Mother Nature, The Ultimate Regulator
Written by John Bree
Headlines like “Coronavirus Outbreak,” “Killer Cyclone”, “Catastrophic Bushfires”, and “Deadly Earthquake” are happening with alarming and increasing frequency. Unfortunately what were “once-in-a-century disasters” are taking place with frightening regularity. Extreme weather, infectious diseases, natural disasters and climate action failure are among the most destructive, impactful, and at the same time, most likely to occur global business disruption risks.
In the 2020 World Economic Forum Global Risks Report, climate related issues dominated all of the top-five long-term risks in terms of likelihood including:
- Extreme weather events
- Failure of climate change mitigation and adaptation
- Major natural disasters
- Major biodiversity loss and ecosystem collapse
- Human-made environmental damage and disaster
Additionally, in terms of impact, the World Economic Forum Global Risks Report added infectious diseases to the list of the top 10 risks along with extreme weather and natural disasters.
In today’s interconnected business ecosystem, a volatile Mother Nature has serious implications for business continuity when third-parties’ ability to perform are affected. So why, then, have so many companies failed to respond proactively to mitigate business disruption when confronted with these powerful, front-burner events? Traditionally, most third-party risk management and business continuity programs have relied on point-in-time risk assessments that have overlooked location-centric risks like natural disasters, extreme weather and disease outbreaks. But continuous monitoring of these location-based events is critical to effectively mitigate business disruption risks caused by the ultimate regulator.
The Expected Unexpected
The economic impact of the coronavirus outbreak is profound and spreading. Tourism and commerce, wherever even a single case of the virus is found, is severely impacted or grinds to a screeching halt. Major global juggernauts like Apple, Google and Hermès are sounding the alarm for serious supply shortages because of the closure of their Chinese factories and offices due to the coronavirus. The gut-punched International Air Transport Association (IATA), the trade body for the global airline industry, warned in mid-February 2020 that the reduction in air travel demand would cost the airline industry and estimated $29.3 Billion in lost revenues in 2020 alone. For the first time in more than a decade, global air travel is expected to fall. As of this writing, the virus has spread from China to 27 countries, with over 92,000 people infected and the death toll exceeding 3,100. As these numbers are rising everyday, the threat is obviously not over. As China’s president Xi Jinping warned, the coronavirus is indeed having a “relatively big impact on the economy and society.”
When It Rains, It Pours… And Floods
The tragic fires in Australia are estimated to have destroyed 18 million hectares and 5900 buildings including 2800 homes. In addition to over 30 human lives losts, inconceivably it is estimated to have resulted in the deaths of one billion animals. Australia’s devastating fire season has ended, but unbelievably the region faced another crisis as the long overdue rain resulted in flooding that has destroyed even more homes not far from where the all-consuming fires were raging. Scientists are calling the cycle “compound extremes”: one climate disaster intensifying the next. Each of these events alone is enough to profoundly affect business, but compounded the challenge of managing and mitigating business disruption has intensified.
Mother Nature – Ultimate Regulator
Oppressive regulatory fines, reputation loss and delivery delays are indeed terrible — yet they pale in comparison to the harshest penalties dealt by Mother Nature including infrastructure destruction, environmental devastation, natural wonder destruction, property loss, and even loss of life.
Heavy rain, flooding, droughts, tsunamis, hurricanes, typhoons, volcanic eruptions, geomagnetic storms, earthquakes and major catastrophic fires are more rampant than ever. As the frequency of natural disasters increases so does the challenge of managing the results as the likelihood also increases that a company could be dealing with multiple natural disasters concurrently. At the same time as a coronavirus outbreak, an interconnected company with global supply chains and third parties can easily be afflicted with a Dengue outbreak, killer cyclone or hurricane, and an infrastructure-destroying earthquake.
Obviously, in this increasing frequency, intensity and compounded risk environment, the most effective risk mitigation decisions require the most current, accurate and focused data. Effective risk monitoring needs to include coverage of location-based, natural disaster risks. When others are left reeling from these devastating and often tragic events, proactive business leaders use real-time and continuous risk intelligence to make the best proactive business disruption mitigation decisions to maintain business continuity, reduce downside risks and strengthen their sourcing operations.
All success is a function of time, and speed is critical, especially when trying to mitigate business disruption caused by a natural disaster. But lack of data is not the problem. Data is ubiquitous in today’s internet-friendly era. However, the sheer quantity of data in any catastrophic event can freeze professionals in place with information overwhelm. The best risk mitigation decisions happen when organizations have access to the most current, reliable, validated and focused intelligence possible. Timely, reliable and focused data expedites the mitigation and response timeline.
Supply Wisdom is the solution that today’s business leaders need to effectively mitigate the risks associated with natural disasters, severe weather events and infectious disease outbreaks. Our ‘always-on’ risk monitoring provides our subscribers with an early warning of these events and critical updates as the events unfold. As our alerts are 100% curated, our subscribers don’t waste time sifting through noise and false positives to find relevant news and, as a result, can concentrate their efforts on effective risk mitigation. Additionally, our alerts provide actionable, expert risk mitigation guidance to further enable proactive risk mitigation. Our alerts are easily shared to support an effective cross-functional risk mitigation response.
But our solution goes far beyond natural disasters, extreme weather events, and disease outbreaks with the most comprehensive risk framework available in the market today. Supply Wisdom monitors 14 third-party and location-centric risks categories across 300+ parameters. Our open APIs enable seamless integration of our real-time and continuous risk intelligence into any risk platform to get you up and running quickly.
To experience for yourself how Supply Wisdom’s continuous and real-time risk intelligence and monitoring can elevate your current third-party risk management program, request a demo today.
About the Author
John Bree is Chief Evangelist for Supply Wisdom. Prior to joining Supply Wisdom, John held senior positions in New York, Tokyo, Singapore and London for Citi and Deutsche Bank covering corporate, investment, commercial and consumer banking operations. John has managed global staffs and corresponding budgets in multiple locations and delivered cost efficient and operationally effective programs ensuring compliance with local and global regulatory requirements. Through interaction with Business Units, Internal Audit and regulatory agencies, John resolved MRIAs, MRAs and Findings, on time and without penalty. John is a member of the Shared Assessments US and UK Steering Committees and Co-Chair of the Financial Industry Vertical Strategy Group. He has authored numerous articles and blogs on Third-Party Risk Management and Governance in the Digital era.