catastrophic risk management

Catastrophe Risk Management


Catastrophe risk management
Preparing for potential storms ahead....



Companies have always faced threats from
catastrophic events, such as earthquakes, hurricanes
or major social unrest, but some of the most pressing
concerns now facing the global business community
are relatively recent phenomena. For example,
terrorism, although by no means a new tactic, first
received significant corporate attention following the
attacks of September 11th 2001, and H5N1, the strain
of bird flu that is currently causing concern around the
world, evolved only in the late 1990s.
The recent foiling of a major plot to cause multiple
explosions on transatlantic jets demonstrates
that the threat of terrorism remains very much in
our midst. And as the United States enters a new
hurricane season, which many meteorologists have
predicted will be as severe as last year’s, the damage
caused by extreme weather events remains a pressing
concern for businesses with operations along the
eastern and southern coasts of the US. However, in
terms of economic damage and loss of life, a global
bird flu pandemic threatens to dwarf both these
threats. According to Risk Management Solutions, a
company that specialises in the development of risk
models, there is a one-in-five probability of an H5N1
flu pandemic being more severe than the influenza
outbreak of 1918, which is estimated to have killed
between 50 and 100 million people worldwide.
When asked about how serious they consider a range
of threats to be to their business, respondents to our
survey cite power outage as being the most significant,
perhaps reflecting what they see as the relatively high
probability of such an event occurring. Next on their
list comes bird flu, which is cited by 43% as being either
significant or very significant, and then terrorism,
which is seen as a significant or very significant threat
by 35% of respondents. Perhaps not surprisingly,
given that bird flu has so far had a greater impact in
Asia than elsewhere, respondents from that region are
more likely than those from the US or Europe to see
the threat as significant. Likewise, US respondents
are more likely than those from other regions to see
extreme weather events as a significant threat, which
reflects concerns about intensifying hurricanes along
the country’s southern and eastern coasts.
A fairly high proportion of respondents have
looked at these most significant threats as part of
their risk management processes, with 69% having
considered power outage, 60% terrorism, 55%
bird flu and 54% extreme weather events. Levels of
planning vary considerably from region to region,
however, with companies in the US generally showing
slightly higher levels of preparedness than those
in Asia and significantly higher levels than those in
Europe. For example, 71% of US respondents say that
their organisation has considered the threat from
terrorism, compared with 62% of Asian respondents
and 50% of European respondents. The greater
attention afforded to catastrophe risk management in
the US is not necessarily based on a higher perception
of risk—across Asia, Europe and the US, terrorism
is seen as a significant threat by broadly similar
percentages of respondents.






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