JOHNSTON – Last week, to mark the one-year anniversary of Hurricane Sandy, property insurer FM Global issued a whitepaper outlining the importance of assessing natural disaster risk for CEOs and business leaders.
The whitepaper, titled “Prepare for the Expected: Achieving Business Resiliency in an Era of Severe Natural Disasters,” provides insights from corporate and academic experts about lessons learned since Hurricane Sandy devastated the East Coast last October and urges chief executives to develop a comprehensive strategy to address risks to their infrastructure, business operations and global supply chains.
“CEOs own risk for their organization, yet many only have a tenure of a few years,” said Tom Lawson, FM Global executive vice president, in a release accompanying the whitepaper. “However, a once-in-a-century event like Sandy has a 1 percent chance of occurring each year a chief executive serves. The colossal financial losses that can arise should make even a 1 percent threat a top-of-the-agenda item.”
Highlighted in the whitepaper are the “Seven Costly Sins Committed by CEOs” as well as the short-term and long-term effects that natural disasters can have on businesses and the economy.
Since 2000, economic losses from natural disasters are estimated at $2.5 trillion globally, 50 percent more in damage than previously expected, according to report released in May by the United Nations Office for Disaster Risk Reduction.
“This is unacceptable when we have the knowledge to reduce the losses and benefit from the gains,” said U.N. Secretary General Ban Ki-moon in the report.
Among the “seven costly sins” of chief executives regarding disaster risk named in the whitepaper are:
- Undervaluing the identification, assessment and mitigation of natural disaster impacts on their business.
- Making insufficient efforts to quantify supply chain exposures.
- Failing to insist that the board of directors and senior executives provide oversight on risk management.
- Seeing only the “statistical” risk, and not the real risk of whether their business is at peril.
- Relying on insurance alone to protect their business.
- Not having a tested emergency response plan.
- Ignoring the opportunity to create a culture of risk management within their organization.
“CEOs who ignore the growing impact of natural disasters are putting their companies at risk,” the FM Global whitepaper states. “Unaddressed vulnerabilities to extreme weather threaten business operations, employee livelihood and the economy.”
To read the complete whitepaper, visit www.fmglobal.com.