Widespread disruption and business failure in the UK economy can be staved off for at most a week in the case of a major terrorist attack. That’s the key finding of a recent Chatham House report.
The report also states that:-
*Governments and businesses are under-prepared to respond to high-impact, low-probability (HILP) events, with worst-case scenarios rarely factored into contingency planning
*the current fragility of the global economy leaves it particularly vulnerable to unforeseen shocks – as much as 30% of GDP for developed countries can be directly threatened by crisis, especially in key sectors such as manufacturing and tourism which are vital for many countries’ economic recovery and growth
*a one week disruption is the maximum tolerance of our ‘just-in-time’ global economy: beyond this threshold, costs start to escalate rapidly as production stalls and businesses start to fail… yet for business, deviating from the ‘just-in-time’ model means potentially offsetting short-term profitability
The report’s author Bernice Lee explained: “The frequency of HILP events in the last decade, such as Hurricane Katrina, the Deepwater Horizon oil disaster and the nuclear crisis and tsunami in Japan signals the emergence of a new ‘normal’ – the beginning of a crisis trend. Industries – especially high-value manufacturing – may need to re-consider their just-in-time business model in an interdependent world.”
Lee continued: “Contingency and business planning often assumes the return of status quo ante post-crisis, but this approach will be inadequate in a world of complex economic and social risks when there is no return to business-as-usual practices. Slow-motion crises like climate change and water scarcity will also bring additional risks and vulnerabilities, and experts agree this trend is only set to continue.”
The report considers how Governments and businesses (and indeed, the global economy) could be made more resilient and the role of communications improved in a crisis. Reacting too slowly can cede control of the message to other stakeholders who have quite different interests.
It’s also Chatham House’s firm belief that much more could be done to harness the power of social networks in a crisis.