How risk preparation protects businesses from natural disasters
Natural disasters may be unavoidable, but they do not have to be overwhelming. Businesses are not doomed to suffer in the aftermath, so long as plans have been made to minimise the risks and manage the knock-on impacts as effectively as possible.
According to Munich Re’s annual review, natural disasters caused $330 billion (£231 billion) in overall losses last year. Such events often result in the interruption of supplies and can leave some companies unable to fulfil their commitments to customers, leading to subsequent losses in revenue and profit. There is also the danger of reputational damage. If a crisis is handled badly, it can mean a permanent loss of market share.
The stakes, then, are extremely high. So what can those in charge of supply chains learn from recent natural disasters? How might they utilise the latest risk management techniques and advances in technology to prepare much stronger contingency plans?
Building resilience can involve big strategic decisions. If natural disasters remain a strong possibility in part of the world where key suppliers exist, companies may be wise to consider moving a proportion of their business to suppliers elsewhere. “With really critical products, even if it costs a bit more, it’s worth thinking about diversifying your suppliers that way,” says Professor Brian Squire, who leads the HPC Supply Chain Innovation Lab at the University of Bath School of Management.
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