Third Party Risk Management - Consultancy, Assessment & Advisory

Risk Management & Natural Disasters – Mother Nature, The Ultimate Regulator

Shared Assessment Natural Disasters Third Party Risk Management

Headlines like “Coronavirus Outbreak,” “Killer Cyclone”, “Catastrophic Bushfires”, and “Deadly Earthquake” are happening with alarming and increasing frequency. Unfortunately what were “once-in-a-century disasters” are taking place with frightening regularity.

Extreme weather, infectious diseases, natural disasters and climate action failure are among the most destructive, impactful, and at the same time, most likely to occur global business disruption risks.

In the 2020 World Economic Forum Global Risks Report climate related issues dominated all of the top-five long-term risks in terms of likelihood, including:

Additionally, in terms of impact, the World Economic Forum Global Risk Report added infectious diseases to extreme weather and natural disasters in the list of the top 10 risks.

In today’s interconnected business ecosystem, a volatile Mother Nature has serious implications for business continuity when third parties’ ability to perform are affected. So why, then, have so many companies failed to respond proactively to mitigate business disruption when confronted with these powerful, front-burner events? Traditionally, most third-party risk management and business continuity programs have relied on point-in-time risk assessments that overlooked location-centric risks like natural disasters, extreme weather and disease outbreaks. But continuous monitoring of these location-based events is critical to effectively mitigate business disruption risks brought on by Mother Nature.


The Expected Unexpected

The economic impact of the coronavirus outbreak is profound and spreading. Tourism and commerce, wherever even a single case of the virus is found, is severely impacted or grinds to a screeching halt. Major global juggernauts like Apple, Google and Hermès are sounding the alarm for serious supply shortages because of the closure of their Chinese factories and offices due to the coronavirus. The gut-punched International Air Transport Association (IATA), the trade body for the global airline industry, warned in mid-February 2020 that the reduction in air travel demand would cost the airline industry and estimated $29.3 Billion in lost revenues in 2020 alone. For the first time in more than a decade, global air travel is expected to fall. As of this writing, the virus has spread from China to 27 countries, with over 92,000 people infected and the death toll exceeding 3,100. As these numbers are rising everyday, the threat is obviously not over. As China’s president Xi Jinping warned, the coronavirus is indeed having a “relatively big impact on the economy and society.”


When It Rains, It Pours… And Floods

The tragic fires in Australia are estimated to have destroyed 18 million hectares and 5900 buildings including 2800 homes. In addition to over 30 human lives lost, inconceivably it is estimated to have resulted in the deaths of one billion animals. Australia’s devastating fire season has ended, but unbelievably the region faced another crisis as the long overdue rain resulted in flooding that has destroyed even more homes not far from where the all-consuming fires were raging. Scientists are calling the cycle “compound extremes”: one climate disaster intensifying the next. Each of these events alone is enough to profoundly affect business, but compounded the challenge of managing and mitigating business disruption has intensified.


Mother Nature – Ultimate Regulator

Oppressive regulatory fines, reputation loss and delivery delays are indeed terrible — yet they pale in comparison to the harshest penalties dealt by Mother Nature including infrastructure destruction, environmental devastation, natural wonder destruction, property loss, and even loss of life.

Heavy rain, flooding, droughts, tsunamis, hurricanes, typhoons, volcanic eruptions, geomagnetic storms, earthquakes and major catastrophic fires are more rampant than ever. As the frequency of natural disasters increases so does the challenge of managing the results as the likelihood also increases that a company could be dealing with multiple natural disasters concurrently. At the same time as a coronavirus outbreak, an interconnected company with global supply chains and third parties can easily be afflicted with a Dengue outbreak, killer cyclone or hurricane, and an infrastructure-destroying earthquake.

Obviously, in this increasing frequency, intensity and compounded risk environment, the most effective risk mitigation decisions require the most current, accurate and focused data. Effective risk monitoring needs to include coverage of location-based, natural disaster risks. When others are left reeling from these devastating and often tragic events, proactive business leaders use real-time and continuous risk intelligence to make the best proactive business disruption mitigation decisions to maintain business continuity, reduce downside risks and strengthen their sourcing operations.

All success is a function of time, and speed is critical, especially when trying to mitigate business disruption caused by a natural disaster. But lack of data is not the problem. Data is ubiquitous in today’s internet-friendly era. However, the sheer quantity of data in any catastrophic event can freeze professionals in place with information overwhelm. The best risk mitigation decisions happen when organisations have access to the most current, reliable, validated and focused intelligence possible. Timely, reliable and focused data expedites the mitigation and response timeline.


The Solution

Today’s business leaders need to be able to effectively mitigate the risks associated with natural disasters, severe weather events and infectious disease outbreaks. To do so, organisations should find a solution that enables them to efficiently detect and effectively respond to events such as these.

The solution should have:

Shared Assessments members are a valuable resource and available to provide information and also be a good sounding board. Shared Assessments will be hosting Enterprise Resilience: The Pandemic Effect, a webinar where attendees will learn from leading experts how resilient organisations persevere in the face of supply chain, manufacturing, workforce and operational disruptions. Register here.



This article was originally published by Shared Assessments and is shared with their kind permission,

About The Author

John Bree is Chief Evangelist for Supply Wisdom™ ( Prior to joining Supply Wisdom, John held senior positions in New York, Tokyo, Singapore and London for Citi and Deutsche Bank covering corporate, investment, commercial and consumer banking operations. John has managed global staffs and corresponding budgets in multiple locations and delivered cost efficient and operationally effective programs ensuring compliance with local and global regulatory requirements. Through interaction with Business Units, Internal Audit and regulatory agencies, John resolved MRIAs, MRAs and Findings, on time and without penalty.

John is a member of the Shared Assessments US and UK Steering Committees and Co-Chair of the Financial Industry Vertical Strategy Group. He has authored numerous articles and blogs on Third-Party Risk Management and Governance in the Digital era.