Impact of Super Typhoon Meranti in the province of Batanes, Philippines, 2016. Loss of communications in disasters can have a cascading effect, causing widespread business disruption.
(Source: PDRF 2016)
Small and medium enterprises (SMEs), includ-ing small-scale agriculture, are the backbone of many economies worldwide, and very much so in the Philippines and neighbouring South-East Asia. SMEs range from micro-businesses such as sole retailers in street markets, to manufacturing plants with significant capital investments in equip-ment and workforce training. They are recognized by the Asia-Pacific Economic Commission (APEC) and the Association of Southeast Asian Nations (ASEAN) as central to socioeconomic development in South-East Asia111, which is the global region most exposed to natural hazards. Their resilience to disas-ters is therefore also central to sustainable develop-ment. In the Philippines, 99.56% of businesses are micro, small and medium enterprises (MSMEs), and they provide 62.85% of all jobs.112
When disasters occur, a common image of the private sector is of large corporations helping with equipment or relief supplies. However, SMEs rarely have significant resources to offer others in this way, and they are often not part of business networks such as chambers of commerce. SMEs are embed-ded in their rural and urban communities, sharing the same risks from natural hazards as their neigh-bours. They are also at risk from fires, and chemi-cal, technological and environmental hazards (as well as potentially being a source of such hazards).
They are set apart from their residential neighbours in that, in a globalized economy, SMEs are increas-ingly susceptible to systemic risks related to supply chains and access to markets from events that may occur at a great distance away.
Previous GARs and a range of other reports have documented the systemic impacts of the 2011 Bangkok floods on manufacturing supply chains in South-East and East Asia113. Flooding in and around Bangkok triggered a cascading regional
111 (ASEAN 2015, 2016–25); (APEC 2013); (APEC 2014); (APEC 2015a); (APEC 2015b)
112 (Almeda and Baysic-Pobre 2012); (Philippine Department of Trade and Industry 2017)
113 (UNISDR 2013); (UNISDR 2015);
system. Most SMEs that the partnership works with have never done this kind of risk-informed planning in the past.
Soon after it began in 2009, PDRF was formally recognized as the private sector coordinator to work with the Government.116 A decade later, it has evolved into the major umbrella organization of the private sector for disaster preparedness, relief and recovery. PDRF gained new impetus to support SMEs from a 2015 regional project on strengthen-ing disaster and climate resilience of SMEs in Asia, with the intergovernmental organization the Asian Disaster Preparedness Center (ADPC) and other partners.117
As part of the SME resilience project, a survey of MSMEs in the Philippines indicated that, although owners were aware of risks from natural hazards, few MSMEs had contingency response plans, business continuity plans, insurance or financial resources that would see them through a major event such as a local destructive hurricane or earthquake.118 Systemic or cascading risk from hazard events occurring elsewhere was not part of their calculations. Most of them reported that they recovered from disasters by working longer and harder, and often using informal loans for recovery capital. Essentially, they were starting again each time a disaster hit, often with additional debt. In the hazard-prone territory of the Philippines, this meant they could not grow or build a secure busi-ness. MSME owners epitomized, in their individual lives, the premise that disasters reverse develop-ment gains.
In the same project, an analysis of the enabling environment made up of legislative and policy frameworks in the Philippines was conducted. It revealed that although there was a series of govern-ment agencies responsible for MSME developgovern-ment, small business financing, DRR and CCA, there were no clear mechanisms to bring these together to support MSME resilience against natural and mixed hazards and systemic risk. In a sense, Philippine MSME resilience was “everybody’s business” and
“nobody’s business”, and yet the situation clearly required a systems response.119
impact because so many components essential to manufacturing in countries such as Japan were made there. The disruption of Bangkok manufac-turing through loss of electricity supply, no access to their premises and flood damage blocked the supply chain. Most of the disrupted suppliers in Thailand were SMEs that lacked resilience to flood hazards. Few SMEs had contingency plans or alter-native premises to relocate stock or plant, some had sensitive equipment and supplies at ground level and few had relevant insurance cover. Many that did not have access to capital or recovery loans never re-opened their doors.114 In the delta city of Bangkok, which is close to sea level, and in a country where SMEs are the majority employ-ers, these flood impacts were the realization of a series of risks that, like many systemic risks, seem obvious in hindsight, but were not perceived fully until the impact occurred.
Despite the negative impact, the experience of the 2011 floods has also had a positive cascad-ing effect in the region, generatcascad-ing new research and partnerships among the private sector, govern-ment and civil society for private sector and SME resilience. These floods and other disasters in South-East Asia have shown that it is not only large multinational enterprises that face systemic risks in the global economy, but also much smaller and apparently local enterprises, and therefore the supply chains that operate among them.
The Philippine Disaster Resilience Foundation (PDRF) the country’s primary private sector coor-dinator for disaster resilience – is working with the Government and other partners to offer train-ing on business continuity planntrain-ing and also other disaster resilience programmes for SMEs.115 In just a few years, this partnership has trained around 7,000 enterprise owners throughout the Philippines.
The training considers risks to business continu-ity from the direct impacts of natural and techno-logical hazards, the indirect or systemic impacts of hazards (e.g. power blackouts, loss of communica-tions, breakdown in transport systems and supply chains) and the more traditionally recognized risks to business continuity such as economic reces-sion and other shocks through the global financial
Presentation during the Train for Business Resilience Course, Tuguegarao, Philippines, 2018 (Source: PDRF 2018)
The Government of the Philippines promptly took up the challenge. Together with ADPC, it convened relevant government and private sector organiza-tions to agree a road map intended to improve government and private sector collaboration across sectoral silos, to support Philippine MSMEs to move towards resilience to the range of shocks they are
likely to experience.120 The MSME Resiliency Core Group was formalized in July 2016, made up of a diverse group of government and private sector agencies: the Bureau of Small and Medium Enter-prise in Development of the Department of Trade and Industry; the Office of Civil Defense; the Phil-ippine Chamber of Commerce and Industry; the
Philippine Exporters Confederation; the Asia-Pacific Alliance for Disaster Management, Philippines; the Employers Confederation of the Philippines; the Department of Science and Technology; the Depart-ment of Interior and Local GovernDepart-ment; PDRF; and ADPC. The group is continuing its work and has
114 (ADPC 2014); (ADPC 2017d); (Haraguchi and Lall 2015) 115 (PDRF 2019)
116 (Philippines 2010)
117 Supported by Asian Development Bank, Deutsche Gesell-schaft für Internationale Zusammenarbeit GmbH within the framework of the Global Initiative on Disaster Risk Manage-ment, and Canada.
118 (ADPC 2017b) 119 (ADPC 2017a) 120 (ADPC 2017c) 121 (ADPC 2017a)
assigned various organizations to lead implemen-tation of different themes, nationally and in the regions.121 It is under this core group that PDRF plays a leading role in business continuity aware-ness and capacity-building.
The idea of supporting individual SME resilience has also expanded to the regional level, with PDRF and others joining the Asian Preparedness Partner-ship (APP), launched in 2017. Adopting a “network of networks” approach, APP aims to improve networking, strengthen interactions and partner-ships, share knowledge and resources among governments, networks of local humanitarian orga-nizations, and private sector networks.122 With ADPC as its Secretariat, APP has already formalized national preparedness partnerships in Cambodia, Myanmar, Nepal, Pakistan, the Philippines and Sri Lanka.123
A positive cascade of risk reduction awareness trig-gered by the Bangkok floods has thus permeated government policy and action and private sector engagement in other countries in the region. In the Philippines, it has energized new ways of working in
“systemic risk reduction” to tackle a broad spectrum of local and regional disaster risks that affect SMEs’
business continuity and their contribution to socio-economic development.
122 (ADPC 2018) 123 (ADPC 2018)
Introduction
The basis for understanding risk the world will face in the coming century cannot rely on past informa-tion to inform future states. The myriad effects of climate change, intentionally diverted or dammed river flows, new dynamics of human interaction, air quality, new industrial facilities, inevitable accidents, biodiversity loss, ocean acidification, increasing social and wealth inequality, and new wars all repre-sent a context that can be estimated only.
Some hazard effects can be modelled. Hydrody-namic models can project what would happen in a given watershed given predefined conditions of volume, speed, depth and obstacles. Models can be used to indicate disease spread with a specified viru-lence, mortality rate, vector type, etc. Their ability to