PwC & UNISDR

Driving sustainable growth & resilience

Advisory

By Oz Ozturk

February 2014

PwC

Introduction

1 Setting the scene

2 Collaborating with the United Nations, UNISDR

3 Working with the private sector

4 Some lessons

5 The future

Slide 2

2 The opportunity

PwC

Natural hazards are a growing concern for global businesses…

Natural hazards 2011 – a global sample

Winter Storm Joachim – DecFrance, Switzerland, Germany

Flash floods – NovFrance, Italy, Spain

Floods – Aug-SepPakistan

Tropical Storm Washi – DecPhilippines

Cyclone Yasi – FebAustralia

Floods – Aug-NovThailand

Drought – Oct-SepSomalia

Flash floods – JanBrazil

Floods, landslides – OctGuatemala

Wildfires – Apr-SepUSA

Drought – OctUSA

Wildfires – MayCanada

Severe storms, tornadoes – MayUS

Hurricane Irene – AugUS, Caribbean

Floods – Apr-MayUS

Severe storms, tornadoes – AprilUS

Flash floods – Dec-JanAustralia

(…) Toyota, Honda Motor Co. and Nissan Motor Co. -- are losing 6,000 units of production daily (…) lost production may cost more than $500 million a month (…)

(…)“the whole PC production chain is stuck at a bottleneck” because of the constraints on hard disc supply. (…)

(…)Tens of thousands of people have fled Bangkok, which accounts for 40 per cent of the nation’s economic output (…)

UNISDR and PwC • Working together to reduce Disaster Risks

(..) Superstorm Sandy will end up causing about $20 billion in property damages and $10 billion to $30 billion more in lost business (…)

and one of the latest in Nov 2012

PwC Slide 4

With a significant socio-economical impact…

Cumulated impacts of disasters since the 1992 Rio de Janeiro Earth Summit

4.4 Billion 2.0$ Trillion 1.3 Million

People affected

Financial impact

People killed

Top 3 disasters

account for 80+ %

FloodDroughtStorm

Storm Earthquake

Flood

EarthquakeStorm Extr.

temperature

Top 3 countries impacted

China 2.5 $bnIndia 938 $mioBangladesh 136

$mio

USA 560 $bnJapan 402 $bnChina 331 $bn

Haiti 230’675Indonesia 185’152

Myanmar 139’351

Source: Physical risks from climate change, DGA, LLC

PwC

Collaborative disaster risk management bears a multi-billion dollar savings potential

The costs of corrective disaster risk management are similar to the ones of climate change adaption and are estimated at USD 75-100 billion annually between 2010 and 2050.

If all the USD 1.9 trillion of FDI foreseen for 2014 were disaster-risk sensitive, this would represent critical exposure.

10:1 ratio - Private sector practice shows that for each 1$ invested in disaster risk management, there are potential savings of up to 10$ should a disaster occur.

63% of businesses see opportunities to generate value from disaster risk reduction.1

Natural hazards: a multi-billion USD cost factor

Investing today means making savings tomorrow

1 Economist Intelligence Unit survey

Our joint study ‘Working together to reduce disaster risk’ has shown that opportunities for the private and public sectors to collaborate on risk reduction and building systemic resilience are still largely untapped.

Most corporate disaster risk reduction initiatives have been introspective and remained largely unshared. Similarly, governments, international organizations and NGOs have promoted initiatives without meaningful private sector involvement.

The potential of collaborative disaster risk management is widely untapped

Slide 5

PwC

Resilience VS Response

Slide 6

‘Pre’ disaster ‘Post’ disaster

Information: Understand natural hazards & disaster

risks

Impact Assessment

Define scenarios

Strategy

Communication: Notification

Immediate action, business continuity

Remediation

Accounting: Capture and track ongoing expenses

Colla

bora

teColl

ab

ora

te

Resilience Response

PwC

Successful PPP in driving resilience has 3 major pillars:Creating awareness, Enabling exchange and Generating collaborative action

Creating shared

awareness

Enabling exchange

Generating collaborative

action

“Shared benefits for shared investments”:Releasing the untapped

potential of collaborative Disaster

Risk reduction

Creating shared awareness is an essential precondition for effectively channeling organizations’ DRM efforts towards collective action. Creating shared awareness means raising consciousness about the importance of carefully managing disaster risks and emphasizing possible ways and benefits of collectively addressing them.

Enabling exchange between community members means facilitating the sharing of information in the widest sense of the word: knowledge, know-how, experience, proven practice, insights and ideas. An open and ongoing dialogue is indispensable to sustain cohesion and to unveil opportunities for concrete collaborative action.

Generating collaborative action means guiding community members’ disaster risk reduction efforts around common initiatives. Only projects with tangible benefits can sustainably foster trust and credibility.

Slide 7

PwC Slide 8

Strong link with public

organisations

Our Initiative

UNISDR

Expertise in public response to

disaster risk management

Strong link with private companies

Expertise in corporate risk management

Collaboration

Private

Public

Driving sustainable resilience

PwC

Engaging the private sector to share best practices and create a holistic resilience strategy

Technology

People

Process

Structure

Strategy

Reputational

Financial

Human

Environmental

Operational

Asset damage

Activity disruption

Collateral damage

CorporateSupply chain Public

Hazard type

Impact dimensions

DRM strategies

DRM drivers

Und

erst

and

Res

pon

d

Geological Hydrometeorological

Avoidance Reduction Sharing Acceptance

Short-term or long-term responseResponse type

• Good practice• Maturity assess-

ment• Methods and tech-

niques• DRM commu-

nity

Disaster Risk Management Framework (‘DRM-F’)

1

‘Working together to reduce disaster risk’

3

Defining Business Strategy2

Annual ‘GAR’ Report on Disaster Risk Reduction

4

Key drivers of change

Slide 9

PwC

Disaster risks management framework

Slide 10

Assets &Infrastructure

Governance & Organisation

Technology

GeologicalHydro-

Meteorological

Hazard categories

Disaster risk categories

DRM strategies

DRM options

DRM drivers

What

Human

Environmental

Financial/Operational

Reputational

Asset damage

Activity disruption

Collateral damage

Avoidance

Reduction

Sharing Acceptance

Corporate Supply Chain

Private-Public

Impact dimen-sions

Term

inolo

gy

DR

M c

om

mu

nit

y

Matu

rity

mod

el

Pro

ven

pra

ctic

es

Tech

niq

ues

Enable

Toolkit

DR

M p

rocess

How

Un

ders

tan

dR

esp

on

d

• Storms and Hurricanes• Floods• Sandstorms• Extreme Heat and Cold and

Droughts• Avalanches• Landslides

• Earthquakes• Volcanic

eruptions

• Facility deterioration

• Damage of transport vehicle

• Supply disruption• Production

bottleneck• Distribution

failure

• Oil spill• Release of

chemicals

• Asset emplacement

• Asset securisation, e.g. earthquake resistant buildings

• Business continuity planning

• Alternative sourcing

• Supply Chain continuity planning

• Infrastructure development, e.g. shelters, damns

• Development of rescue services

• Educational measures to build understanding and awareness

PwC

The objective

Slide 11

To improve the management of disaster risks by business, for improved performance and for

the benefit of the company’s wider relationships with suppliers, communities and

marketsBy fostering dialogue and interaction between the private and the public sector

By collecting and gathering knowledge, tools and good practice

By setting up a link to the disaster risk community in the form of a platform of dialogue and exchange

By developing a conceptual framework to manage disaster risks caused by natural disasters

PwC Slide 12

Findings from working with the private sector

Industry leading companies have set out their objectives and stepped up efforts to reduce disaster risks, but there is opportunities for improvement and know-how remains unshared

‘A widely untapped opportunity’ – Companies have developed know how, display a desire to share it and have a chance to collaborate with peers and the public sector to increase risk resiliency rather than acting alone

Public and private sectors play an active role in addressing the challenges that hinder collaboration and in improving their ongoing DRM

Collaborative DRM requires a common vision and the long term cultivation of broad based relationships

Finding 1

Finding 2

Finding 3

Finding 4

Share

Value

Dependant

Holistic

PwC

Case examples.

13

Development of an iPad application which displays a global heatmap of assets – One of our sample companies developed an application which displays the current level of compliance of each of its assets globally. The company used external help to identify the risks for each region where they operate, and has an independent entity conduct yearly audits of its operations. The site are encouraged to raise their compliance level through positive / negative incentives.Local collaboration with peers in the same industry – One of our sample companies identified the risk of fire as a major threat to one of their critical asset. This threat is shared by a peer in the same industry and both companies have agreed to collaboratively share resources in case of a fire.Working with local authorities to identify natural hazard risk exposure – One of our sample companies is working with public authorities to determine potential natural hazards risk. The company relies on public authorities input to develop working sites in certain regions and locally collaborates with them in case of a disaster.

Preparation of ‘disaster kits’ and interest from local government – One of our sample companies prepared and shared ‘disaster kits’ in preparation for a major hurricane threat. The local government identified this as an outstanding idea and collaboratively worked with the company to extend the distribution of kits to the public.Hiring staff with a public crisis management background – Some of our sample companies started hiring staff with a public or military crisis management background to be best prepared in case of a disaster.

Slide 13

PwC

Case examples cont.

14

Reducing dependency on key suppliers – Some of our larger sample companies are increasing the supply chain flexibility by increasing supply chain flexibility or integrating critical suppliers.Collaboration with peers in the industry / region to send suppliers in an affected zone – Some of our sample companies are collaborating with peers to concentrate supplies in the few available transportation means in order to send suppliers in affected zones.Preparation of ‘one pagers on country risks’ – One of our sample companies has developed a database containing ‘one pagers’ of risks in each of the countries they operate in. These risks are identified by local operations and the global headquarters reviews the one pagers periodically and defines actions accordingly.Transferring work to other sites – One of our sample companies set up a business continuity plan which allows to offload work to other sites if one of their operations is hit by a disaster.

Remote access to work – Some of our sample companies provide the tools and developed the necessary processes for employees to be able to work remotely in case access to the office is impossible.Getting to know public authorities – Some of our sample companies get to know public authorities and stress how critical it is to know your counterpart in order to collaborate in case of a disaster.Scenario planning – Some of our sample companies in Japan have started to collaborate with the government and are running scenarios to define the processes and standards which will lead to create minimum level of service (telecommunication, energy supply, lifeline services) which are necessary during a disaster.

Slide 14

PwC

Some lessons to share

1.Collaboration equals early and continuous engagement

2.Private sectors speaks a different language to Public organisations

3.Horizons of investment are long whereas Mr Market shortsighted

4.Transfer of risk is a great concern

5.Current economic drivers do not drive resilience

6.Regulatory contraints hinder collaboration

7.We have a tendency for amnesia as a species

8.PPP tends to focus on financial funding not holistic resilience

Slide 15

PwC

The future, coming soon

Slide 16

PwC

It is a new way of collaborating, on a global scale, to unlock the potential for public and private sector actors who are ready and willing to make a step forward and take leadership on disaster risk reduction.

The United Nations Office for Disaster Risk

Reduction (UNISDR) and PwC,

the founding members, join with:

• R!SE aims to convene stakeholders who have the ability and resources to influence the future direction of DRM.

• Business, Investors, Insurers, Public Sector, Education professionals and Civil Society.

The R!SE Initiative is an ambitious global

response to a daunting global challenge.

By bringing together 6 connected communities

What

How

Who

• The Economist Intelligence Unit (EIU)• Florida International University (FIU)• Principles for Responsible Investment (UNPRI)• AECOM• Willis

• as well as other companies and institutions to build a broad alliance to support the R!SE Initiative.

The R!SE Initiative

Slide 18

The overall objective of the R!SE Initiative is to make all investments risk-sensitive.

PwC 17

“The more governments, UN agencies, organizations, business and civil society understand risk and vulnerability, the better equipped they will be to mitigate disasters when they strike and save more lives”Ban Ki-moon, United Nations Secretary-General