Third Party Oversight

Force Majeure Risk Management: Are You Prepared for Unpreventable Risks?

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It’s easy for business leaders to dismiss the importance of monitoring location-based risks such as natural disasters, since in many cases those risks are not preventable or predictable. For instance, why worry about earthquakes, floods or fires if it’s impossible to prevent them?

It’s important to remember that although the occurrence of these types of geo-political risks is out of your control, your reaction to these risks and your ability to recover from them is completely within your control. An effective risk management program provides a disciplined framework to identify, monitor and react to any and all risks that could potentially impact your global operations, including unpreventable events. Your ability to successfully recover from a natural disaster, political unrest, or other disruptive event relies on early detection as well as well-rehearsed disaster recovery and business continuity plans in order to minimize impact to operations.

The Metro Manila Earthquake Drill

Earlier this week, our Supply Wisdom Alerts service reported on the Metro Manila Earthquake Drill. This was an effort by the government to prepare residents and businesses of metro Manila for a possible high magnitude quake.

Experts have warned that Metro Manila is at risk of a powerful earthquake due to the West Valley Fault, a 100-kilometer fault line that cuts across the highly populated city and outlying provinces. This fault has the potential to trigger an earthquake with magnitude of up to 7.2, an event that would cause significant damages and fatalities.

Officials took a proactive approach to preparing against this risk by issuing the earthquake drill on July 30. The drill staged a real-world scenario, complete with sirens, evacuations, and other simulations, in order to test existing emergency preparedness plans and assess areas for improvement to ensure a faster and more efficient recovery, in the event of such a disaster.

This Manila earthquake drill serves as an example that even when exposed to risks and events outside of your control, there are certain actions and precautions that can be taken to prepare against these risks. Businesses can build disaster recovery plans and business continuity plans that specifically address location-specific risks, including steps to relocate operations in case of service disruption. Having a disaster recovery plan in place is only part of the solution. That plan must be put to the test so that gaps can be identified and addressed ahead of a real-world event.

Although you can’t eliminate or reduce every risk that faces your business, you can prepare for and manage all risks – even Force Majeure events – with a comprehensive risk management program in place.