@Risk

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. (more…)

Is the world becoming more risky than it has ever been?

On the one hand . . .

It’s only August, and analysts already have concluded that natural hazards have been more costly to the world economy in 2011 than in any other year on record. Researchers estimate that the tsunami in Japan, tornadoes in the US, the Christchurch earthquake and flooding in Australia all have contributed to a massive $265 billion –and that’s for just the first six months of the year.

In addition to natural hazards, cyberattacks are on the rise. Counterfeiting continues to flourish. Terrorism remains a significant threat. Do I even need to mention the wild swings on Wall Street? The list of risks goes on and on.

But, on the other hand . . .

Some may argue that there’s actually less risk than before. After all, risk managers are growing increasingly sophisticated about measuring and mitigating threats. And, there are other significant reasons for optimism. Both men and women in the US are living longer. Violent crime is down. The number of US property crimes has decreased, and motor vehicle fatalities have fallen, too.  (See infographic here.)

So, which is it? Do you think the world is becoming more risky, or less? (more…)

US technology companies are growing increasingly concerned about supply chain issues.

New research by BDO USA, LLP found that US and foreign supplier concerns/supply chain issues are now considered a top risk factor by 86 percent of the 100 largest publicly traded technology companies analyzed –that’s up 15 percent from last year’s survey results.

Even so, supply chain issues came in tied for sixth place on the list of top 10 risk factors. Here’s the complete list:

• Competition, consolidation and pricing pressures (97 percent)
• US general economic concerns (96 percent)
• Federal, state or local regulations (96 percent)
• Failure to properly execute corporate strategy (93 percent)
• Failure to develop or market new products or services (88 percent)
• Legal proceedings (86 percent)
• US and foreign supplier/vendor concerns, supply chain issues (86 percent)
• Management of current and future M&A or divestitures (85 percent)
• Threats to international operations (85 percent)
• Predicting customer demand and interest, innovation (85 percent)

The list of the top 20 risk factors cited by the 100 US tech companies in the survey is available here.

BDO USA also found that:
(more…)

Manufacturers and other businesses that rely on Japanese components and/or products are beginning to realize that the earthquake, tsunami and nuclear crisis that have devastated Japan are likely to affect their supply chains for several weeks –and possibly even longer.

For example, The New York Times is reporting that Nissan has at least nine Japanese vehicle and parts factories and 35 suppliers that have been disrupted by the disaster. In the article, the chairman of Nissan Americas says he can offer no guess on the financial toll or when the company would return to normal.

Likewise, Honda has told US dealers that it will delay taking orders for Japanese-made cars and trucks that they would normally receive in May until the company has a better idea of its ability to ship them. And Toyota plants remain shuttered, as well. (more…)

Friday’s devastating earthquake and tsunami will have broad economic implications.

For instance, The Detroit News is reporting that Japan’s leading automakers are suspending production at their domestic plants on Monday as they assess the condition of their factories and parts suppliers.

Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co.have suffered damage at more than a dozen plants and facilities.

Toyota says that it is now conducting a detailed survey of each plant to determine the extent of any damage. The company is also assessing the situation at our suppliers, dealers and the impact on North American import vehicles.

Updates from Nissan are available here.

We’re likely to see shutdowns in the high tech and semiconductor manufacturing industry –and others –as well. (more…)