Japan and the US have the highest economic exposure to natural hazards.
But, new research from Maplecroft concludes that the emerging economies of China, India, Philippines and Indonesia pose the most risk to investors because these countries lack capacity to combat the impacts of a major disaster.
According to Maplecroft's Natural Hazards Risk Atlas 2011 (NRHA), China, India, Philippines and Indonesia are not only at high' and extreme risk' from economic exposure to natural hazards (earthquakes, tsunamis, tropical cyclones, floods, drought, etc); they also lack the resilience to mitigate the disruption a major event would have on their societies and economies.
Maplecroft points to Japan to illustrate the point. The UN states that Japan has nearly 40 percent more people exposed to tropical cyclones than the Philippines. Yet, if both countries experienced similar sized cyclones, fatalities in the Philippines would be 17 times higher than in Japan.
What's more, due to the rising economic power of those major emerging countries, the occurrence of a major natural disaster there may also have global economic impacts and severely affect the supply chains of business. Maplecroft advises investors who are currently diversifying portfolios into Asian countries to factor in natural hazards risks into their investment strategies.
"Companies which are dependent upon a global network of suppliers are inevitably likely to be exposed to disruption and financial losses following the occurrence of a natural disaster," said Principal Natural Hazards Analyst at Maplecroft, Helen Hodge. "Organizations need to monitor risks and build their own organizational resilience. Just as the strength of a country's resilience will determine their economic recovery, the strength of business resilience will be reflected in their management of business continuity and recovery."
More information on the study is available at Natural Hazards Risk Atlas 2011.