PwC report warns on multinational disaster risks

Multinational companies are facing increased disaster risks as a result of overseas expansion, according to research by PwC, and need to look at more collaborative ways of managing that risk with local companies.

A new report by the UN International Strategy for Disaster Reduction (UNISDR) and PwC warns large multinationals' dependencies on international supply chains, infrastructure and markets poses a systemic risk to 'business as usual'.

UN research suggests direct losses from floods, earthquakes and drought are under-estimated by at least 50% and describes disaster risk as 'a new multi-trillion dollar asset class'.

The latest UN/PwC report showed that while good practices existed for disaster risk reduction for corporate-owned assets, the level of understanding and ability to manage risks in local supply chains overseas was far lower.

Celine Herweijer, partner, PwC sustainability & climate change said: 'Globalisation means disaster doesn't stop at the factory gate or the office door, and British businesses can't stick its head in the sand and hope it won't affect them.'

The report warns that multinational businesses in the UK have witnessed increasing numbers of occasions of indirect impacts of natural disasters amplifying losses globally through commodity price rises, supply chain disruption, workforce dislocation, asset damage, and lost or damaged infrastructure.

It says that some large businesses rely on the insurance industry alone for risk assessments, with most having only limited access to disaster risk information on which to base investment decisions. It recommends that global businesses consider shared risks with suppliers, SMEs and local businesses in their supply chain, particularly in developing and emerging economies, where disproportionate economic and human impacts of disasters are being felt.

Herweijer said: 'The businesses we interviewed understand they need to do more than just do business in the communities they are working in. Collaborating on disaster risk management is a strong platform on which to create local partnership with governments and cities, and demonstrates that business is having a full and positive impact on society.'

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