Planning for Man-Made and Natural Disasters
Force Majeure: How to Plan for Man-Made and Natural Disasters
January 18, 2016
Primary Author and Team Leader following the Philippines – Cameron Torrens
Keywords: Philippines, short-term preparedness, location, Mindanao region, Marikina, proactive planning
Due to the frequent occurrence of natural disasters affecting the Philippines annually, firms should be justifiably hesitant when investing in the region. Recently, natural disasters have become increasingly multi-faceted, for example an earthquake and a tsunami, which have resulted in extremely expensive rehabilitation projects. There is a dire need for the Philippines to recognize natural disasters as a potential obstacle to long-term sustainable development. However, the federal government currently places widespread emphasis on post-disaster relief and short-term preparedness, mainly in forecasting and evacuation, rather than focusing on mitigation or post-disaster support for economic recovery, such as livelihood regeneration or tax breaks to affected businesses.
Since budgetary restraints have rendered the federal government incapable of implementing required changes to fully address a variety of disaster scenarios, firms will need to engage in alternative avenues to secure their investments and reduce their vulnerability. First, firms need to establish relationships with NGOs such as UNICEF and the Red Cross. Maintaining an open dialogue with NGOs will help to ensure the safety the business and its employees. Additionally, industry leaders should consider pooling resources into disaster relief funds. It would be up to the discretion of the firm whether to address this matter individually or collectively, as well as potentially utilizing the DICT as a resource. Contingency plans will also need to be put in place to address the risk of nightmare scenarios, when the majority of the business is affected by a disaster, occurring. Lastly, firms should contemplate investing into surrounding infrastructure projects, such as having the foundation of a structure raised or implementing more efficient sewage pipelines to reduce the impact of flooding.
Additionally, where a firm is located in the Philippines is the overarching variable that intertwines natural disasters with that of man-made disasters. Man-made disasters refer to terrorist activity, civil disturbance, and labour strikes. Businesses may look to relocate to the southwest of the country to reduce the frequency of natural disasters, however, there is a substantial increase in political instability and violence in this region. The Mindanao region is a melting pot of breakaway rebel groups, pan-Asian militant Islamist groups and communist rebels rubbing shoulders with mercenary kidnapping groups and clan militias. In 2008 alone, regular eruptions of violence have displaced 600000 residents from their homes. Although disputes between the Philippines government and the Mindanao region have declined, spill over effects from the displacement of Filipino citizens have caused civil disturbances to occur increasingly occur in the north of the country as well. If a firm where to locate to southern Philippines, regardless if it is not directly in the Mindanao region, it would come with the recommendation of hiring a private security firm to protect firm assets.
The city of Marikina, located in the vicinity of the capital Manila, has been a leader for which many cities are following, in adopting substantive change to prevent man-made and natural disasters. The mayor of Marikina has reallocated federal and provincial funding towards calamity funds with the goal to ensure efficient and proactive planning. Emphasis has been placed on prevention, mitigation and preparedness. This has resulted in a positive business environment for firms, demonstrated by an increase in business relocation to the city. Additionally, it has enhanced the security felt by community, which has in turn reduced civil disturbances. Because of this, the federal government has given incentives to Marikina as well as other cities to adopt these policy measures. Firms should look to invest in regions where proactive security approaches are being enacted, as it will reduce the need for the firm to absorb as much of the cost of disaster funds and prevention procedures.
With all the risks that currently effect businesses in the Philippines, natural and man made disasters remain one of great importance when investing in the region due to the likelihood and frequency of events. Firms will need to adopt policies that while perhaps limiting short-term profits will ensure security and longevity. Although this risk cannot be completed mitigated, installing the necessary proactive measures, as well as wisely choosing where to be located, will reduce the costs of this risk tremendously.
