Natural disasters top of mind in risk survey

Natural disasters top of mind in risk survey

24 January 2011 - Marsh Ltd’s fourth biennial report into the risk management practices of New Zealand businesses, has revealed that two of the top five risks of concern in 2010 were related to natural disasters.

This is somewhat unsurprising given the major events that occurred last year - in particular the Canterbury earthquake. Whilst only 17% of the survey respondents originated from the Christchurch region, the earthquake has clearly impacted businesses across New Zealand and been a strong reminder of the importance of having good business continuity plans in place.

The top risk was “disruption to your business following a major incident, such as fire, earthquake, flood, act of terrorism”, followed by “destruction of assets by fire, flood or some other natural disaster”.

Despite the concern over these risks, 16.9% of respondents still do not have a plan in place to manage business disruption from a natural disaster. On the other hand, 95.4% tell us that their assets are protected should something occur.

This would suggest that some organisations believe that as long as their assets are insured they are in good stead if something happens. However, if we have learnt anything from the Canterbury earthquake, it is not so much the damage to the assets of a business that can cause it to topple but more the ongoing impact to revenue and income as a flow on from the physical damage.

Respondents were asked if they had suffered a high impact financial loss in the last three years. Of the 20.8% of respondents who said yes only 46.7% had insurance policies that covered the loss.

“If 2010 proves anything it is that the ‘unexpected’ does actually happen”, says Grant Milne, Country Head, Marsh Ltd. “The survey results reinforce the importance of not only having the right insurance policy in place to help cover your risks, but also having good risk management strategies to support them. It is also a reminder that insurance policies need regular review to help ensure that you are not left out of pocket in the untimely event of a disaster.”

Emerging risks

Organisations were also asked what they saw the main future / emerging risk issues being that would have an impact on their business in the next 24 months.
The major disasters of 2010 still weigh heavily on peoples’ minds here, with the risk of most concern in the next two years being around business continuity.

Increasing corporate governance requirements, which was the top emerging risk in the 2008 survey, was ranked second in the 2010 survey and oil spike / prices rises coming in third.

Respondents were also asked how these key risks were being managed, who is responsible for risk in their organisation and what external risk advice they seek.

The Marsh Survey of Risk was conducted in December 2010. A full copy of the survey report can be downloaded from www.marsh.co.nz or by clicking here.

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About Marsh
Marsh, the world’s leading insurance broker and risk adviser, has over 24,000 employees and provides advice and transactional capabilities to clients in over 100 countries. Marsh is a member of Marsh & McLennan Companies, a global professional services firm with over 50,000 employees worldwide and annual revenue of $10 billion, which is also the parent company of Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of HR and related financial advice and services; and Oliver Wyman, the management consultancy. Its stock (ticker symbol: MMC) is listed on the New York , Chicago and London stock exchanges.
Marsh has been in New Zealand since 1958 and has over 240 staff in seven offices around New Zealand . The Marsh New Zealand website is www.marsh.co.nz.

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