Without a common purpose, financial and economic resilience to natural disasters is challenged

Losses linked to natural disasters are not just a risk for the people and local economies that are directly impacted. They are an issue of sustainable societal development for us all. And the issue is not just a seasonal one.

We saw, in the run up to the Paris Climate Agreement, assessments by the scientific community demonstrating high levels of consensus that the occurrence and intensity of natural disasters will continue to increase.

Countries that lie in disaster-prone hot beds are in a chronic struggle to thrive despite  frequent battering by natural catastrophes. These vulnerable nations work to build economies that can absorb impacts from hazards, but existing disparities in wealth have caused some countries to languish in a downward spiral of economic and human losses.

Three forces – globalisation, ‘financialisation’ and technology – have driven immense progress over the past seventy years. The combined impact of these forces have fundamentally changed the economic ‘engine’ that was intentionally and successfully designed on the basis that financial success would deliver societal progress.  However, today’s system is not as effective as it once was, resulting in increasing disparities in wealth and opportunity, and the rise in populist movements as just two examples.

The modern economy has compounded the vulnerabilities of nations and communities that are subject to frequent natural catastrophes.

Countries and businesses have long focused on delivering financial outcomes with less emphasis on issues such as contribution to climate change. New technology and the rise of automation in the workplace makes business more efficient, but has excluded workers without the “right skills” from societal progress. In some cases, forcing workers into hazard zones out of pure necessity. They might be operating in low-skill agriculture jobs, pushed into disaster-prone terrain, or could be working on the fringes of big cities, living in modest homes in low-lying flood areas.

The introduction and adoption of the UN’s Sustainable Development Goals has shifted focus at the national and corporate levels. GDP growth or financial performance is no longer the only measure of success, and business leaders are increasingly concerned with their impact on broader societal issues. This transformation could arise partly from a desire to do no harm, but also as a form of self-preservation. Companies with a narrow vision of success risk market backlash and threaten their own sustainability if their supply chain relies on materials or workers from disaster-prone communities. There is increased interest from private, international donors to provide funding for humanitarian preparedness and response efforts. Countries have invested in “skills for the future” educational programs to upskill their workforce.

While the world is threading towards a coordinated, global response to climate change, the burden of economic recovery and resilience has fallen on individual nations, and local communities within those nations. Countries have invested in disaster preparedness technology and training (PDF), like early warning systems (EWS) that can detect tremors and automatically broadcast warnings through multiple channels. They have implemented local policy shifts to enable rapid recovery, adopted adaptive financing solutions, and invested in blockchain or biometric data to distribute insurance payouts or humanitarian aid. They have also worked to diversify their economies by attracting alternative sectors and building out online sales channels. These are strong examples of how a holistic approach and common purpose can mean both mitigating unintended adverse consequences of change and maximizing positive social and environmental benefits.

It is also reflected in PwC’s work with the T20 taskforce on an international financial architecture for stability and development, which shows there is room to connect this progress at a local level to international agendas and to multinational companies that desire to contribute to society more broadly.

The international community should collaborate to develop an overarching framework for private sector engagement in resilience and recovery. Multilateral organisations and governments can support vulnerable countries through the implementation of innovative solutions that mitigate the economic and financial impact of natural disasters.  Multinational private sector leaders can provide much needed rapid economic stimulus by working through local chambers of commerce, industry associations, and networks to identify and make connections with local business partners.

When considering the need for a common purpose, it is important not to lose sight of the relationship between the macro and the micro, or the fact that the many challenges experienced today are symptoms of underlying systemic issues that will shape the long-term tomorrow.  

With thanks to contributing team members from the PwC global network: Tania Yue, Joanna Robinson, PwC Barbados, Amy Parks, PwC US, and Tapas Sanyal PwC India.