Apart from fire and natural disasters, technology-led risks may also impact businesses
Nearly 300 fire incidents have erupted in Mumbai alone since the devastating blaze in Kamala Mills Compound on December 28, 2017.
Twenty-nine Indian cities and towns, including Delhi and capitals of nine states, fall under 'severe' to 'very severe' seismic zones i.e. earthquake prone, according to the National Centre for Seismology. Also, India ranks 8th in the Global Terrorism Index out of 162 countries.
These and many more such statistics highlight the kind of risks we are surrounded by all the time.
As per the FICCI-Pinkerton India Risk Survey (IRS) 2017 that ranks various risks that pose a threat to India Inc, information and cyber insecurity' top the list of risks followed by terrorism and insurgency. The survey ranks natural hazards as the fourth highest risk to businesses, followed by fire at the fifth position. The important to note is that fire has moved up by three positions from the last year’s ranking.
Today businesses of all sizes cannot ignore the impact of various risks, which can threaten the very existence of business through catastrophic means. Whilst traditional risks like fire, natural catastrophes are becoming more challenging, technology-related risks, process failures, impact of regulatory changes and emerging regulations are dominating many of the boardroom discussions too. These risks not only pose threats but also have the potential to wipe off a substantial chunk of the Profit and Loss statements of corporates of meaningful size. Small and mid-size corporates are obviously far more vulnerable.
Are businesses doing anything to protect against these disasters?
Preparing for any disaster needs combination of complex efforts through various stakeholders which are both internal and external to the business. There is a greater recognition amongst all businesses today that all stakeholders must work together including govt agencies to reduce the threat of disasters.
National Critical Information Infrastructure Protection Centre (NCIIPC) in India is one such example through which the government is dealing with challenges in cyber security that target the overall security of India’s Critical Information Infrastructure.
New emerging technologies are changing the risk landscape dramatically and permanently, representing both an opportunity and a challenge for businesses. On the one hand, technological innovation provides new ways to mitigate risk. On the other it creates new perils, which are emerging as a top concern for businesses globally.
Whilst there are many common risks facing all business, each industry has its unique risks which needs tailor-made responses. Each organization today needs well thought and debated structured risk management approach to prevent, minimize the impact of various risks including plans to reduce the impact on business post striking of disaster.
Despite the best of risks management practices, businesses will continue to be exposed to traditional & emerging risks. Therefore, well documented and communicated business continuity plan post-striking of major risks is of utmost importance irrespective of size of the organisation.
Buying the right kind of insurance coverages with limits that are suitable to organization needs to meet low, medium, large and catastrophic losses forms an important part of disaster readiness. Insurance industry today is faced with many challenges of designing the products that will respond to emerging risks. So, it is important for the business to analyse the insurance needs and purchase strategy on regular basis.
The role of external advisors, especially professional insurance brokers and risks consultants is assuming greater importance for many of the industries and it needs to be integral part of risk management strategy.
When it comes to disaster readiness, many of the Indian business today are certainly scoring higher compared to its position a decade earlier. However, a lot needs to be done further in a short span of time if India were to be among the top three economies of the world.The writer is Chief Broking Officer, Head-Reinsurance & Aviation at Global Insurance Brokers