Wednesday, May 8, 2013
Despite recognizing natural catastrophes as a growing threat, many companies have insufficient mitigation plans in place, and considerably more effort will be required before the risks of natural catastrophes are adequately controlled, according to a global survey by Zurich Insurance Group.
The study, conducted in January 2013 by the Economist Intelligence Unit and sponsored by Zurich, polled 170 executives from medium-sized and large companies around the world.
The findings confirm a widespread perception among organizations that natural catastrophes are becoming both more frequent and more severe, and that commensurate importance is assigned to assessing and mitigating the associated risks.
Survey respondents were asked to rate the severity of potential disruptions to distinct areas of their business operations in the event of a natural catastrophe occurring within the next three years.
Combining the top two most severe ratings on a scale of five puts continuity of IT support as facing the most severe disruption (46 percent), followed by supply-chain logistics (44 percent) and business-critical functions (44 percent).
While most companies have taken some steps to mitigate associated threats to IT systems, the adoption of systematic, integrated approaches to risk management is surprisingly low, the survey found.
Fewer than half (45 percent) of the companies surveyed use some form of scenario analysis to assess the risks of natural catastrophes.
Moreover, while a large majority of respondents say they have addressed the challenges of mitigating IT risks from natural catastrophes, only 31 percent say that their risk-management strategy explicitly addresses the interconnectedness of different types of risk.
Zurich says the findings suggest that while businesses are aware of the challenges they face, most have not yet developed a holistic approach to confronting these risks.
Company executives consider inadequate budgets for business-continuity planning and/or disaster recovery as the biggest obstacle to adopting more effective risk management strategies. An inability to present compelling business cases for risk management initiatives is cited as another significant hurdle.
Canadian Underwriter has more on this story.