A string of costly earthquakes and extreme weather, including the acceleration of the Pacific typhoon season, has prompted new action in APEC to enhance economic security in the world’s most natural disaster-affected region.
APEC member economies experience 70 per cent of all disasters globally and sustain over US$100 billion in related losses annually. Emergency management officials from the region have joined forces with affected sectors to promote more disaster-resilient trade.
Emphasis is on helping businesses integrated in cross-border production and supply chains limit disruptions to their operations in an emergency—safeguarding jobs and growth in the Pacific Rim.
Convening in the industrial center of Nagoya, officials and representatives from auto, electronics, insurance and finance firms assessed vulnerabilities and fleshed out strategies for encouraging wider, more effective business continuity planning in APEC economies to mitigate risks. They drew on lessons from disasters like the two magnitude-7 earthquakes in southern Japan in April 2016 that halted auto and semiconductor facilities still facing residual temblors.
The increasing frequency of extreme weather compounds the urgency of this effort. Typhoon Nanmadol which struck Japan and Korea this week disrupted flights, rail service and shipping production networks depend on. It adds to supply chain challenges posed by recent flooding in New Zealand, Peru and Thailand, record heatwaves in Australia and severe drought in Papua New Guinea, as well as the start of the hurricane season in Mexico and the United States.
Exposed to high risks
“Increasingly advanced production processes and new distribution patterns of raw materials, parts and services from global suppliers power modern manufacturing but are exposed to high risks including shocks caused by natural disasters,” explained Dr Li Wei-Sen, Executive Director of the APEC Emergency Preparedness Capacity Building Center.
“If a plant in Japan that makes irreplaceable car-control chips or shiny pigment used in auto paint cannot continue its normal operation due to an earthquake, for example, it can impact car production all over the world through the influence of global supply chains.”
“Personnel and capital shortages, damages to production equipment and infrastructure, power outages and elevated cybersecurity threats are among the challenges that can hamper business operations in a disaster,” Dr Li continued. “We are boosting public-private policy coordination and development to ensure businesses – and the trade and communities they support – have proper planning in place to operate as seamlessly as possible during an emergency.”
Delegates examined the business continuity planning of companies such as Nissan and Fujitsu, and the importance of routine checks and random, unannounced drills for it to be effective. They also explored the potential for firms to transfer risk through disaster risk financing as well as the rating of business continuity plans to create financial incentives for their adoption.
Small and medium enterprises that are assuming a greater role in production and supply chains are a particular target. The aim is to reduce their acute preparedness gaps manifested during Super Typhoon Haiyan in the Philippines in 2013 which led to severe operational delays, inventory losses and declining sales within the sector.
Risk of more mass closures and bankruptcies
Failure to achieve progress could lead to more mass closures and bankruptcies such as those that followed the earthquake and tsunami in northern Japan, and historic flooding in Thailand in 2011—wiping out suppliers of goods ranging from hard-drives to component parts used in autos, cameras, copiers and refrigerators.
“Public sector involvement in business continuity management is crucial to shielding local economic platforms such as business operations, employment and corporate tax revenues from disruptions after a disaster,” concluded Professor Kenji Watanabe of the Nagoya Institute of Technology and Vice-Chair of the Business Continuity Advancement Organization.
“Collaboration in APEC is setting new and welcome standards for securing livelihoods and sustainable growth in disaster-affected areas and beyond.”
APEC emergency management officials will meet in Ho Chi Minh City, Viet Nam in August to gauge implementation of the region’s disaster-resilient trade initiative and determine the next steps.