have increased sharply and sub-limits

have been imposed since then. Many

property insurers and reinsurers left the

markets due to high-insured losses,

making flood insurance difficult to

obtain. Consequently, the Office of

Insurance Commission (OIC) of Thailand

set up a THB50 billion catastrophe fund

to offer competitive insurance coverage

for natural disasters. This catastrophe

fund acts as primary reinsurer and

purchases reinsurance to enhance

capacity. This risk-sharing scheme

between the Thai government and the

Thai non-life insurance sector offers

protection for households, SMEs and

industrial factories.

Source: Adapted from Meghan and

Stahel (2013)



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of location-specific information, in which governments should take a lead, seems key, as

empirical evidence shows that adaptation outcomes are influenced by location-specific

factors (Aakre et al 2010).

Multi-layered insurance approach

Differential roles and responsibilities in risk transfer through insurance could be an effective

public-private solution without undermining the basic tenet that the ultimate responsibility

to protect themselves lies on individuals. Litan (2005) proposed a new approach to disaster

insurance based on the division of risk bearing in four layers or stage. The first level of

disaster losses needs to be borne by the victims themselves in order to encourage them to

adopt DRM measures and to avoid moral hazard problems. The second level is to be borne

by private insurance companies; the third level is to be borne by private reinsurers and

capital markets; and the fourth level is to be borne by the public sector, multi-state pools

and/or international financial institutions.

Linking insurances with building codes and industry standards

Governments could encourage insurance companies, as part of a risk-based pricing

approach, to offer discounts on their premiums to businesses that meet certain

national/international BCM standards or building codes. This could be an attractive

alternative to a flat-based pricing approach, which is offering the same premium to all

policyholders based on the same location regardless of their actual level of resilience to

disasters, which generally discourage the private sector to make DRM-related investments.

Linking DRM investments, building codes and industry standards with loans/mortgages

Governments also need to make the adoption of risk mitigation measures financially

palatable from the property owner’s perspective. With public supports, banks holding a

mortgage on a property, or a loan on facilities, could provide funds for this purpose

through a resilience enhancement loan with a payback period identical to the life of the

mortgage. If the increase in interest payment is lower than the decrease in the insurance

premium, the borrower wins. Also, the bank has a financial incentive to provide this type of

loan because it receives interest and the asset in their balance becomes more resilient, thus

more valuable. The insurer also benefits since the borne risk is reduced, and the reinsurers

are in a better situation since the risk they need to pool is lower. In other words, a

quadruple win situation (Kunreuther 2006).



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Subsidies for loans and insurance premiums

Governments could subsidize interest rates for loans used for financing structural risk

mitigation investments. This could be implemented in the framework of the multi-layer

insurance approach explained earlier. Also, subsidies could be directed to reduce premiums

of uninsurable individuals when using risk-based pricing.

Risk-based pricing and mandatory insurance

Governments could advocate for the use of risk-based pricing in insurances, which provides

a higher degree of fairness to both customers and insurers. Furthermore governments could

require the compulsory purchase of insurance for certain businesses in order not to

exacerbate risks to society.

4.3.6 Disaster risk information

Disaster risk information (DRI) essentially refers to the collation and consolidation of an

array of knowledge components needed to better understand the risk, communicate the risk

and 'act' on the risk associated with a particular hazard. DRI therefore needs to adequately

capture the form and manner of the hazard, the vulnerability and the exposure of the asset

or population.

In the pre-disaster phase, this can involve mapping, assessing and monitoring for the

purpose of building resilience against the risk. During a disaster, information such as space-

derived data can be used to assess disaster struck areas and their situation for the purpose

of emergency response and recovery. ICT technology for communication and for

supporting other necessary emergency services is also critical during this period. In the

post-disaster phase, this can cover damage and loss assessment and help build back in a

more resilient manner, taking the risk assessment and hazard maps into account.

The public sector plays a critical role in identifying regional and local deficiencies in disaster

management strategies, which could potentially be enhanced by leveraging private sector

information and experience. There is often a perception that disaster risk management is the



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realm of government only, but since supply chains can be disrupted globally following

disasters, it is increasingly being recognized that disaster risk management should be

integrated into business risk management.

While large corporations are working towards this, SMEs often lack the capacity to

undertake their own risk analysis (as cited in ESCAP, 2014). Suitable capacity building

programs about DRI, regulations and standards, specifically targeted for SMEs, can help

overcome this issue. The lack of expertise and ability to assess risks in SMEs due to their

size in human resources is a structural element that needs to be addressed, together with

SMEs' perception of the unlikelihood of disasters. These issues translate into a strong need

for awareness raising and access to affordable DRI solutions. Some larger corporations are

beginning to support their SME suppliers through training and assistance with risk

assessment as part of their supply chain resilience building through Business Continuity

Management (BCM).

Though BCM is a common practice now to reduce the impact of disasters and shocks on

business operations and supply chains, in the event of a major disaster, the destruction of

the basic infrastructure needed to operate a business, such as roads, electricity and water, is

beyond the control of an individual corporation. In response, Japan has proposed the

extended concept of the Area Business Continuity Management model (ABCM), which

involves public-private partnerships in the development of a disaster management system

for an area, such as a specific industrial zone covering a number of businesses. This system

can include analysis of the hazards and impacts in view of the specific characteristics of the

local businesses, building resilience of critical infrastructure in the area that is shared by all,

such as power, water and transport systems, and flexibility in evolving the ABCM system as

needed to incorporate new hazards, industries, or other changing conditions.

To develop effective BCM or ABCM plans however requires reliable DRI. Governments are

increasingly developing GIS portals and using modern information services for the purpose

of planning and disaster risk management. Examples include geo-portals for disaster risk

reduction and response (Geo-DRM portals) in China, the Cook Islands, Mongolia, Nepal, and

Thailand, among many others, which provide timely information to decision makers during

critical periods of a disaster. Incorporating the right information, these portals can also be

used for urban and land use planning, by assessing how infrastructure, people and areas

may be exposed to a hazard. ESCAP also provides a regional platform for countries to



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share their satellite images to be used by at-risk, low capacity countries. The initiative has

now been expanded to drought monitoring and early warning in six pilot countries. At the

onset of disaster, ESCAP facilitates the affected countries to have easier access to high-

resolution satellite images through invoking the International Charter on Space and Major

Disasters and in collaboration with other specialized agencies in this regard. Business can

benefit from this information, building a stronger economy through collaboration with the

public sector.

There is considerable opportunity for the private sector to contribute information as well.

Some research on aggregated mobile phone GPS data reveals a valuable information map

on the movement and location of people. In one study, this information was coupled with

satellite data of electricity use for lighting, which is used as a proxy for economic

development and helps account for people who do not use a smartphone (Doll et al., 2006).

This information can be invaluable for planning for disaster risk reduction. However, for

more developed countries, privacy laws prohibit its use. Options could be explored that

allow governments to utilize this information in an aggregate form for the benefit of the

population without jeopardizing the privacy of individual citizens.

Although it is possible to visualize and analyze data in many scales, in practice the scale of

input decides the scale of analysis. A foreseeable problem with DRI is that the data sets will

become too large or complex in the future, making them difficult to process using

traditional data processing and storage applications. Challenges include analysis, capture,

curation, search, sharing, storage, transfer, visualization, and information privacy. New

techniques such as big data and crowd sourcing provide opportunities and are being rapidly

developed.

Geoscience Australia for example is currently working on developing a tool to streamline

and simplify the massive amount of data available for planning, risk reduction and other

purposes. Satellite data can be used to assess anything from drought affected areas, water

resources, pollution to soil quality. Coupled with social, economic and physical data such as

infrastructure, land zoning, population, and physical hazards, this can be a powerful tool for

long term planning. The Data Cube paradigm being developed combines and complements

data from a variety of sources for easier access and use by government, industry and

academia. In effect, Landsat data 'tiles' are stacked on top of each other in time sequences

covering the same area of ground. These multiple layers then form a 'cube' of Earth



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Observation data (NCI, 2013). The Data Cube makes this comprehensive information

available as interactive information infrastructure, which in turn allows downstream users,

such as industry, to leverage it to create economic activity and employment or assess risk to

their business operations. This is a further example of how government information can

benefit the private sector; however the private sector should also be active in assisting

governments, particularly for disaster response.

Since the January 2010 earthquake in Port-au-Prince, Haiti, the power of privately owned

technology for disaster risk management has been widely recognized. It is now possible to

leverage technology to generate a real-time traffic map and make it available to the public

(including via internet search engines) using data gathered from moving vehicles. Similarly,

observation data from flood sensors can be distributed to car navigation systems and

smartphones; and GPS data from mobile phones can be used to reproduce and analyze the

flow and location of people at the time of the disaster (World Bank, 2013). Another good

example of benefiting from DRI through optimally utilizing technology was when satellite

operator Thaicom provided the IPSTAR network via the Thaicom 4 satellite to help

Advanced Info Service (AIS) establish an emergency mobile phone network in the South of

Thailand after the severe flooding in 2010 hit all mobile phone networks in the local area

(IPSTAR, 2010).

The use of DRI should be in line with the provisions of the International Charter on Space

and Major Disasters. The Charter aims to establish a unified system of space data

acquisition and data delivery to countries affected by disasters. Likewise, DRI should also

compliment the spirit, purport and objectives of the Tampere Convention - especially in

cases where the provision and availability of communications equipment across international

boundaries is needed.

4.3.7 Supporting SMEs: Awareness raising and capacity building.



165

As we have seen in chapter 3, SMEs are an

integral feature of the economy of the Asia-

Pacific region, playing a key role in terms of

community livelihoods, supply chains and

economic growth. SMEs comprise over 90% of

private enterprises and employ over 50% of

the region’s workforce (APEC 2014). However,

SMEs are often found to be sorely

underprepared when disasters strike. Globally,

25% of SMEs never reopen after a major

disaster (WEF 2014). In Thailand, 240,000 small

businesses in 32 provinces were affected by

the 2011 floods (APEC 2012), whilst, out of 337

SMEs which ceased operations following the

Great East Japan Earthquake in the same year,

90% went bankrupt within six months (ADRC

2013).

A 2012 survey revealed that only 13% of SMEs

have a Business Continuity Plan (BCP) in place

and over half of the organisations sampled

were unaware of the concept of BCPs (ADRC

2012), illustrating the lack of preparedness and

capacity which SMEs currently possess to cope

with disruptive disaster events. It is clear that

there is a need to raise awareness of the risks

facing businesses and organisations across the Asia-Pacific region, as well as proactively

strengthening Disaster Risk Management capacity amongst SMEs in particular. Governments

can play an important role in providing support to improve the capacity of SMEs in view of

disaster risk. They can proactively seek to formulate DRM orientated policies at national

level, develop and implement regulatory legislation to ensure that businesses adopt DRM

measures and encourage the establishment of PPPs to promote and facilitate DRM activities.

Box 4.11 Strengthening Resilience in

South Korea via DRM legislation and

BCP initiatives

In 2007, the government of the

Republic of Korea took key steps

towards improving the country’s private

sector DRM provisions via the

‘Assistance to the Autonomous

Activities for Disaster Mitigation’ Act.

This legislation, administered by the

National Emergency Management

Agency (NEMA) established a set of

comprehensive disaster management

standards for South Korea.

Under the Act, organizations that

adhere to the standards laid out in the

legislation and achieve subsequent

certification could benefit from

discounted insurance premiums, tax

reductions and financial support for the

implementation of DRM programs. The

Act helped facilitate the establishment

of the Association of Business

Continuity and Disaster Mitigation for

knowledge exchange amongst

enterprises. Since 2013, NEMA has built

on this progress by encouraging

businesses to gain disaster mitigation

certification under which they can

benefit from BCP advice provided by

authorised training agencies.

Source: Adapted from APEC 2014



166

Furthermore, national governments can support local government and communities in

resilience building efforts by initiating capacity building measures via practical assistance;

for instance, training SMEs in undertaking risk assessments, design and implementation of

BCM/BCPs, etc. Governments can take the lead in conducting public awareness campaigns

as well as facilitating access to relevant data and information regarding disaster risk.

Governments can also provide incentives to encourage businesses to adopt relevant DRM

measures both in the form of financial assistance and tax exemptions for companies who

can demonstrate that they have put in place adequate DRM measures. The public sector can

work with insurance companies to help provide lower insurance premiums for disaster-ready

companies.

Despite the important role which governments

can play in improving the resilience of

businesses, it is important to recognise that,

particularly in developing countries,

government officials often lack the necessary

capacity in order to provide comprehensive

support to SMEs in view of DRM measures.

Whilst the importance of organisational DRM

and business continuity approaches are

increasingly being recognised by government

officials in developing economies, a lack of

clear policies, inadequate resources and

limited expertise continue to hinder the

implementation of private-sector orientated

disaster resilience strategies. In such cases,

support offered by international partners can

prove crucial in helping national governments

improve the resilience of SMEs by providing

guidance at national and regional levels, in the

form of technical and non-technical assistance.

A variety of international partners have

demonstrated commitment to strengthening

Box 4.12 Government support for

SMEs via web-based business

resilience resources in New Zealand

Following a major earthquake which

struck Christchurch in 2011, the New

Zealand Government responded to calls

to strengthen DRM provisions for SMEs

which were particularly badly affected

by this disaster. Auckland City Council

formed a focus group comprising SME

representatives, leaders from larger

private sector organisations and council

members who identified the need to

promote active BCP implementation

amongst SMEs.

A business resilience website

(www.resilientbusinesses.co.nz) was

selected as the primary medium by

which to engage with SMEs. The

initiative was championed by large

private sector organisations and

promoted via chambers of commerce

and national business associations. The

website, an adaptable and cost-

effective resource, provided

organisations with open access to user-



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private sector disaster resilience. In the Asia Pacific region, governments have benefited

from the support of INGOs including ADPC, inputs from forums such as APEC and

assistance provided by development actors (e.g. UNISDR, UNESCAP, USAID and OCHA). At

the national level, international partners work alongside relevant governmental and public

sector institutions and agencies to help improve the ability of countries to implement

effective DRM measures for the private sector. By engaging with national bodies responsible

for business and SME development, chambers of commerce and industry as well as

departments and ministries responsible for DRM, international partners can play a crucial

role in identifying the specific needs of SMEs for strengthening resilience, developing tools

and guidelines, and conducting capacity building training and guidance.

International partners can provide technical support to government agencies by contributing

to policy, legislation, and incentive formulation as well as conducting risk assessments and

cost-benefit analyses. They can also contribute to development and training on BCPs and

awareness of DRM via seminars and workshops. Initiatives such as the ‘training of trainers’,

whereby government officials are mentored by experts from external agencies, can help

develop domestic capacity thus enabling governments to independently strengthen

resilience at the local or community level.

Importantly, international partners can help facilitate knowledge sharing at global and

regional levels, helping to share examples of best practice and experiences of private sector

Box 4.13 ADPC ‘Trainings of Trainers’ on business continuity planning (BCP) for

SMEs in Thailand

The 2011 floods which hit central Thailand underlined the need to strengthen

disaster resilience across the country’s private sector, in particular that of SMEs which

were severely disrupted by the disaster. ADPC, working alongside two Thai

Government Agencies, the Office of SME Promotion and Department of Disaster

Prevention and Mitigation (DDPM), enlisted the support of international

organizations in helping to prepare a training program to develop and promote

business continuity planning (BCP) for Thai SMEs.

Using training material developed in collaboration with APEC, ADPC conducted two

‘trainings of trainers’ sessions in spring 2014. Representatives from government

agencies and public and private bodies which promote BCP through their activities

took part in the training which was designed to provide participants with business

continuity tools and knowledge which they could in turn disseminate to relevant

SMEs across Thailand.



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and SME-focused DRM initiatives. Intergovernmental forums focused on disaster resiliency

such as the World Conference on DRR and - in Asia-Pacific - the Asian Ministerial

Conferences on DRR, represent important platforms whereby international partners can

provide support to government bodies and public sector organisations. Furthermore,

eminent business platforms such as the APEC Small and Medium Enterprises Ministerial

Meetings and UNESCAP’s Asia-Pacific Business Forum can help to strengthen the resilience

of SMEs and the private sector by allowing key DRM stakeholders to engage at a regional

level, thus supporting governments to enact change at the national level.

4.4 Policymaking challenges in DRM and windows of opportunity

Disasters, by their very nature, are destructive events that can cause loss of life, damage to

infrastructure and disruption to business operations. Such events, however, can also be a

catalyst for constructive change by opening ‘windows of opportunity’ during which levels of

resilience can be strengthened through the introduction of new DRM policies, strategies and

measures. Intergovernmental global and regional forums, such as the WCDRR, the Regional

Commission or the AMCDRR, also represent important ‘policy windows’. Such gatherings

facilitate the strengthening of resilience by helping to specify the roles that the private and

public sectors, along with academia and non-profits, can play in terms of DRM, thus paving

the way for relevant policy changes at the national level. The following section elaborates

several challenges that can benefit from catalytic changes through ‘windows of opportunity’

for policy development.

4.4.1 Political economy issues of disaster risk reduction

From the public sector perspective, there are a number of policymaking challenges in view

of disasters. This becomes particularly relevant during times of ‘normalcy’ when DRM and

resilience building measures are not necessarily a priority for society. In such context,

policymakers typically struggle to gather support for structural and non-structural disaster

risk mitigation measures when preparing for such events is not at the forefront of public

thinking. In addition to this, national and local governments can also be hindered by

bureaucratic inefficiencies or decision-making constraints arising from governmental cycles

and the length of office for elected officials.



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Figure 4.4 illustrates the multitude of stakeholders, interest groups, beneficiaries and

economic agents which together form the complex wider political economy environment in

which policy makers operate. Evidently, a wide range of interests dictate and influence the

decision making and actions of those charged with DRM planning in the public sector.

Figure 4.4 Political Economy model of Disaster Risk Reduction

Source: adapted from Weck-Hannemann (2000)

A local or municipal government agency may “rationally neglect” investments towards what

are considered to be low probability events (Sobel and Leeson 2006, p60). It is

understandably difficult for government officials to appreciate the value of an investment

that may only potentially pay off in decades. Naheed Nenshi, Mayor of Calgary discussed

this idea at the World Economic Forum (WEF) Annual Meeting in 2014, following the floods

that had affected his city a year earlier. In pointing to the dilemma of investing in large

scale DRM measures, he highlighted the disconnect between short political cycles and long

term investment for disasters which are likely to occur outside an incumbent leader’s tenure

in government (WEF 2014). In such instances, vote and budget maximization can be seen to

take precedence over public interests (Daniels and Trebilcock 2006; Sobel and Leeson 2006).

Political administrations at national, regional or local levels may choose investing in projects

that provide more immediate benefits to taxpayers. As such, there is typically a time bias in



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decision-making “toward current over future benefits” which typically results in limited DRM

investment by the public sector (Sobel and Leeson 2006 p. 68).

4.4.2 Structural vs. non-structural mitigation measures

In cases where the public sector does in fact choose to implement disaster prevention and

mitigation measures, political considerations can also influence the type of interventions that

are selected. As part of the World Development Report, Kelman (2014 p. 4) contends that

structural measures take precedence over non-structural measures as “political capital is

rarely gained from implementing DRM, except in cases where it is visible and tangible”.

Hence, those in power may opt for large-scale, tangible structural measures such as flood

walls, levees, retro-fitting of buildings, avalanche barriers, and other mitigation structures

which clearly indicate that financial expenditure has been directed towards public wellbeing

and protection.

Conversely, the OECD (2013 p. 11) states, “continuously adapting structural measures to

withstand ever greater disruptive events may neither be economically feasible nor socially

viable”. Often, non-structural measures can provide an effective, less costly and more

sustainable alternative to structural measures. As such, policy makers should take into

consideration, “complementary non-structural measures” alongside structural measures.

4.4.3 Windows of opportunity and the private sector

The private sector has a key role to play in addressing areas of DRM where the public

sector lacks funding, resources and innovation to provide solutions. A key barrier to

overcome is that instead of introducing new comprehensive and transformational measures,

policy makers - regardless of sector - will make only small-scale changes to existing policies.

Current modes of operating are “intellectually feasible” meaning that the “status quo

dominates all forms of organizational decision making” (Dunleavy and O’Leary, 1992 p. 55).

Therefore, comprehensive changes are more likely to require consensus on the need for

new strategies. In the case of DRM, this would involve not only policy makers, but also

other stakeholders and beneficiaries, supporting the implementation of new disaster

interventions (Twigg 2007). The role of the private sector, which is typically associated with

more progressive perspectives on risk, is particularly crucial.



171

Theorists have suggested that ‘policy windows’ or ‘windows of opportunity’ for enacting

change typically arise following disaster events, since disasters bring into sharp focus the

need for change, emphasizing failings and limitations of existing systems. Birkmann (2008)

contend that strengthening resilience can be associated with windows of opportunities for

change which open after a disturbance. Likewise, Manyena (2013, p.1) points to the

“constructive nature of disasters as creating potential windows of opportunities to address

the overlooked and neglected aspects of disaster risk reduction”.

Box 4.14 Disaster as a window of opportunity: the case of post-tsunami Sri Lanka

Following the devastation brought by the Indian Ocean Tsunami of 2004, The

Government of Sri Lanka took advantage of public and political recognition of the need

to overhaul and adapt disaster management provisions in the country. Legislative

changes and a restructuring of the agencies and institutions responsible for DRM

activities were key actions which formed part of the longer term Sri Lankan response to

the Tsunami. Six months on, in May 2005, the Disaster Management Act (No.13) was

enacted, providing the legal basis for a DRM system in Sri Lanka.

This Act established the National Council for Disaster Management to provide high-level

input into DRM planning and also saw the establishment of a Disaster Management

Centre with offices in each of the country’s 25 districts. Furthermore, the country’s first

comprehensive national disaster management plan ("Toward a Safer Sri Lanka, Road Map

for Disaster Risk Management") was published in December 2005, marking a shift

towards comprehensive planning in Sri Lanka which came about as a direct result of the

Tsunami which had struck the country a year earlier.

To date, commentaries discussing ‘windows of opportunity’ have largely told the experience

of the public sector. However, Sandra Wu, Chairperson and CEO of Kokusai Kogyo and Chair

of UNISDR PSAG, described how the 2011 Great East Japan Earthquake and Tsunami led to

an important intersectoral mentality change in the country’s DRM planning. In her view,

both the public and private sectors shifted towards a view that “saving lives is more

important than protecting the status quo” (WEF 2014). Policy makers were also awakened to



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the value of combining hard and soft mitigation measures as opposed to simply relying on

hard, structural approaches. With this experience in mind, an important part of responding

to disasters can be to capitalize on opportunities to enact changes to DRM policies, thereby

strengthening resilience and helping to more effectively safeguard lives, infrastructure and

economic activity in the event of future disturbances.

As discussed, policymakers can utilize windows of opportunity that arise following disasters

as a tool to facilitate meaningful change. For instance, this may come about in the form of

legislative changes and/or budget appropriations. Legislative changes can encompass the

creation of new laws as well as the improvement and more effective enforcement of existing

laws. An example of legislative change relevant to the private sector may be the

introduction or modification of mandatory safety measures or industry standards in the

wake of a disaster that may not otherwise have been possible due to pressure from lobbies

or interest groups in times of normalcy. After disruptive events, such groups are invariably

more receptive to new approaches and practices, particularly changes for the ’greater good’,

rather than merely focusing on policies that bring about personal or organizational gain.

Similarly, using heightened awareness of disaster risk to leverage political and public

support can be an important factor in attracting the necessary funding and appropriate

budgets to enact such changes.

The Global Financial Crisis of 2007-2008, can be regarded as a technological or human

made disaster directly relevant to the private sector - which prompted a shift in approach

from policy makers. Tightening of banking codes and financial regulations, changes to the

way in which rating agencies operate and introduction of laws making companies more

accountable for their actions, were all changes which came about as a result of the crisis,

with governments acting in response to a public and political consensus that there was a

need for reform across the financial sector. The ‘Dodd-Frank Wall Street Reform and

Consumer Protection Act’ in the USA is an example of legislation enacted following this

disaster which affected the private sector.

It is important to recognize that the adaptations and modifications that come about as a

direct result of disasters are inherently reactive responses to destructive events despite the

positive improvements which may ultimately ensue. As such, prominent intergovernmental

forums (which also represent such windows for change) should be utilized as more proactive

means by which new approaches and strategies for strengthening resilience can be



173

introduced. In this way, windows of opportunity can be utilized as a means by which the

public sector can overcome the policymaking challenges associated with introducing change

towards strengthening DRM approaches across society, including the private sector.



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Along the line of “DRM is everybody’s business” and considering the scale and complexity

of the work, collaboration among stakeholders is inevitable. A review of the scope and

modality of the many different forms of collaboration is deemed instructive to shape the

onward direction of cross-sector partnership toward disaster risk-sensitive investment.

Engaging businesses in DRM processes could encompass actors, institutions and

organizations from a myriad of sectors and backgrounds across national, regional and

global scales. Many collaborative approaches can be considered to foster holistic, wide-

reaching multi-sector partnerships.

5.1 Public-Private Partnerships

Public-private partnerships (PPPs), in a broad sense, are medium to long-term arrangements

between the public and private sectors, where the tasks or responsibilities traditionally

undertaken by the public sector are provided or shared by the private sector. The European

Commission defines a PPP as “the transfer to the private sector of investment projects that

traditionally have been executed or financed by the public sector” (2003), while the Asian

Development Bank defines PPP more generally as “a range of possible relationships among

public and private entities in the context of infrastructure and other services”.

PPPs have been used to run and finance a wide array of projects including energy and

water infrastructure, hospitals and medical services, education, airports, and seaport

container services. While the emphasis has often been on infrastructure, PPPs are now being

used across a broad range of public services. Another interesting aspect of PPPs is that they

are increasingly being used across the globe, as countries seek to reduce public spending,

aiming for public services to be provided at alower cost and with greater efficiency.

An example of a PPP is the building of a toll road, where both the public and private sector

share risks, e.g. land acquisition is the responsibility of the government while the private

sector builds, operates, and maintains the toll road for a set period of time. The public

sector is thus able to use the private sector to build a road, which under ‘normal’



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circumstances is the public sectors’ overall responsibility. In return, the private sector is able

to create revenue through the collection of toll fees.

PPPs are seen as beneficial arrangements as they mobilize the technical and financial

resources as well as the commercial, managerial, and operational expertise of the private

sector to deliver an array of public services. PPPs, in their different types of arrangements,

have several benefits and challenges, some of which are listed in tables 5.1 and 5.2 below:



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Table 5.1 Benefits of PPP agreements

Benefits (for the society)

Increased efficiency in the delivery of

public services and infrastructure

Increased technical know-how

Lower or no public sector expenditure

Improved quality of public services

Reduced whole life costs

Generating commercial value from public

sector assets

Developing local private sector

capabilities

Table 5.2 Challenges of PPP agreements

Challenges

Assessing risk transfer

Limited incentive for continued

investment (especially towards the end of

contracts)

Limited competition for the private sector

(especially with big infrastructure projects)

Setting tariff payments (i.e. providing fair

pricing for the private sector and public in

general)

Creating a clear legal and regulatory

framework

Coordination may prove difficult

There is currently a lack of consensus on what constitutes a genuine PPP. Some

organizations like the World Bank categorize service contracts as public procurement

projects, while the Asian Development Bank categorizes service contracts as PPP

agreements. There are other variations of PPP including those that retain government

ownership and those that involve shared ownership by both the private and the public

sector.

The different types of PPP agreements, differentiated by the degree of participation of the

private sector, are illustrated in figure 5.1. At the lower end, there are services, management,

and lease contracts where the private sector is responsible for the operation and

maintenance while the public sector retains the ownership.

Figure 5.1. Types of PPP organized by degree of involvement of the private sector.

Source: Authors’ adaptation from ADB’s PPP handbook.

Concessions, Build-Operate-Transfer (BOT), and joint ventures involve private ownership to a

certain extent, and are usually focused on infrastructure. For concessions, the private sector

is responsible for the construction, operation, management and maintenance while the

public sector maintains overall ownership and sets standards. In a concession, the private

sector collects a tariff from the system users, although this tariff rate is usually established

beforehand. BOT and other similar schemes, such as Build-own-operate-transfer (BOOT) and

Build-rent-own-transfer (BROT), are a “kind of specialized concession” (ADB) where the

private company provides the investment for the new infrastructure, but crucially, also owns

Service

Contracts

(Public

ownership;

with private

sector

responsible for

providing

services)

Management

Contracts

(Public

ownership; with

private sector

responsible for

managing a

major component

or entire

operation)

Lease

Contracts

(Public

ownership; with

private sector

responsible for

management,

operations and

certain

renewals)

Concession

s

(Public/private

ownership;

with private

sector

responsible for

operations and

financing,

including

specific

investments)

Build-Operate-

Transfer

(Public/private

ownership; with

private sector

responsible for

investment and

operation of new

infrastructure or a

major component)

Joint-

venture

(Public/private

ownership; with

public and

private sector

both involved as

owner and

operator)

Privatization

(Private

ownership)

Private sector participation Low High

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and operates it for the length of the contract. Joint-ventures present an extension of this by

sharing the risk and investment between the private sector and the public sector. It is an

alternative to full privatization, wherein the infrastructure is owned and operated by both

the private company and the government.

Public-Private Partnerships for Disaster Risk Reduction

As mentioned earlier, effective DRM requires collaboration among various stakeholders

through public-private partnership (PPP). Although the term public-private partnership has

been mainly used for development projects of public infrastructure and services, as seen in

the previous section, it can also be used to describe a wide variety of mutually beneficial

engagements between the public and private sectors working together in socioeconomic

development (UNDP 2009; WIPO, undated; World Bank 2011).

Partnerships between firms and governments are re-shaping disaster management

strategies, operations, and tactics. The effects

can combine to strengthen community

resilience in the face of disasters in multiple

ways. Strategically, when firms and

government partner, this arrangement can re-

shape the focus of government agencies

involved in disaster management.

Public-private partnerships reduce the burdens

placed upon governments to provide certain

goods and services over time, permitting the

public sector to focus on other important

strategic priorities. Operationally, cross-sector

partnerships enable government agencies to

move internal resources rapidly, making the

system more responsive to changing

community needs. Tactically, public-private

partnerships play a substantial role in responding to and recovering from disasters.

Box 5.1 PPP between Daikin

Industries and Soka Municipality

Daikin Industries, Ltd. cooperated

with 5 community associations and

Soka City Municipality to establish a

cooperation agreement. The

agreement aims to enhance the

delivery of emergency aid for the

community, support the emergency

management activities of the local

government, and speed-up the

recovery of company services. The

agreement helps to take measures

against wide disaster, providing

space, energies, water supplies and

other facilities. The concrete support

of company is limited to its usual

service contents and facilities.

Source: UNISDR and ADRC 2007

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These partnerships can help to deliver needed goods and services to affected communities

with greater efficiency. In aggregate, these strategic, operational, and tactical changes help

communities to bounce back faster from disasters.49

Figure 5.2. Examples of DRM actions in the different phases of the cycle organized

according to the level of private-public sector involvement.

Figure 5.2 illustrates some examples of typical DRM actions organized by the different

phases within the DRM cycle. The actions in each phase of the cycle have been classified

according to the relative degree of involvement of the public and private sectors, following

the green arrow on the left side of the diagram. The actions fall into three areas separated

by the discontinuous lines: one for government-only actions, one for PPP actions, and one

for businesses-only actions. The actions pictured are just a small sample, since the objective

of the diagram is to illustrate the framework and not to provide a comprehensive list.

49 A good example is the experience of Maiya Corporation in Japan in the aftermath of the Great East

Japan Earthquake and subsequent Tsunami (2011). More information can be found in box 3.1, chapter

3.

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Benefits of PPP in DRM

A successful PPP requires the appropriate allocation of resources, risk sharing and rewards

between the public sector and the private sector. Such a PPP, which attains more service

provisions, effective management and efficient delivery of services than the public sector

would be able to attain alone, can serve as a vehicle for the injection of private-sector co-

financing while allocating financial risks among participating players. The central advantage

of this scheme is to utilize the management expertise, advanced technologies, physical

assets and financial resources of the private sector under the enabling PPP environment,

which must be fostered by the public sector. A PPP may be able to operate more flexibly

and effectively than a government department or agency does.

However, the most critical success factor for PPPs is to provide appropriate incentives to the

private sector, particularly through financial rewards, such as revenue flows, tax breaks,

public subsidies or discounted loans, as well as other business benefits, such as brand

reputation or employee satisfaction. A successful PPP must balance the private sector’s need

to make market-based returns with the public sector’s need to improve the DRM process at

a reasonable cost (CDIA 2011).

The United States Federal Emergency Management Agency (FEMA) has identified the

following eight general benefits of public-private partnerships for disaster resilience:

1. Enhance situational awareness. Two way information flow can provide mutual benefits:

the public sector can expand its base of information beyond standard government sources

whilst the private sector can benefit from timely, reliable information from the government

upon which business decisions can be made.

2. Improve decision-making. Information sharing between sectors can provide policy and

decision makers with the most up-to-date, relevant and accurate data upon which to make

judgments and informed choices.

3. Access more resources. Public and private collaboration can help pool physical resources

as well as intellectual capital in the form of strategic and business knowledge which can be

harnessed towards making communities more disaster resilient.

4. Expand reach and access for communication efforts. Cross-sectorial efforts at

communicating messages and information help reach a larger, more diverse audience.

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5. Better coordination with other efforts by segments of the private sector. Close

collaboration and coordination through ongoing partnership efforts will support effective

planning, preparedness, and response by all participating members of public-private

partnerships.

6. Increase the effectiveness of emergency management efforts. Public-private

partnerships can increase transparency and trust between parties. People may be more likely

to take appropriate action when they learn of it through their employer. Meanwhile,

governments can benefit from a better understanding of the capabilities, limitations, and

requirements of the private sector.

7. Maintain strong relationships, built on mutual understanding. Long-established

partnerships between stakeholders involved in a response can help facilitate more effective

response and recovery if/when an emergency scenario arises.

8. Create more resilient communities and increase jurisdictional capacity to prevent,

protect against, respond to, and recover from major incidents. Collaboration,

coordination and communication between government and private sector partners

throughout the year can help strengthen relationships in the long term and ultimately help

to strengthen community resilience levels.

Challenges of PPP in DRM

Public-private partnerships present different challenges that need to be overcome in order

to make such initiatives effective tools for DRM. Busch and Givens (2013) point out the

following three obstacles to functional PPP agreements.

Unclear expectations

The parties should define very clearly what they want or expect to achieve through the

partnership in order to avoid uncertainty and misunderstandings that could damage the

agreement during its implementation. A ’free rider’ problem can appear when one of the

parties inputs less effort than the other to achieve the goals of the partnership, or is seen to

be taking advantage of the other’s effort. In the long run, the effectiveness of the

partnership can be undermined and it is likely that one or both parties may opt to

terminate the agreement. Also, related to this problem, a ‘prisoner’s dilemma’ could arise,

182

when there is no certainty as to whether the other party will fulfill its commitments, making

it safer to “defect” before the other party does it. There is hence an incentive to both

government and business to leave their relationship in an ambiguous state when there is no

trust between the parties.

Unclear roles, authority and accountability

Another problem arising when the public and private sector work together in DRM is the

definition of the roles (oversight, lead, management, implementation) that each party will

play. When roles are not specified and clearly defined, coordination problems appear, giving

way to possible breaches of the agreement, or in the case of the emergency management /

response phase, even potential loss of human lives. The issue of employee loyalty in public-

private partnerships should also to be taken into account. As Busch and Givens (2013) pose:

“how do private sector employees remain good stewards of public funds, and at the same

time continue to report to private sector supervisors?” (p. 15). To this end, government and

businesses should directly address concerns about accountability by ensuring that contracts

contain clear terms and deliverables, as well as built-in roles and responsibilities of each

party.

Potential “hollowing out” effect due to increasing privatization

The third challenge of PPP agreements is the so-called “hollowing out” effect. This means

that government capacities become poorer as more of its functions are outsourced to the

private sector. In the case of DRM, public disaster management agencies may lose capacity

as they engage in greater numbers of PPPs with the private sector. Although prima facie

this might seem negative, it can be argued that the public disaster management agencies

can concentrate in management and coordination tasks, enhancing their efficiency as a

result of the division of duties and increased specialization.

Emergency agreements in Japan: a successful model of PPP

Emergency Agreements50 (EAs) are a strategy for enabling community and local-level

resilience through public-private partnerships (PPP), which has proven effective in Japan. EAs

work in a similar manner to Business Continuity Plans (BCP); both these methods try to

50 Saigai kyotei in Japanese.

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reduce the impact of a disaster by preparing countermeasures in advance. At its core is a

(usually) bilateral written agreement for the private sector party (company or industry

association) to provide specific goods or services to the public sector party (usually local

governments). The EA can be activated on request or upon specified trigger events (e.g. an

earthquake of certain magnitude). A March 2012 survey of 66 prefectures and cities in

Japan found a total of 7,378 EAs in use by these local governments.51 Of these, 6,415 were

signed between local governments and the private sector.52

The large numbers of EAs per city/prefecture indicate that local governments across Japan

are matching and meeting specific needs - identified through disaster risk management

planning - with the specific strengths that can be found among local businesses in their

community. The advantages of utilizing the private sector’s reservoir of specialist skills and

tools have been recognized in the 2013 Global Assessment Report (UNISDR 2013b) and in

UNISDR (2013f and 2013h). To give one example, by having private sector experts on call,

local governments can assure their ‘success in the last mile,’ i.e. effectiveness in meeting

individual needs in their community. According to the aforementioned March 2012 survey,

most (6,546) of the existing EAs were created sometime after the 1995 Great Hanshin-Awaji

Earthquake; as such, their longevity also demonstrates the effectiveness as well as the

sustainability of the approach.

EAs serve as a highly visible promise from the private sector company to the community via

the local government; a promise to be on hand to offer aid, which businesses will do their

utmost to fulfill by improving their own resilience. In UNISDR (2013h), businesses ranging

from general contractors, supermarkets, to wholesale manufacturers at least partially credit

EAs as motivation to make improvements to their own business continuity and

preparedness.

The same publication also describes how the possibility of providing water to surrounding

communities (and the prospect of signing an EA with local government to publicly

announce this initiative) has swayed hospitals, universities, and factories into investing in

resilient infrastructure (in particular water supply systems).

51 http://www.jiji.com/jc/graphics?p=ve_soc_jishin-higashinihon20120308j-03-w360, accessed 8

November 2013.

52 The other 912 were with other local governments (most commonly mutual aid pacts with entities in

different geographical areas), and 42 with both private and public partners.

http://www.jiji.com/jc/graphics?p=ve_soc_jishin-higashinihon20120308j-03-w360

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The discussion on ‘incentivizing DRM in the private sector’ will likely include

recommendations of strong regulatory input, disincentives and other forms of

discouragement to ‘rein in’ bad private sector investment, i.e. risk-blind investment. It will

also likely include mechanisms that can positively and systematically encourage private

sector investment, e.g. rating systems, insurance, and subsidies.

The above are important factors but ultimately concern external forces from the standpoint

of a single business or company. In contrast, the discussion of EAs will speak to the private

sector at the grassroots level, because such agreements are actionable for individual

company level. It is also a model of engagement that speaks to local governments, because

it shows how the public sector can harness the private sector – be it businesses or industry

associations, SMEs or global companies – as actors in local level action thus improving the

overall resilience of the community.

EAs have demonstrated their effectiveness in Japan. The challenge will be to find a way to

apply this good practice in other countries. It should be noted that goods and services

provided by the private sector through the EAs are not necessarily donations. The

provision of fair remuneration on a timely basis by the public sector after crises is as

essential as the execution of promised actions by the private sector in ensuring the

continued growth of the trust-based relationship.

Local governments could be instructed to explore EAs with their local business community,

with a few suggested starter areas, for example: EAs with shopping malls, conference

venues, and major transportation terminals to serve as emergency accommodation and

depots for emergency supplies; EAs with construction companies for lease of manpower,

transport, and equipment, etc. It is also effective to suggest to national governments and

nonprofits to consider how to ultimately fund such EAs. For example, EAs to distribute

food, drinks, and daily items will not only help victims but also increase the delivery speed

of aid from the humanitarian organizations’ point of view (this is an unexplored area in

Japan where local government EAs are backed by national and local emergency funds).

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5.2 Business and non-profit organizations53

Businesses often find themselves more likely to achieve better performance when entering

into partnership with non-profit organizations that share a similar agenda (Lafferty,

Goldsmith & Hult 2004; Porter & Kramer 2006). Since today’s consumers are becoming

increasingly demanding, the simple fact of embracing a good cause makes business sense.

Partnering with nonprofits can be a powerful marketing tool to gain a competitive edge

through a positive corporate reputation. All other things being equal, many consumers

would prefer to do business with a company that stands for something beyond merely

profit-making (Andreasen & Kotler 2003).

Collaboration between the business sector and nonprofit organizations requires sound

coordination and engagement at all levels. To achieve this, contributions are needed from

both the nonprofit and business entities (preferably with reinforcement from the

government) to ensure the sustainability of nation-wide partnerships and networks, both

financially and from a human resource standpoint. These networks need to ensure that core

competencies of all members are identified and shared on a constant basis prior to any

joint action. This coordination mechanism between businesses and nonprofits ensures that

the collaboration is based on:

1. The acceptance of societal resilience as a shared aim/mission/purpose with

understanding of differences and uniqueness of both sectors;

2. The notion of disaster risk-sensitive and responsible business, incorporating not only

economic perspectives but social and environmental perspectives;

3. A common understanding of the need to address local risks from a long-term

solution-oriented perspective.

A key challenge is to establish a proactive enabling environment to allow the transformation

of these relationships, which usually end with philanthropic or transaction-type outcomes,

into interactive and integrative ones. To this end, dissemination of best practices of the

business-nonprofit collaboration needs to occur at all levels e.g. local, regional, and national

level. Best practices can be realized through the implementation of strong monitoring and

53 Nonprofit organizations include non-government organizations (NGOs), inter-governmental

organizations (IGOs) and civil society organizations (CSOs).

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evaluation practices, ensuring that results are shared, with corrective actions taken to

improve areas of weakness. Along with distributing information, the government and

business leaders can also play a strong role by providing clear guidelines and encouraging

business involvement in community-level DRM.

In collaborating with the private sector, nonprofits need to be attentive to the characteristics

and drivers of businesses. CSR managers often seek information and materials they can

utilize to justify the company’s CSR strategy and influence the executive management. For

this, the ability of the nonprofit partners to propose win-win solutions is required.

Companies often request nonprofits to “Please be explicit on what [resources] are needed

on the ground and what you need from us.” In-depth mutual understanding of resources

against delivery of objectives is indispensable to formulate strategies for effective

collaboration. Furthermore, the importance of judicious resource management increases

manifold when the collaboration focus is on Small and Medium Enterprises (SMEs).

In the context of the post 2015 HFA, promoting nonprofit-business collaboration needs

strong endorsement from both the government and business associations. Progress needs

to be reported by these networks to contribute to the future national post-2015 framework

for DRR monitoring reports. Accountability should be clarified and shared. For example,

when working on DRM in other developing nations, community members of these countries

ultimately need to be the primary beneficiaries. Governments need to be accountable in

ensuring that an appropriate enabling environment is provided, and that progress is

reported under the post-2015 framework periodic monitoring report. In terms of targets, the

focus should be on building networks that bring together the business sector and

nonprofits. Connections between different networks are also an important factor, while the

number and details of collaborative cases in each type (philanthropic, transactional,

integrative), can serve as indicators of performance.

Following are two cases of business-nonprofit collaboration drawn from the experiences

during the Great East Japan Earthquake and subsequent tsunami in 2011. An additional case

of business-nonprofit partnership between AXA Group and CARE International can be found

in Annex IV.

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Box 5.1 Japan Platform and East Japan

Earthquake and Tsunami relief

Japan Platform (JPF) constituted a platform to

provide international aid within a tripartite

cooperation system where NGOs, the business

community (Keidanren – the biggest business

association in Japan), and Government of Japan

(Ministry of Foreign Affairs) worked in close

cooperation, based on equal partnership, aiming

to maximize each respective sector’s

characteristics and resources. While normally

focusing on aid provided abroad, during the East

Japan Earthquake and Tsunami (EJET), JPF

realized that it was able to also help the relief

efforts in Japan.

With many supplies and services on offer but

with a lack of coordination between the business

sector and NGOs, JPF saw an opportunity to help

out. Many companies tried to provide material

aid to the affected areas but logistical delays

were holding up the process. JPF stepped in by

creating a list of contributable items from

companies, which was shared with NGOs in the

affected areas. This resulted in a one stop

provision list, serving as a point of contact for

both companies and NGOs, greatly increasing

efficiency and effectiveness of the aid efforts.

JPF was also able to use its presence as an

international aid organization, as companies like

Nissan and Bridgestone provided materials for

EJET that would later be sent to Africa. JPF efforts

were built on the relationships that they had

fostered before EJET, allowing them to

understand what each company was able to

provide, which led to brainstorming on possible

combination of each contribution.

By linking each contribution from companies, JPF

Box 5.2 Cloud services and East Japan

Earthquake and Tsunami relief

Data related to needs assessment during the

initial relief phase following a mega-disaster can

be overwhelming in terms of the amount of

information that needs to be gathered, assessed,

analyzed, and shared. After EJET in 2011, vast

amount of information gathered on the needs of

affected communities were difficult to assess,

analyze and share systematically. Many local

government offices were affected by the tsunami

and resulting nuclear accident, further

complicating information handling.

Into this situation stepped Fujitsu Limited, which

dispatched an IT engineer to affected areas and

was able to establish a Cloud system within 5

days. This Cloud service from Fujitsu Limited

enabled the provision of an IT platform that

allowed the vast amount of information on the

needs of the affected communities to be utilized.

This SaaS type Cloud system enabled

management of the related information within

one platform. The intervention expedited

information management during the relief phase.

The outputs from this Cloud system were widely

shared and utilized by the aid community during

EJET relief phase. This system is also used for

managing information on bird flu and foot-and-

mouth disease.

This case contributes to HFA1’s Priority for Action

5 as it enhances companies’ contribution to

humanitarian actions.

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5.3 Business and academia

Business and academia partnerships are essential to create resilient communities and

implement disaster risk management. In 1996 the Organization for Economic Co-operation

and Development (OECD) recognized that economies are based on knowledge and

information and that it drives economic growth and productivity (OECD, 1996). OECD (1996)

argues that policies based on “’knowledge-based economies’ – economies which are directly

based on the production, distribution and use of knowledge and information” should be

utilized to enhance wellbeing (p.7). Wellbeing of a community, among others, includes

protecting it from natural and technological hazards.

Business and academia partnerships are not new but they are currently underutilized

despite being referenced in the Hyogo Framework for Action 2005-2015. It is important to

note that the use of research and science to enhance disaster risk reduction are a priority

area of focus for the post-2015 Framework for Disaster Risk Reduction as well as

acknowledging the private sector as a key stakeholder in disaster risk management. The

key now is to bring them together to create a more comprehensive, evidence-based

approach to disaster risk management.

The knowledge economy creates an opportunity for businesses to partner with the research

and academic community. Academia produces the knowledge. Business uses the knowledge

and information to create value. That is not to say that businesses do not produce

knowledge or conduct research, or to say that academia does not use knowledge or add

value; however, traditionally this has been the breakdown of their respective roles. The

partnership opportunity is in the distribution of the knowledge. Knowledge distribution is

done through formal (classroom) and informal (community activities) both of which can

enhance economic performance and mitigate losses (in the hazard perspective). Similar to

the concepts behind business logistics – in the right place, at the right time, at the right

price – the key is the distribution of the knowledge in terms that are relevant to the

community, they can use and understand.

Businesses have several roles in communities. One is a capitalistic, to earn money. Another

is to support community development and sustainability. These roles morph depending on

what is happening in the community and are not exclusive of each other. Academia and

research have used businesses for financial support and as well as innovation for some time.

If a business can remain operational during a disaster event then not only the business, it’s

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employees (and their families) but also the community as a whole benefit. Academia can

work with businesses to identify weaknesses in operations and collaborate to identify

corrective options. They, as instructors, can work with business to develop and deliver

training or short courses that help to educate businesses, employees and others on various

topics related to hazards. It needs to be noted that academia and the research community

are employers, and have the potential to employ large numbers of people and are

businesses in their own right.

Potentially more important is the need to recognize and acknowledge that every partnership

will be different. There is a not a single solution for every situation. For a partnership to be

successful it has to work for all involved. Kindornay (2013) noted that a range of models

exist for successful business partnerships and that these should fit the partners involved.

They also noted that roles are changing. While the government is still the major donor, the

business sector actively funds initiatives and drives change and each have their own

motivation for getting involved (Kindornay 2013).

Partnerships can benefit both participants but are not without their challenges. One of the

key problems that such partnerships face is a difference of culture. Business moves quickly,

they make decisions quickly and need answers quickly to address problems. Academia and

research take time - they do not generally move quickly. There are also questions about

some research endeavors by businesses. By supporting research, they have a vested interest

in the results supporting their stance or business. Some companies address this by not

doing dedicated business research but supporting the overall field of research. AXA

Research Fund is one such entity and clearly states that they do not own the intellectual

property of the research results and do not fund research in their area. This is why

partnership is important as it allows existing mechanisms like ethics review boards in

academia to address some of these concerns.

Examples of Partnership

An example of this change as well as a business and science partnership is the AXA

Research Fund. This is an example of a business funding research. Their mission “is to boost

scientific progress and discoveries that contribute to better understanding, and better

prepare against, environmental, life and socio-economic risks” (AXA Research Fund 2014).

AXA has granted over €114 million to 410 research projects in 30 countries utilizing

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researchers from 49 nationalities. It focuses on life risks, socio-economic risks and

environmental risks. In the hazard sphere it includes both the physical and social impacts of

events as well the hazard phenomena itself.

Another example of a recent partnership is the SAFE STEP project. Prudential Corporation

Asia, an asset management, life insurance and consumer finance entity, partnered with

National Geographic Channel through the Prudence Foundation, the charitable arm of

Prudential Corporation Asia. National Geographic has been a scientific and educational

institution since 1888. This unique business and science partnership identified a need- lack

of basic disaster information and worked together to find a solution - SAFE STEPS (Prudence

Foundation 2014). Launched in 2014, SAFE STEPS is a public service initiative in Asia to

provide basic education messages about hazards and how to prepare for them. This

includes website, posters, infographic hand-out cards and public service announcements. In

addition to the partnership between business and science they have partnered with the

International Federation of Red Cross, free-to-air television, government, and other non-

governmental organizations. Some of their key accomplishments include over 40,000 page

views on the website (safesteps.com); over 11,000 views on YouTube; SAFE STEPS reaches

more than 24 million households every day through FOX network alone; and has launched

in 2,000 schools reaching 10,000 children in Thailand.

The key to any successful partnership is the need to recognize the strengthens that each

bring to the endeavor; acknowledge the different motivations for being involved; that

different arrangements work in different situations and lastly, it is important to develop

long-term partnerships not one-off initiatives. If the business and academia community can

bring these components together the results will be a significant strengthening of disaster

risk management.

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5.4 Multi-sector partnerships

Significant research has been conducted to investigate how businesses and nonprofit

organizations partner for solving social problems, and how public sector agencies and

private businesses collaborate in dealing with social issues. However, very limited research

has primarily examined tri-sector collaborations for solving social problems, particularly from

a perspective which considers how the approach may assist in the recovery from disasters.

In the field of disaster recovery, Kong (2013) examines this issue and concludes that

recovery may be achieved more effectively if the three sectors collaborate. While his paper

only focuses on the recovery phase of the DRM cycle, the tri-sector collaboration framework

can easily be extended to all phases of the DRM process.

Table 5.2. Benefits from tri-sector collaboration.

Business Nonprofits Government

Reputational

capital

Enhance corporate

reputation

Create customer

loyalty

Gain differentiation

Counteract negative

image

Provide a legitimate cause

Promote non-profit

brands

Generate financial

resources directly

Attract donations

Attract volunteers

Improve government /

political image

Develop community

trust

Generate political buy-

in

Responsibility

and

accountability

Create social value in

addition to economic

value

Create trust among

stakeholders

Behave in social

responsible ways

Fulfill their social mission

Increase the number and

scope of community

development projects

Protect vulnerable

citizens

Solve social and ethical

issues

Manage environmental

crises

Regulate social policies

Relevance to their

respective goals

Increase equity value

Gain competitive

advantage

Increase economic

profit

Achieve social profits

Behave in social

responsible ways

Gain financial support

Solve social problems

Help community be more

resilient

Generate more awareness

Reduced political and

economic pressure due

to social problems

Solve social and ethical

issues

Protect citizens better

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Source: Kong (2013) with authors’ additions.

As can be seen in table 5.2 above, through tri-sector collaborations, businesses gain

reputational capital, which focuses not only on profit, but also social issues that concern

community development. An improved reputation likely increases sales and revenues. In

other words, a business-nonprofit-government strategic collaboration likely assists business

firms to fulfill both business and philanthropic objectives. For nonprofits, the strategic

collaboration can potentially assist organizations to generate higher income or revenues,

which can improve the level of self-sufficiency (Guo 2006). Such self-sufficiency gives

organizations the ability to fulfill a greater number of social objectives. The government is

also likely to benefit from tri-sector collaborations in terms of reducing social expenditure,

solving social problems more effectively and efficiently, and gain reputational capital (Swartz

2013) and political buy-in.

Figure 5.3 below contains a flowchart detailing the tri-sector collaboration framework, where

the most important interrelations among the 3 sectors are represented, with the community

at the core.

Figure 5.3. Flowchart of a trisector collaboration framework.

COMMUNITY

GOVERNMENT

CIVILSOCIETYORGANIZATIONSBUSINESSES

ENVIRONMENT

LaborFinancialresources(taxes)

Publicgoodsandservices

Solvesocialproblems

Socialservices,

Protecon

Financialresources

(donaons)

Labor(voluntary)

Jobs

Incom

e(salaries)

Labor

Money(purchases)

Socialservices

Fillingcoveragegaps

Watchdog

Reputa onWatchdog

CSR(financialresources,exper se,…)

Financialresources(aid)Financialresources(taxes)

Experseandtechnology

Publicservices(infrastructure,…)

Revenue(contracts)

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Source: Authors’ construction based on Guo (2006) and Kong (2013).

In a recent study by R3ADY Asia-Pacific and Mercy Corps Indonesia (2015), a series of

recommendations for a successful multi-sector partnerships design pointed out to the need

of ensuring clarity of roles, coordination structure and communication. Roles and

responsibilities should be clear and pre-agreed upon when entering into partnership, as well

as function-based. Each function in the partnership should be in line with each actor’s

competencies and motivations. Furthermore, given that each actor has individual objectives,

in order to achieve coherence a coordination structure that accommodates these differences

on basis of equality needs to be in place. Disaster occurrences may present windows of

opportunity for these diverse actors to work together. Mapping out existing relationships,

competencies and capacity may be needed to provide clarity and transparency to each

actor, which would enhance the efficiency of the partnership by recognizing and accepting

each other’s capacities and limitations. Finally a high-level of commitment and trust is

needed to ensure that the partnership survives these initial challenges and avoids any of the

actors to bail out when facing difficulties. Evidence shows that those partnerships with high-

level institutional backing (e.g. CEOs, directors) have over all resulted in more effective

partnerships (R3ADY Asia-Pacific and Mercy Corps Indonesia 2015).

Box 5.3. Disaster early warning system in Sri Lanka

In Sri Lanka, the Disaster Management Center (DMC) has centralized DRM initiatives since

2005 in order to implement the Hyogo Framework for Action. In 2008, a public-private

partnership between DMC, the group of telephone service provider Dialog Telekom PLC and

the national University of Moratuwa launched the Disaster Early Warning Dissemination

System (DEWN). The Memorandum of Understanding (MOU) between the organizations

allows the DMC to use a private network to disseminate messages across the country, “for

the benefit of the public”, thanks to SMS, cell broadcasting technology and alarm devices.

This collaborative arrangement enhanced the early warning capacity of the DMC

substantially.

Source: Adapted from DMC (2008)

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5.5 Collaborative platforms and forums

As the contexts within which crises occur become increasingly complex against the

backdrop of economic and political globalization, rapid technological innovation and climate

change, the environment for engaging in DRM is also fast evolving. Actors struggle to find

governance approaches that respond in a meaningful manner to this rapidly changing

environment.

One of the ways to retain relevance and engage meaningfully in filling the gaps in DRM is

through ‘platforms’ – intermediaries that exist to facilitate the systematic involvement of

actors, including the private sector, in DRM (HFP 2012). The development of neutral

platforms for exchange and sharing of information has the ability to address some of the

major challenges to cross sector collaboration, in decision making, partnering capacity and

mutual understanding. There are already a number of existing platforms that promote and

support the engagement of the private sector in DRM at different geographical levels (i.e.

national, regional and global).

Experiences from the humanitarian field show that platforms are struggling to define and

measure their impact: challenges include lack of information repositories for learning; an

inconsistent record of success in forging links with governments; and the need to be more

adaptive to changing environments. The opportunity lies in new ways of private sector

engagement by having a greater focus on the use of technology, social media, risk

information, research and analysis, and strengthened collaboration with other platforms and

actors (HFP 2012).

National Level

Governments recognize that countries could benefit greatly from DRM frameworks that

contain local private sector engagement. However, the reviews on existing national

platforms for various disaster management authorities across Asia and the Pacific have yet

to find evidence of strong private sector involvement in DRM.

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Strong national platforms on disaster risk reduction will facilitate cross-sector collaboration

as well as enhance accountability. The national platforms can have a working group on

private sector partnership in collaboration with business and industry associations.

As an advance case in the region, in 2008, Singapore developed a national platform to

enable public-private collaboration in DRM. It established the National Business Continuity

Management (BCM) programme to strengthen the resilience and competitive edge of

Singapore-based businesses in terms of long-term sustainability of not only large

companies but also SMEs (National Business Continuity Management Centre 2010). For this

purpose, the Government assigned the Singapore Business Federation (SBF) to oversee this

programme and coordinate closely with other business associations. Through various

activities such as workshops and training sessions, the SBF worked towards increasing the

awareness of BCM among businesses in Singapore. Companies can access BCM materials

and receive support to secure BCM certification through the programme. These concrete

steps are intended to drive the active interaction of the public and private sectors on DRM.

Other countries could embrace Singapore’s experience and engage private businesses for

DRM through entities such as chambers of commerce. If governments are to embrace

private businesses as key players in disaster risk management, then it is necessary for them

to provide an enabling environment, such as national DRM platforms and other forums, for

private sector involvement on a national scale.

Singapore’s experience strongly suggests that business associations can contribute to the

development of effective DRM platforms. For a further example, the Government of Viet

Nam developed a national DRM action plan for the private sector through the Viet Nam

Chamber of Commerce and Industry. At the provincial level, this partnership developed and

implemented disaster preparedness activities, while it also engaged in disaster information

dissemination and public awareness, training and capacity building (ADPC 2013). Other

examples of national platforms from the region include Business for Peace Alliance in Sri

Lanka; CiYuan in China; Corporate Network for Disaster Response in the Philippines and the

Disaster Resource Network in India.

Box 5.4 The Trusted Information Sharing Network (TISN) for Critical Infrastructure

Resilience (CIR) in Australia

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The Trusted Information Sharing Network (TISN) for Critical Infrastructure Resilience (CIR)

has been established by the Australian Government to build a partnership between business

and government for CIR. Within this platform, businesses and government get to share

information on security and resilience issues relevant to the protection of critical

infrastructure in the case of a disaster. With seven sector groups, TISN allows a better

understanding of cross-sectoral issues, which is of primary importance to achieving a true

disaster resilient community, CIR being a shared responsibility across private sector and

government.

Source: Adapted from UNISDR (2011) & Commonwealth of Australia (2010)

Regional Level

Regional platforms have a role in building relationships across sectors among national

governments, linking national governments to regional entities and mechanisms, and

integrating the private sector to work as a partner with national and regional entities. Given

their focus and long-term presence in the region, regional entitites can be seen to be the

first point of call for information or to serve as an advocate on a particular issue or need.

Examples of platforms from the region include the Asia-Pacific Business Forum (APBF) that

has placed emphasis on inclusive and sustainable business; Pacific Asia Travel Association

(PATA) with its emergency preparedness scheme (see industry standards in section 2); Pacific

Humanitarian Team (PHT) based in Fiji; and Pacific Platform for Disaster Risk Management

(PPDRM) based in Fiji. A purely private sector initiative was launched in the Philippines in

2012 called the Top Leaders Forum that involves dialogues between business leaders from

the region (mainly Philippines) and UNISDR. It seeks to highlight the main issues of DRM,

discuss experiences and best practices, and ultimately enhance DRM and resilience.

Although these are interesting initiatives in the region, they are mostly localized in specific

countries, and the truly regional platforms are not currently focusing intensively in DRM (i.e.

APBF). Hence, a truly regional platform with a genuine DRM focus is needed in the Asia-

Pacific. In this regard, organizations such as ASEAN, APEC, SAARC, UNESCAP and UNISDR,

among others, building on existing regional business networks such as the previously

discussed APBF and their own regional business advisory councils (i.e. ASEAN-BAC, APEC-

ABAC, SAARC-CCI, ESCAP-EBAC and UNISDR-PSP/PSAG) should advocate for the creation of

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a strong multi-stakeholder platform for DRM. This should be done in partnership with other

DRM-active civil society and non-government organizations, like ADPC or ADRC, among

others.

Global Level

Global level platforms are established to help tap into the private sector’s expertise to

engage as a partner to help resolve specific operational and sectoral challenges. They may

also carry an advocacy role that is targeted at a specific thematic issue or focus area. In

engaging the private sector, coordination at the global level is also crucial, especially with

an ever-increasing number of cross-border value chains. It is important to take stock of

lessons learned from previous disaster situations and to learn best practices from DRM

measures implemented throughout the world.

The Disaster Risk Reduction Private Sector Partnerships (DRR-PSP) is a global partnership

between UNISDR and members of the private sector seeking to mobilize action to reduce

disaster risks. DRR-PSP hosts an interactive exchange between partners from key industries

including financial services, telecommunications, construction and support services. An

example of DRR-PSP at work occurred when an American company discussed DRM with a

Mexican partner, who then began to promote DRM in Mexico, increasing the interest and

membership application from Mexican companies to the DRR-PSP group. Members of DRR-

PSP are active in four working groups to leverage resources and increase coordination in

DRM: Making Cities Resilient Campaign Working Group, Global Assessment Report Group,

Global Platform Working Group and Regional Working Group. To enhance private sector

involvement as part of DRR-PSP, the Private Sector Advisory Group (PSAG) was formed.

Members of the PSAG include leading global private sector actors who believe in the

benefits for businesses of preventive action and seek to use their expertise, in collaboration

with UNISDR, to increase resilience across the world.

The Global Platform for Disaster Risk Reduction is the main global forum for continued and

concerted emphasis on DRM. This biennial forum for information exchange involves all DRM

actors (governments, nonprofits and civil society, international agencies and organizations,

academic and technical institutions and the private sector) coming together to take shared

responsibility in reducing risks and reinforcing resilience in at the community level. The

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Global Platform offers an opportunity to spread DRM concepts across the globe, while also

involving multiple stakeholders. Building on the work of the Global Platform, six regional

multi-stakeholder forums (in Africa, the Americas, Arab States, Asia, Europe and the Pacific)

reflect the commitment of governments to improve coordination and implementation of

DRM activities while linking to international and national efforts.

Other examples of global platforms include: Aidmatrix Foundation in the United States; Fleet

Forum in Switzerland; Global Hand in Hong Kong, China; NetHope in the United States; and

the World Economic Forum in Switzerland.

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6. Conclusions and Recommendations

Those seeking evidence of success and signs of hope can find many: disaster-related human

loses are decreasing, awareness is rising in most countries, and evidence of an increasing

will to engage in multi-stakeholder collaboration can easily be found across the region on

the numerous cases that have been reported, some of them compiled by this study.

However, many challenges lay still ahead.

The private sector is increasingly engaging in DRM but it remains a rather passive player in

the different international, regional and national DRM frameworks and platforms. There is

hence a need to show a stronger and more untied voice in order to be part of the DRM

agenda at all levels. Simultaneously, there is a need to recognize that business can also

contribute to building risk and as “risk shareholders” need to be held accountable for their

own share on risk creation, both by governments through adequately enforced legal

systems and by society.

The paradigm on business participation in DRM hence needs to be shifted, from reactive to

proactive behaviors that prevent and reduce risk; from short-term to long-term perspectives

that will increase stability and sustainability; and from one-time corporate social

responsibility actions to longer engagements that create shared value.

Governments can also support private sector engagement through a different set of

incentives that have been explored in this publication, as well as by facilitating access to risk

finance and transfer instruments and timely risk information. They should also provide

special support to SMES by putting in place awareness raising and capacity building

programs, among others, that help them to deal better with disaster risk.

Partnerships between business and governments, nonprofits and academia, as well as

collaborative arrangements that go beyond these type of bilateral engagements, offer not

only individual incentives to each participating party but also benefits for the society at

large, for they increase efficiency in the use of resources, facilitate exchange of information,

enhance risk sharing, and help to better protect and assist the community during and after

disruptive events. Efforts should be directed to overcome the arising challenges of

coordination and generating trust among partners.

200

This concluding chapter is a compilation of the main recommendations that have been

made throughout the book and aims to serve as a compass to guide the direction of the

work that still lies ahead. It takes forward the recommendations provided in the two studies

where this publication is built on (ESCAP and ADPC 2014a; ESCAP and ADPC 2014b) as well

as the results of the discussions held by a wide range of stakeholders at the 6th Asian

Ministerial Conference in DRR in Bangkok, Thailand and at the 11th Asia-Pacific Business

Forum in Colombo, Sri Lanka, complementing and expanding them with key findings from

additional research.

201

6.1 The role of the private sector: “With great power comes great

responsibility”

The important role, responsibility and accountability of the private sector in DRM needs to

be highlighted whilst raising awareness across all sectors. Businesses can contribute with

their expertise and resourcefulness to resilience-building partnerships with governments and

nonprofits.

For the reasons outlined throughout this publication, businesses should have a more active

role in DRM frameworks and discussion forums. However, this can come about only if the

sector is properly represented at the international, regional, national and local levels with a

stronger voice. In order for the private sector to step-up in public policy forums, DRM

reference groups need to be established at all levels within existing structures. At the

regional and sub-regional levels, such reference groups could be set up within the business

advisory councils of ESCAP (EBAC), APEC (ABAC and CEO summit) or ASEAN (ASEAN BAC),

among others. These should be connected to one another, in order to bring in the private

sector’s perspective and influence into the inter-governmental institutions throughout the

Asia-Pacific, and become the driver of the paradigm shift. At the national level, reference

groups could be created within chambers of commerce and business associations.

Businesses, through their investments, can determine both the level of exposure to disaster

risks that they face and that of the society at large. The private sector thus would need to

exercise this responsibility by undertaking more risk-sensitive investments that build

profitable and sustainable business models and simultaneously contribute to the

enhancement of societal resilience. By framing the private sector as one of society’s key ‘risk

shareholders’, businesses can appreciate responsibility they have - as well as the benefits

they can derive - in contributing to the resilience building agenda.

Businesses should focus on the benefits that effective and sustainable DRM provides, such

as contributing to the survivability and safeguarding of their operations and those of

suppliers and customers. In this regard, companies should take responsibility in increasing

resilience within their own supply chains by ensuring that their BCPs are aligned with

those of their suppliers and customers and disclosing risk information in a timely manner.

202

The governance of risks involving the public and private sectors would need to be improved

to foster awareness of rights and obligations by both sides with strong and transparent

accountability mechanisms and to be expressed in concrete and actionable practices.

Accountability of private sector actors is fundamental, as businesses that adopt risk-

insensitive behaviors directly hinder the competiveness of fellow businesses that are

compliant with the existing laws and regulations, endangering their survivability and thus

ultimately undermining the sustainable development of society. Governments should protect

responsible businesses by adequately and effectively enforcing existing laws and

regulations.

203

6.2 The need for a paradigm change

To bring about effective private sector engagement in resilience building, bold steps must

be taken to shift the paradigm in the business sector from reactive and responsive

interventions towards proactive, risk-sensitive business investments. The ongoing

development of the post-2015 framework for DRR and the transformative agenda of the

sustainable development field represent a valuable opportunity to guide businesses to

adopt practices focused on long-term goals rather than only short-term gains. Businesses

should be encouraged to choose interventions that strengthen resilience by providing wider

shared societal benefits as opposed to merely engaging in limited CSR initiatives.

In the case of businesses, myopic behavior and a focus on short-term profits has proven

problematic. Executives and managers charged with maximizing profits and increasing the

value of the company for shareholders are disincentivized from making long-term

investments - including resilience-building interventions. Such engrained behaviors are at

odds with effective disaster resilience building, which requires a long-term outlook as well

as willingness to make investments that potentially only pay off decades later. It is feasible

to bring about systematic change to remove ‘perverse incentives’ embedded in business

practices such as executive compensation schemes tied exclusively to the annual level of

profit the manager has brought to the firm. These can be adapted to include means of

assessing long-term sustainability as well as short-term quantitative indicators. The

responsibility falls upon governments to implement and enforce relevant laws and

regulations to oversee this change in culture.

Whilst planning for longer-term resilience may incur initial short-term costs, ultimately long

term societal gains can be derived from the adoption of forward-thinking sustainable

approaches. Disaster risk should be factored into the cost/benefit analyses that

enterprises carry out, whilst knowledge related to best practices from businesses that have

made savings via structural/non-structural investments can form part of awareness raising

of the benefits of resilience building for both businesses and wider society. The reputational

benefits, profit enhancements and competitive advantage over rival businesses which DRM

investments can derive should be underlined by governments as well as prominent industry

leaders who can take advantage of high profile businesses platforms and forums to relay

this message to private sector actors.

204

DRM can also generate new business opportunities as part of resilience building. For

instance, the private sector can partner with governments via emergency agreements in

order to perform specific tasks in the aftermath of a disaster or work with the public sector

in the provision of critical infrastructure and services.

The way in which post disaster financial aid for recovery and reconstruction efforts is

currently handled, should also be revisited. International donor, governmental and private

sector aid contributions should be delivered in a conditional manner and closely

monitored to ensure that they avoid rewarding risk-insensitive behaviors and to ensure that

funds are channeled towards the areas of greatest priority and need following disasters. A

comprehensive auditing process should be undertaken following the distribution of funds to

hold beneficiaries accountable for the aid received.

For a complete change of paradigm a shift away from CSR initiatives - underpinned by

short-term motivations and characterized by one-off philanthropic gestures such as

contributions to disaster relief aid – towards creating shared value (CVS) is necessary to

add value to the resilience-building efforts of both companies and the communities within

which they operate. CSV - using business and market based solutions to address societal

problems - can enable companies to compete effectively within their sector and maximize

profits while bringing about longer-term positive social benefits, including active risk

reduction and disaster preparedness.

6.3 Creating an enabling environment for private sector risk-sensitive

investments

Each State generally holds the primary responsibility to protect the wellbeing of its people

including from the threat of natural and man-made disasters. Since the reduction of disaster

risk is a common concern for all, governments need to develop, nurture and further

enhance the role and contributions of all stakeholders, including the private sector.

Strong political commitment and leadership at all levels are required to create the necessary

conducive and enabling environment that promotes results and deliverables. A formal and

legal framework, as well as monetary and non-monetary incentives for responsible and

resilient businesses needs to be clearly defined. Providing access to risk information,

205

encouraging risk disclosure and, as necessary, facilitating and supporting the

implementation of disaster risk management initiatives and their financing, notably via

insurance are also key components of an enabling environment for business engagement in

DRM. Furthermore, the provision of special support to enhance the resilience of SMEs would

need to be considered.

Combining these components to ensure an effective enabling environment will require clear

articulation of responsibilities across public and private stakeholders, including business and

academia, to ensure mutual outreach, partnership, complementarity in roles and

accountability and follow-up. Furthermore the different drivers of business engagement in

DRM, such as the pursuit of economic benefits, compliance to laws and regulations, and

performance of social responsibility, should be considered when establishing the enabling

environment for active involvement of private sector in DRM.

Several governments across the Asia-Pacific region have gained valuable experience in

engaging and collaborating with businesses in DRM over the years, after having suffered the

impact of numerous disasters. These individual country experiences are an invaluable pool

of knowledge that could be compiled in a best-practices resource book to provide

governments in the region with practical references on creating an enabling environment

for promoting the involvement of private sector in DRM.

Regulatory frameworks: Deconstructing business risk by increasing

accountability and risk-sensitivity of business investments

The limited coverage of regulatory frameworks and its effective implementation for the

private sector to integrate disaster risk into their investment decisions and management

practices often hinges on the lack of knowledgeable implementation of practical actions.

There are a number of components a government should take into consideration when

developing an enabling legal and regulatory environment for business engagement. These

may include: introducing building codes to ensure buildings meet certain minimum criteria

for disasters; establishing land use planning to support population density control, site

selection and government land acquisition in hazardous areas; creating safety and resilience

standards for critical infrastructure and sectors, such as BCPs and mandatory liability

insurance; and imposing corporate law and business risk information disclosure.

206

Establishing an appropriate regulatory framework is the first step. Enforcement of this

framework will also require careful consideration and follow up by the government,

especially with respect to the allocation of necessary resources, including finance, human

capacity and logistics.

Monetary incentives and Non-Monetary incentives

A good opportunity exists for governments to stimulate private sector engagement in DRM

through monetary and non-monetary incentives. Generally monetary incentives would aim

at engaging businesses by either making their DRM investments more affordable through

tax credits and deductions or by conditioning the reception of certain funds such as soft

loans, subsidies and grants to pre-investing in DRM or meeting certain minimum standards

of resilience. The range of non-monetary incentives is targeted at increasing resilience

standards. This incentives range from certifications and resilience awards, to requesting

certain industry standard certification or resilience level in order to access to, or score

higher in, public procurement processes and/or public contracts. Guidance can be sought

from other sectors where such incentives are better established such as energy, transport

and climate change.

Such incentive schemes can create an excellent opportunity for the public and private

sectors to work more closely together through public-private partnerships.

Making insurance work for both big and small businesses

Asia is the lowest disaster-insured region in the world behind Africa, as the average share of

insured over total losses in the past three decades is only 9 per cent and the regional

average of non-life insurance penetration in 2011 was 1.55 per cent of GDP. The main

challenges for insurance adoption in the region are related with lack of insurance culture

and market failures such as possible uninsurability of disaster risk, information asymmetries

and pricing problems.

Although disaster risk financing and transfer instruments pose big challenges for

governments, they remain powerful instruments to effectively incentivize the private sector

to invest in DRM. Governments should work closely with insurance and reinsurance

207

companies in order to help overcome market failures and incentivize insurance adoption.

This could be done by promoting risk-based over flat-rate premiums and multi-layered

insurance approaches where the risk is shared by the company, the insurer, reinsurer and

ultimately government as a back-stop liquidity provider. This risk sharing scheme has the

potential to lower risk premiums since the company, by bearing part of the risk, becomes

more concerned in investing in its own resilience. Linking insurance premiums with

resilience standards might also prove a good solution for lowering insurance premiums

since the risk faced by the insurer would decrease when a company has adopted sound risk

management systems or invested in resilient infrastructure.

Disaster risk financing and transfer instruments will also need to be tailored to

accommodate the special circumstances of SMEs. This could involve the public sector

working with insurance companies to help provide lower insurance premiums for disaster-

ready SMEs by bearing part of the premium or undertaking the role of insurer or reinsurer

when market failures such as uninsurability problems appear.

Risk information: Increasing availability and accessibility

Only by fully understanding the risk associated with a particular hazard is it possible to

communicate the risk and act on the risk. The creation of an effective disaster management

strategy thus requires reliable disaster risk information. One of the main obstacles to

effective DRM is the lack of risk knowledge and awareness by entrepreneurs and business

managers, especially those of SMEs. Disaster risk information should be recognized as an

inseparable part of general business risk management, and as such, should be treated

equally with other type of information usually made available to businesses by government

agencies during the start-up phase (e.g. tax obligations, safety and quality standards, etc.).

Disaster risk information could be effectively made available to businesses at a low cost,

without creating specific awareness raising campaigns or engaging in resource-intensive

activities. This could be accomplished by making use of existing distribution channels,

namely government agencies that are in direct contact with entrepreneurs and investors.

Making use of existing “distribution channels” could effectively make disaster risk

information available to businesses. Agencies working in fields such as investment

promotion, business advisory services, business registration and promotion of

208

entrepreneurship usually have a set of information packages available to potential

international and national investors and entrepreneurs. These packages contain information

regarding laws, fees, taxation, registration processes, etc. By integrating disaster risk

information in these packages, governments can, simultaneously increase disaster risk

awareness of entrepreneurs and investors; increase transparency in risk information;

promote a culture of DRM by equating the importance of disaster risk information with

other usually provided information (e.g. knowledge of corporate tax obligations); build

the capacity of entrepreneurs and investors in simple disaster risk assessments; and drive

foreign and domestic investments to specific sectors and regions according to national

DRM plans.

The advances in information technology also present a good potential. Governments are

increasingly developing modern information services which provide timely information to

decision makers during critical periods of a disaster. Incorporating the right information,

these portals could also be used for urban and land use planning, by assessing how

infrastructure, people and areas may be exposed to a hazard. The private sector can benefit

from this information by using it to mainstream DRM into their business risk management

and BCM, in order to enhance their coping and resilience capabilities.

There is also considerable opportunity for the private sector to contribute information and

technology as well. Data generated from their own risk analysis could feed into public sector

databases, thereby strengthening the reliability of the information. Other data compiled by

the private sector for business purposes, such as aggregated mobile phone GPS data which

reveals an information map on the movement and location of people, could be used for

planning for disaster risk reduction.

A strong regulatory framework which holds both the public and private sector accountable

in the sharing (and disclosing) of reliable and accurate disaster risk information, will very

likely determine the success of any information sharing mechanism.

Provide support to SMES

As SMEs are an integral feature of the economy, comprising over 90% of private enterprises

in the Asia-Pacific region, any public-private partnership for DRM will need to be crafted to

address the needs of these businesses. While transnational companies, and to a certain

209

extent larger companies, have relatively better coping capacities that equip them to deal

with disasters more effectively, SMEs face tremendous constraints in terms of their ability to

quickly bounce back from a disaster due to their lack of resources, knowledge, planning and

experience.

Many SMEs are found to be unprepared when disaster strikes with the majority unaware of

the concept of BCPs. A clear need to raise awareness of the risks facing businesses, as well

as proactively strengthening DRM capacity amongst SMEs exists. Governments can play an

important role in resilience building efforts by initiating capacity building measures via

practical assistance, for instance training SMEs in undertaking risk assessments, design and

implementation of BCMs. Governments can also take the lead in conducting public

awareness campaigns as well as facilitating access to relevant data and information

regarding disaster risk. Additionally, governments can provide incentives to encourage

businesses to adopt relevant DRM measures for companies who can demonstrate that they

have put in place adequate DRM measures. Such initiatives could be further supported with

business-to-business market-based and pro-bono solutions, which may include large

companies providing trainings in risk assessments or BCP to SMEs.

Where resources and expertise are limited within government agencies, governments can

take advantage of support offered by international partners to assist with the resilience

building of SMEs through the provision of guidance in the form of technical and non-

technical assistance.

210

6.4 Working together: Promoting multi-stakeholder approaches to

regional and local DRM challenges

Effective DRM requires collaboration among different sectors and stakeholders through

bilateral and multilateral partnerships. Different collaborative arrangements among all risk

shareholders of society are necessary and can provide a range of benefits to all parties

involved while strengthening the overall resilience of society.

Partnerships between the private and not-for-profit sectors are also increasingly relevant in

the DRM context. As pointed out while outlining the change of paradigm recommendation,

moving from current one-time CSR donations towards long-term strategic partnerships

between businesses and nonprofits can lead towards profitable results to for both parties

by enhancing reputation and brand value for companies on the one hand, and generating

more stable resource flows and increasing efficiency for nonprofits on the other. Unity of

purpose and ensuring that the collaboration is interactive and integrative, are key factors of

success.

Although partnerships between businesses and academic/scientific institutions are not

new, they are currently underutilized. These institutions can work with business to develop

and deliver training or short courses that help to educate businesses, employees and others

on various topics related to hazards. In return, businesses can fund/support research that

can later on be used by the business itself and by the community.

Public-private and multi-sector partnerships reduce the burdens placed upon

governments to provide certain goods and services over time, permitting the public sector

to focus on other important strategic priorities while freeing resources and increasing

effectiveness and efficiency in DRM. However, this type of agreements present a number

of challenges mainly related with coordination, differing goals and trust among partners.

Furthermore, governments should be careful with over-outsourcing public DRM functions in

order to avoid falling into the hollowing-out trap.

A successful partnership requires the appropriate allocation of resources, fair risk sharing

and sufficient reward flows among all partners involved. It is also important for partners

across public, private, nonprofit and academic fields to be aware of each other’s capabilities

and limitations so that common objectives for comprehensive, holistic and reliable DRM

211

strategies and interventions can be formulated and implemented across the Asia Pacific

region.

Given that many existing partnerships are new and not well documented, it is currently

difficult to properly design a roadmap for creating effective and sustainable PPP or multi-

sector partnerships. To this end, all stakeholders could pull efforts and resources together to

document best practices from across the region.

Platforms, which are multi-stakeholder forums for exchanging good practices,

strengthening coordination, finding synergies and holding one another accountable to

respective responsibilities, need to be strengthened, or as necessary established, at the local,

national, regional and global levels to promote private sector’s active interactions with other

DRM stakeholders. As avenues for exchange and sharing of information, they have the

ability to address some of the major challenges of cross-sector collaboration towards

building the new paradigm for business involvement in DRM. Such platforms could

accommodate the different scopes of partnerships where risk information, business

practices, resource allocations and liabilities are being dealt with in agreed frameworks that

promote mutual accountability.

* * * *

Building resilience to disasters in an effective way will require the full engagement of the

private sector as a critical stakeholder. Governments need to raise awareness of the role of

the private sector in DRM across all sectors, whilst also creating an enabling environment

that will facilitate and motivate the private sector in taking a more active role. Collaborative

arrangements among business and all other risk shareholders will be critical in

strengthening the resilience of society in Asia-Pacific. The private sector must therefore

stand up to contribute to the crucial task of making societies more resilient and be

recognized as a critical component of the post-2015 framework for disaster risk reduction.

212

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Annex I. Three case studies on business continuity planning

Case study 1: Siam Cement Group Business Continuity Plan (BCP)

Model, Thailand 54

SCG is one of the Thai top companies initially producing cement and main building material

for infrastructure projects. Being the 2nd largest cement company in the country, SCG

consists of over 100 companies under 5 business groups55 and employs approximately

24,000 employees across the region.56 The company has successfully developed BCP and

has been certified with the international BCM standard in 2011. Afterwards, the Corporate

BCM Office was set up as the center to monitor possible risks to the company. Following its

implementation, SCG’s BCP was tested for the first time due to the unprecedented flood in

54 For more detailed information, please contact Mr. Suriya Paripunna (Corporate BCM) at

+6681-904-7965 or [email protected]

55 Chemicals, Paper, Cement, Building Materials and Distribution

56 More information on SCG, please see : http://www.scg.co.th

http://www.scg.co.th/

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2011. Fortunately, the division of labor was effectively introduced within the organization.

SCG Crisis Management Team was established comprising of the Corporate BCM Office,

Business top management, Facility, HR, Corporate Communication, CSR and IT. Their tasks

were divided as follows.

1. Corporate BCM Office

Monitoring flooding situation from various available data sources

Analyzing and predicting the situation

2. Business top management

Making decision on the business issues

Ensuring that business can perform continually during crisis

3. Facility

Preparing and preventing all critical buildings from being flooded

4. Human Resources

Ensuring the well-being of all staff

Providing accommodation, transportation, food and other services to staff

during crisis

5. Corporate Communication

Continually updating the situation to employees with clear messages

6. Corporate Social Responsibility

Handing out flood relief supplies to flood-hit communities

Implementing various CSR activities i.e. Big Cleaning Day

7. Information and Communication Technologies

Ensuring that ICT related work processes can be performed normally during

crisis

Case study 2: The Otagai Project, Thailand

The Otagai Project reflects close cooperation between Thailand and Japan on safeguarding

SMEs from natural disasters. The project was initially proposed by the Japanese government

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after Mr. Veeraphol Ramangkura, Chairman of the Strategic Committee for Reconstruction

and Future Development (SCRF) and Mr. Kittiratt Na-Ranong, Deputy Prime Minister of

Thailand, visited Japan in November 2011. Later in December, Japan’s METI with the

collaboration of Japan International Cooperation Agency (JICA) organized a “Seminar on

Government Support Measures for SMEs – Recovery from Flood Disaster”, where a

comprehensive policy package including Otagai Business Continuity was recommended by

the Japanese government. Until now, the project was assigned to Department of Industrial

Promotion, Ministry of Industry Thailand and National Economic and Social Development

Board of Thailand (NESDB).

Originally, Otagai means ‘each other’ or ‘together’ in Japanese. Therefore, the Otagai

Business Continuity would refer to “a plan to help each other while facing trouble.” The

objective of this project is to strategically promote cooperation between two countries

under the “sister cluster” concept as a business continuity plan (BCP) to strengthen their

business activities during the normal situation, to be each other’s suppliers during

unprecedented situation including floods and thus to increase customers’ confidence in

both Thai and Japanese companies. The target groups of Otagai Project are flood-affected

industrial parks that cluster in Ayutthaya, Pathum Thani, Bangkok and Samut Prakan.

The main strategies of the project include (1) Japan-Thailand Sister Cluster Network

Creation, which operates in three phases, namely match-making phase, platform creation

phase and financial support phase; (2) Cluster Sustainability Standard Setting: THAICOBAN,

which is similar to hotel’s star rating and will be given to potential Thai and Japanese

enterprises; and (3) Financial Support: Business Fusion Fund for Innovation, which is a form

of Thailand-Japan Joint Investment supported by their local banks, and then Thai companies

will support the Japanese Industrial Cluster, while Japanese enterprises will do the same to

Thai Industrial Cluster.

Currently, the pilot project called “Rice Valley” has been launched as a model project that

“promotes business competitiveness by a new standard of management system about

business continuity and its practical use", planned by the Ministry of Economy, Trade and

Industry (METI). Its objective is to match Japanese technological know-how with the low-

cost Thai Indica rice in order to develop new products that can compete against others in

the global market. Moreover, these products can be the supply for one another if disasters

take place. Furthermore, this BCP-like concept can mitigate impact of global/regional supply

232

chain disruptions during emergencies. According to Mr. Hosotsubo, a Secretary-General of

Crisis management & task organization, the latest cooperation has taken place between

Niigata Prefecture and Nakhon Sawan Province in Central Thailand. The research team from

Niigata University and Kasetsart University is trying to apply their innovation in Nakhon

Sawan Province. They have also planned to implement similar projects in other provinces in

Thailand.

Business continuity taking advantage of both countries (from Rice Valley operation bureau)

Source: Nikkei BP

233

Case Study 3: Institutional support for the adoption of BCP in

Singapore

Among South East Asian nations, it could be said that Singapore is the most concerned

country about disaster resilience of SMEs despite the fact that the country is less likely to

suffer from severe natural disasters. Based on a survey by ADRC (2012), 57.6 per cent of

SMEs in Singapore already had BCPs in place, while more than 50 per cent of SMEs in other

ASEAN countries have not recognized the plan. This can be attributed to the strong support

by the Singaporean government who believes that the country’s private sector must be

prepared in order to become the world’s business hub. According to the Organization for

Economic Co-operation and Development (OECD), Singapore divides its national critical

infrastructure into 14 sectors including communications, health, public safety, defense, and

energy, among others. Agencies in charge of disaster preparedness and BCP promotion

include the Ministry of Home Affairs, the Disaster Recovery Institute Singapore (DRI

Singapore), the Economic Development Board (EDB), the Singapore Business Federation

(SBF), the Standards Productivity and Innovation Board (SPRING) and the Business Continuity

Management Institute Singapore (BCM Institute). Most of the organizations and enterprises

have developed their BCPs based on the Singapore Standard (SS540) under the control of

the Management Systems Standards Committee (MSSC). Other standards for specific sectors

are the Business Continuity Management Guideline 2003 by the Money Authority of

Singapore (MAS) and the Singapore Stock Exchange Business Continuity Policy Rule 4.6.21.

In addition, information about BCM is widespread on various websites of government

agencies (i.e. SPRING, SBF) and BCM-related organizations (BCMI, Singapore BCM Standard).

For instance, the Flu Pandemic Business Continuity Guide can be downloaded from the

SPRING website. Moreover, BCM templates and guideline for SS540 exam can be accessed

via the Singapore BCM Standard Website.

Significantly, the government announced the National BCM Program in 2008 allocating the

amount of SGD 30 million and appointing the SBF to be the focal point. The program aims

at improving BCM resilience of SMEs and strengthening their overall economic

competitiveness. Moreover, this initiative has further encouraged BCM certification among

SMEs based on the Singapore Standard. Being financially supported by the SPRING, SMEs

are able to get 50-70 per cent subsidy to be certified with SS540 in Business Continuity

234

Management. The Group Director (Quality & Standards) of SPRING addressed the

importance of BCM as below.

“The financial and reputational implications of a business disruption can be very serious.

BCM helps companies build up their resilience to handle events that pose a threat to their

businesses. Having BCM measures in place enables them to recover faster, thus minimizing

losses. Good crisis management also enhances a company’s reputation as a reliable partner.

This helps them to secure business opportunities while boosting their growth.” 57

In January 2013, the SBF organized the Business Continuity Management (BCM) Awards.

Twenty Singaporean companies were awarded in this event, while SBF appointed 6

companies as the first BCM Ambassadors for the BCM Ambassadors Program. Up until

January 2013, over 140 BCM activities were organized by the SBF, and have benefited more

than 9,600 firms.

57http://www.spring.gov.sg/NewsEvents/PR/Pages/Singapore-Business-Federation-launches-BCM-

Ambassadors-Programme-and-promotes-new-Singapore-Standard-ISO-22301-

20130124.aspx#.Ul5eflO4EdU

235

Annex II. Micro-insurance collaboration scheme in Indonesia

Contributor: Indonesia and Mercy Corps Indonesia

Title How risk financing can be done by promoting a sustainable public-private

partnership model?

Abstract The Indonesia Liquidity Facility after Disaster (ILFAD) develops an innovative

solution for risk financing for disaster recovery in partnership with banks, micro

finance institutions and insurance companies to get cash quickly into disaster

hit areas through locally managed sustainable financial service systems.

Context Indonesia is very prone to natural disasters including earthquake, tsunami, and

volcanoes as well as flooding and landslides. The main problem was community

awareness about disaster preparedness and financial institutions’ capacity and

readiness to respond in the aftermath of disasters.

How was the

problem

addressed?

Training and support were provided to micro finance institutions (MFIs) to build

their capacity and help them with basic knowledge to be more resilient to

disasters. Also, a locally managed liquidity facility mechanism was created.

ILFAD program partnered with 135 MFIs and facilitated the development of

liquidity facility mechanism in collaboration with banks and insurance

companies.

The main challenges encountered were the difficult access to loan capital since

this is a major challenge for micro finance institutions (MFIs) in Indonesia. Also,

disaster related financial products are limited in number, scope and coverage.

The lessons learned were that demand for disaster recovery products is

increasing exponentially in Indonesia. Also, DRR products are attractive to

clients when combined with micro insurance. Furthermore, as disaster awareness

is on the rise amongst the households, more and more people realize that they

need security against disasters in a sustainable way. There is a need to

complement the savings and loan products early on with disaster related micro-

insurance products to further benefit clients and MFIs. Also, there is a need to

provide tailored disaster preparedness training and financial literacy training.

Results A public-private model based on shared value partnership and a DRR savings

236

product implemented through the market.

The key elements for success were a locally tailored sustainable solution to

disaster management and the facilitation of intervention with a long-term

impact and sustainability.

Potential for

replication

The DRR savings product is planned to be replicated by additional MFIs in

Indonesia. ILFAD is a public-private partnership model with potential to be

replicated in the Asia-Pacific region.

Contact Bharat Pathak, Mercy Corps Indonesia Program Director for DRR-CCA, Email:

[email protected]

Alfi Syahrin. Mercy Corps Indonesia ILFAD Program Manager, Email:

[email protected]

mailto:[email protected]

237

58 World Justice Project 2014 index on enforcement of regulations, “6.1 Effective Regulatory Enforcement”.

59 Department is the highest level of government office in the Philippines

Country

under

assessment

Progress under HFA

SRP: Self reported progress HFA (most recent

submission)

PA: Priority action

CI: Core indicator

Scope of involvement in

international agreements,

working groups etc. on

DRM

3

*see annex X.X for

country-specific details

Existence of

dedicated Ministry,

government office,

working group,

etc. specialized in

DRM?

4

Existence of

dedicated

Ministry,

government

office, working

group, etc.

specialized in SME

development/pro

motion

4

Permanent or temporary

ad hoc Business oriented

DRM measures since

2010

4

*see annex X.X for

country-specific details

Amount of members

in

UNISDR’s Disaster

Risk Reduction Private

Sector Partnerships

(DRR-PSP)

3

Legislation Overall status

References

to private

sector

3

PA2-

CI1

3

PA3-

CI1

3

PA3-

CI4

1

PA4-

CI1

2

PA4-

CI3

4

Specific law

on land use?

3

Specific law on

building codes?

3

Specific laws

on DRR/DRM?

2

Enforcement of

regulation index58

4

Total Score Unweighted

index

Weighted

index

Measureme

nt scale

[Weighted

Scores]

Active

engageme

nt (10)

Future

plans for

engageme

nt (5)

no

mention

(0)

Point

s 1-5

scale

X2

Point

s 1-5

scale

X2

Point

s 1-5

scale

X2

Point

s 1-5

scale

X2

Point

s 1-5

scale

X2

Agreements/treaties?

(yes 2.5, no 0)

Working groups?

(yes 2.5, no 0)

Hosted a regional/global

intergov. DRM-related

event (yes 2.5, no 0)

Regional-multilateral

organization taking action

on DRM? (yes 2.5, no 0)

Specialized:

Ministry: 10

Agency: 6

Department: 4

Center: 2

Specialized:

Ministry: 10

Agency: 6

Department: 4

Center: 2

More than 1: 10

1: 5 points

None: 0 points

more than 5: 10

points

1-5: 5 point

1: 2 points

0: 0 points

Yes: 10

Pending/Dra

ft laws: 5

No: 0

Yes: 10

Draft laws: 5

No: 0

Multiple: 10

Yes: 5

No: 0

Index times ten

rounded to single

digit, max 10

points

Sum of

individual

scores (Max

150)

Total score /

150 (Max 1)

Weighted

score

(Max. 1)

(Weight

46x10=460)

Japan

2013 10 [30] 8 [24]

10

[30]

10

[10]

8

[16]

8

[32] Total 10 [30]

Specialized Agency

8 [32]

Specialized Agency

8 [32] More than 1: 10 [40] 10 [30] Yes: 10 [30] Yes: 10 [30]

Multiple: 10

[20] 0.73 = 7 [28] 137 0.91 0.90

Thailand

2014 10 [30]

4

[12] 6 [18] 8 [8] 6 [12] 4 [16] Total 10 [30]

Specialized

Department

4 [16]

Specialized Agency

8 [32] More than 1: 10 [40] 5 [15] Yes: 10 [30] Yes: 10 [30] Yes: 5 [10] 0.43 = 4 [16] 104 0.69 0.68

Philippines

2011 10 [30]

8

[24] 6 [18] 6 [6] 6 [12] 4 [16] Total 7.5 [22.5]

Specialized

department(s),

4 [16]59

Specialized

Department

4 [16]

More than 1: 10 [40] 2 [6]

Pending/Draf

t:

5 [15]

Yes: 10 [30] Multiple: 10

[20] 0.46 = 5 [20] 97.5 0.65 0.63

Nepal

2015 0 [0]

4

[12] 6 [18] 6 [6] 6 [12] 4 [16] Total 7.5 [22.5]

Specialized Center

2 [8]

Specialized

Department

4 [16]

More than 1: 10 [40] 0 [0] Yes: 10 [30] Yes: 10 [30] Yes: 5 [10] 0.45 = 5 [20] 79.5 0.53 0.52

China

2012 10 [30]

8

[24] 8 [24] 8 [16] 8 [16] 8 [32] Total 10 [30]

Specialized Center

2[8]

Specialized

Department

4 [16]

More than 1: 10 [40] 2 [6] Yes: 10 [30] Yes: 10 [30] Multiple: 10

[20] 0.46 = 5 [20] 113 0.75 0.73

238

Annex X. Assessment of institutional frameworks in selected Asia-Pacific countries.

60 Data for Maldives not available from WJP Rule of Law Index, score derived from countries with comparable ranking in the World Bank’s Worldwide Governance Indicators (WGI) under the ‘Regulatory Quality’ dimension

Maldives

2012 10 [30] 4 [12] 6 [18] 6 [6] 8 [16] 6 [24] Total 7.5 [22.5]

Specialized Center

2[8]

Specialized Center

2[8] More than 1: 10 [40] 0 [0] Yes: 10 [30] Yes: 10 [30] Yes: 5 [10] [0.47]60 = 5 [20] 91.5 0.61 0.60

Sri Lanka

2015 10 [30]

6

[18] 8 [24] 8 [8] 8 [16] 6 [24]

Total 7.5 [22.5]

Specialized Ministry

10 [40]

Specialized

Ministry

10 [40]

More than 1: 10 [40] 0 [0] Yes: 10 [30] Yes: 10 [30] Yes: 5 [10] 0.55 = 6 [24] 114.5 0.76 0.78

Viet Nam

2015 10 [30]

6

[18] 6 [18] 6 [6] 4 [8] 8 [32] Total 7.5 [22.5]

Specialized Center

2[8]

Specialized Agency

8 [32] More than 1: 10 [40] 0 [0] Yes: 10 [30] Yes: 10 [30] Yes: 5 [10] 0.54 = 5 [20] 97.5 0.65 0.66

239

COUNTRY TABLES

Japan

Scope of involvement in international agreements, working groups etc. on DRM

Agreements/treaties:

IFRC Guidelines for the Domestic Facilitation and Regulation of International Disaster Relief and

Initial Recovery Assistance; World Customs Organization Resolution of the Customs Co-operation

Council on the Role of Customs in Natural Disaster Relief

Working groups:

APEC Emergency Preparedness Working Group

UN resolution:

United Nations General Assembly resolution 46/182

Regional-multilateral organization which takes action on DRM:

ESCAP, APEC Member

Existence of dedicated Ministry, government office, working group, etc. specialized in DRM?

Fire and Disaster Management Agency, Ministry of Internal Affairs and Communications

Existence of dedicated Ministry, government office, working group, etc. specialized in SME

development/promotion

Small and Medium Enterprise Agency under the Ministry of Economy, Trade and Industry (METI)

Permanent or temporary ad hoc Business oriented DRM measures since 2010

Yes, e.g. Measures to Assist SME and Microenterprise;

Various financing in Response to the Great East Japan Earthquake 2011

Specific law on land use?

The National Land Use Planning Act

240

Specific law on building codes?

Building Standard Law

Specific laws on DRR/DRM?

Disaster Countermeasures Basic Act; Act on Earthquake Insurance; City Planning Act

Thailand



ASEAN Agreement on Disaster Management and Emergency Response; IFRC Guidelines for the

Domestic Facilitation and Regulation of International Disaster Relief and Initial Recovery

Assistance; World Customs Organization Resolution of the Customs Co-operation Council on the

Role of Customs in Natural Disaster Relief

Working groups:

APEC Emergency Preparedness Working Group; WMO/ESCAP Panel on Tropical Cyclones (PTC) -

Disaster Risk Reduction (DRR) component

UN resolution:



ESCAP, APEC Member; ASEAN member


Department of Disaster Prevention and Mitigation (DDPM) under the Ministry of Interior



Office of Small and Medium Sized Enterprises Promotion (OSMEP)

241


e.g. National Catastrophe Insurance Fund (NCIF) established after 2011 floods ;Water

management and flood prevention plan for areas along the Chao Phraya River Basin; Legal

amendment to allow the Central Bank in Thailand to offer soft loans via state-run and other

commercial banks to help alleviate financial difficulties for businesses and ordinary citizens who

have been affected by 2011 floods; Thai Government commissioned a BCP study in terms of

economy’s capacity to respond to future emergencies - completed in 2011

‘Training of Trainers’ from key national institutions completed by ADPC in spring 2014.


Thailand Land Code Act


Building Control Act


Disaster Prevention and Mitigation Act

The Philippines







Working groups:


UN resolution:



242

ESCAP, APEC Member; ASEAN member


National Disaster Risk Reduction and Management Council (Department)



Bureau of Micro, Small, and Medium Enterprises Development, Department of Trade and Industry


e.g. extended coverage of tax reductions under tax code; Passing of the Disaster Risk Reduction

and Management Act (RA10121) in 2010; National disaster risk reduction and management plan

(NDRRMP) 2011 to 2028. published in 2011; Top Leaders Forum for private sector and

government leaders to meet (November 2014).


Pending: National Land Use Act (NLUA)


National Building Code Of The Philippines


Philippine Disaster Risk Reduction and Management Act of 2010, Republic Act No. RA10121, 27

July 2009;

Implementing Rules and Regulations of Republic Act No. 10121, 27 September 2010 ; Climate

Change Act of 2009

Nepal





243


Working groups:


UN resolution:



ESCAP, APEC Member


Nepal Centre for Disaster Management (NCDM)



Department of Cottage and Small Industries (DCSI)


Comprehensive Disaster Risk Management Programme (CDRMP) with private sector input

established with UNDP in 2011

Internet service providers worked with Government regulator, Nepal Telecommunication Authority

(NTA) to create disaster insurance funds. Mobile service provider companies also worked with the

government to develop communication networks in disaster prone areas; National Society for

Earthquake Technology-Nepal (NSET) is implementing the program “Promoting Public Private

Partnership for Earthquake Risk Management (3PERM)” with the funding support from United

States Agency for International Development, Office of U.S. Foreign Disaster Assistance

(USAID/OFDA) during October 2011 – September 2014.


Law Books Management Committee (LBMC/GoN 1963).


Four building codes, each for a different type of buildings.


244

Natural Disaster Relief Act (NDRA), 1982

China






Working groups:


UN resolution:



ESCAP, APEC Member


National Disaster Reduction Center (NDRC) under the Ministry of Civil Affairs (MCA)



Department of SMEs, Under the Ministry of Industry and Information Technology


ASEAN and China Sign Agreement on Disaster Management, October 2014; Ministry of Civil

Affairs published National Comprehensive Disaster Prevention and Reduction Plan (2011-15)

including business DRM provisions;

The Government of China held the 8th Asia Pacific Economic Cooperation Senior Disaster

Management Officials Forum (APEC SDMOF) from 11-12 August 2014 in Beijing, China under the

theme "Science and Technology Strengthening Disaster Risk Reduction"

245


Land Administration Law, Law on Land Contract in Rural Areas, Property Law,


Framework of codes under the Construction Act


Regulation on the Army's Participation in Disaster Rescue Law on Flood Control of P. R. China, law

on Earthquake Control and Disaster Reduction of P. R. China; Regulations for a Destructive

Earthquake Emergency; Emergency Response Law of the People's Republic of China; Law of the

People's Republic of China on Appraising of Environment Impacts

Maldives





Council on the Role of Customs in Natural Disaster Relief; South Asian Association for Regional

Cooperation (SAARC) Agreement on

Rapid Response for Natural Disasters (ARRND)

Working groups:

WMO/ESCAP Panel on Tropical Cyclones (PTC) - Disaster Risk Reduction (DRR) component

UN resolution:



ESCAP member, SAARC member


National Disaster Management Centre under Ministry of Defence and National Security Services


246


Business Development Services Centre (BDSC) under the Ministry of Economic Development


Adopted strategic national action plan for disaster risk reduction and climate change adaptation

(SNAP) in 2011; Multifaceted project with UNDP Bureau for Crisis Prevention and Recovery; 2013:

The Small and Medium Enterprises Act passed which governs the policies and principles for

regulating micro, small and medium enterprises (MSMEs) in the Maldives.


Yes, Maldivian Land Act


Maldives National Building Code


Maldives Disaster Management Act, 2006

Sri Lanka





Council on the Role of Customs in Natural Disaster Relief; South Asian Association for Regional

Cooperation (SAARC) Agreement on Rapid Response for Natural Disasters (ARRND)

Working groups:

WMO/ESCAP Panel on Tropical Cyclones (PTC) - Disaster Risk Reduction (DRR) component

UN resolution:

247



ESCAP member; SAARC member


Ministry of Disaster Management and Human Rights



Ministry of Traditional Industries & Small Enterprise Development


World Bank Climate Resilient Program launched in 2014 - consisting of the Climate Resilience

Improvement Project for US$ 110 million and a Development Policy Loan with a Catastrophe

Deferred Draw Down Option (CATDDO) for US$ 102 million with a specific focus on risk modeling

and disaster risk financing and insurance; Sri Lanka Comprehensive Disaster Management

Programme 2014-2018 included an ‘Enhanced role for Private Sector in Disaster Management’.


Planning and Building Regulations law, 1986


Urban planning and building codes under legislation


Disaster Management Act No.13, 2005

Vietnam


248






Working groups:


UN resolution:



ESCAP member; APEC Member ASEAN member


Disaster Management Center (DMC) under the Directorate of Water Resources



Agency for Small and Medium Enterprises Development


New DRM Law 2013 has two articles referring to insurance offering the insurance industry

incentives to cover disaster events; World Bank Disaster Risk Management Project, 2013; UNDP

Strengthening Institutional Capacity For Disaster Risk Management In Viet Nam Including Climate

Change Related Risks (SCDM Phase II) 2012-2016


Law on Land 2003 (No. 13/2003/QH11) regulates the use and management of land.


The Law of Construction of 2003 (No. (16/2003/QH11) regulates the constructions of buildings in

Viet Nam


249

Law on Natural Disaster Prevention and Control 2013 (New DRM Law), which entered into force

on 1 May 2014

HFA Self-Assessment Reports

Japan: http://www.preventionweb.net/files/31426_jpn_NationalHFAprogress_2011-13.pdf

Thailand: http://www.preventionweb.net/files/41674_THA_NationalHFAprogress_2013-15.pdf

Philippines: http://www.preventionweb.net/files/18619_phl_NationalHFAprogress_2009-11.pdf

Nepal: http://www.preventionweb.net/files/41755_NPL_NationalHFAprogress_2013-15.pdf

China: http://www.preventionweb.net/files/28446_chn_NationalHFAprogress_2011-13.pdf

Maldives: http://www.preventionweb.net/files/28967_mdv_NationalHFAprogress_2011-13.pdf

Sri Lanka: http://www.preventionweb.net/files/41730_LKA_NationalHFAprogress_2013-15.pdf

Vietnam: http://www.preventionweb.net/files/42305_VNM_NationalHFAprogress_2013-15.pdf

250

Annex IV. A case of business-nonprofit partnership: AXA and CARE

Context

Since 2011, the AXA Group has joined forces with CARE, the international humanitarian NGO, to help vulnerable

populations better prepare for climate-related risks. This partnership aligns with AXA's corporate responsibility

policy, whose flagship initiative is Risk Research and Education.

AXA and CARE have chosen to work together on a series of programs to raise awareness and encourage action

about natural disaster prevention. These programs target communities that are particularly exposed to this type

of risk in developing economies and aim to reduce the human and economic impact of natural disasters.

Activities include campaigns to raise public awareness on risks, early warning systems, trainings to reinforce

communities’ response capacity and the planting of mangroves which is a natural barrier limiting the impact of a

disaster. They are being implemented in Benin, Indonesia, Madagascar, Mali, the Philippines and Vietnam.

Since 2011, €2.7 million has been invested by AXA in these projects, benefiting up to around 756,000 people in

Asia and Africa. In 2014, AXA and CARE have renewed their partnership until 2016 with a financial engagement of

€2.3 million and targeting 1.2 million beneficiaries and have expanded activities to Central and South America.

The Philippines project example

AXA supported CARE’S Natural Disaster Risk Reduction Project and Emergency activities in the Philippines

- Timing: 16 months (06/2010 - 10/2011)

- Total budget: €501,568

- N° of direct beneficiaries: 53,943

Objectives

The ‘Advancing Safer Communities and Environments against Disasters’ project aims to increase resilience and

reduce vulnerability of communities, schools and local governments units in high-risk areas by consolidating and

scaling up disaster risk reduction and climate change adaptation gains.

The CARE project in the Philippines is channeling school children energies to create a culture of safety and

disaster risk reduction that reaches their families and communities.

251

Working with the public school system is an important strategy of the project. Children, who spend more of their

waking hours at school, are most vulnerable to disasters. Schools, on the other hand, are very important venues

for raising public awareness and building the culture of safety and disaster risk reduction at an early age. Further,

schools also serve as temporary shelters in most high-risk areas during natural hazard events.

Results and impacts of the project

Result 1: Communities, municipal and provincial LGUs, people’s organizations, and corporations have consolidated

project gains, replicated sustainable disaster risk reduction activities, and institutionalized DRR.

Result 2: Public schools in three municipalities invest in the creation of safer schools and in mainstreaming DRR in

the school curriculum.

Result 3: All project stakeholders and key DRR actors proactively develop a common DRR/CCA agenda, actively

practice learning and sharing of DRR tools and knowledge, and coordinate at the national and field levels to

improve the quality of, and to promote, DRR.

Sample activities

Teaching about natural disasters

The pupils of the 89 schools in the municipality of Calabanga are given theoretical and practical lessons on what

to do in the event of a tsunami, flood or earthquake, and on how to identify any dangers they might have to

face. AXA's employees from Turkey attended these courses and shared the experience of an earthquake drill with

the children.

Simulating a typhoon alert

In Calabanga, typhoon simulation exercises are frequently conducted with the assistance of the local authorities.

The aim of the program is to teach local populations the right reflexes. The evacuation of the most vulnerable

areas is now faster and more efficient, residents know where the strategic gathering places are and a

transportation system has been set up to move them to safety. Three AXA Hearts in Action volunteers took part

in a practice typhoon alert that involved several villages.

Skills- based support

Sponsored by AXA Tech, five volunteers went to the Philippines to support the CARE humanitarian aid mission by

providing telecommunication services in the aftermath of Typhoon Haiyan. AXA Philippines also provided

252

emergency aid to employees and agents, as well as to their families, for example, by offering flights to safe areas

and financial assistance to cover the cost of procuring basic necessities (e.g. food, clothing and medication).

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