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Reducing shock to businesses after a disaster

by Kiyoshi Natori and Li Wei-Sen

Special To The Japan Times

It was at this very juncture three years ago, after the initial shock of the Great East Japan Earthquake and Tsunami, that the full scope of the disaster came into greater light. Compounding the horrific losses of life, devastated communities and unfolding nuclear crisis, massive numbers of people were left with livelihoods turned upside down due to disruptions to businesses and the far-reaching linkages between them.

Such vulnerability runs deep in the Asia-Pacific. The region is hit by over 70 percent of all natural disasters and suffered $68 billion annually in related costs from 2003 to 2013. Mitigating the risks is an intensifying focus of collaboration for Japan and the other 20 member economies of the Asia-Pacific Economic Cooperation forum, whose well-being depends on unimpeded flows of goods, services, people and capital between one another.

The downturn in automobile and information and communications technology manufacturing in the months following the 3/11 tragedy, fanned by shortages of vital parts and raw materials from crippled producers, and ensuing turnaround within these labor-rich sectors as production lifelines were restored reflect these dynamics.

They further underscore the critical importance of building business resilience to lower disaster risk and ensure trade flows that keep economies — and efficient emergency recovery — moving in an era of interdependent production facilities, suppliers, subcontractors and consumers.

Preparedness is the focal point of our agenda. Complementing the efforts of international bodies that deal with disaster relief, APEC economies, led by disaster management officials from the APEC Emergency Preparedness Working Group, are working jointly with the private sector to strengthen the capacity of firms in the region to weather future threats.

A dialogue with the business community, in Sendai City five months after the coastal hub was rocked by the Great East Japan Earthquake and Tsunami, charted a course for action. Notably it launched a multiyear business continuity planning initiative within APEC to promote greater awareness of natural disaster risks and to encourage businesses to identify their vulnerabilities and organize teams to address them accordingly.

Already, APEC economies have formulated best-practice guidelines for doing so and are conducting group training exercises to facilitate their implementation — boosted by inputs from private sector partners, including chambers of commerce.

We are targeting small and medium enterprises, in particular. Collectively they account for around 90 percent of businesses and 60 percent of employment in the region, playing a significant role in supply chains, but remain more exposed to emergencies as a result of preparedness gaps. Research, conducted on the heels of the Great East Japan Earthquake and tsunami, highlights the urgency of our work. Of more than 260 small and medium enterprises surveyed by the Asian Disaster Reduction Center and Taiwan Institute of Economic Research, just 13 percent had business continuity planning in place.

APEC economies are, meanwhile, benchmarking business continuity plans in the information and communications technology, logistics and auto parts sectors. The goal is to make it easier for suppliers to field effective systems to mitigate disaster risk and avert the kind of disruptions that resulted in around $50 billion in losses due to massive flooding in Thailand just six months after the disaster in Japan.

Halted industrial facilities, especially among water-logged producers of electronics components, translated into a 2.4 percent fall in Japan’s manufacturing production index alone between October 2011 and January 2012. The incentives for reducing shocks like these are prompting deeper regional cooperation in pursuit of this objective.

This week, officials from APEC economies’ small and medium enterprise ministries gather in Taiwan — no stranger to emergencies such as earthquakes and typhoons — to identify additional steps that can be taken to improve the fortitude of these businesses as they develop and become more integrated in global supply chains.

An APEC transportation workshop in Christchurch, New Zealand, days later, will coach governments on logistics and supply chain post-disaster recovery and offer guidance to relevant companies for bolstering infrastructure resilience and connectivity between different transportation modes. It will draw on the experiences of those driving the estimated $40 billion reconstruction from the 2011 Christchurch earthquake.

Such cross-cutting measures reflect APEC economies’ broader agenda to ensure trade and sustainable growth, as articulated by the region’s leaders in Yokohama in 2010 and now being advanced under the auspices of China as this year’s APEC chair.

Future emergencies will come, testing our resolve. By working together to improve preparedness, we are positioning our economies and the businesses and workforces that power them to withstand their fury.

In this sense, APEC’s 2014 theme, “Shaping the Future through Asia-Pacific Partnership,” is not just about the pursuit of greater prosperity but also better safeguarding it for those times when it is needed most.

Kiyoshi Natori and Li Wei-sen cochair the APEC Emergency Preparedness Working Group.