Tax Incentives Urged For Firms' Risk Management

Wednesday 28th October 2011 | Bangkok Post | Link

The government should provide incentives for businesses to have risk management plans in place, in response to the statistically increasing natural disasters caused by global warming, suggests Andrew Durieux, director of Coverage Ltd.

With all the natural and man-made disasters that have occurred in Thailand over the last six to seven years, by now all companies should have in place documented and tested business continuity plans (BCPs), as well as appropriate levels of insurance.

''BCPs and insurance will require updating of risk assessments and planning. If companies do not have BCPs and insurance in place they should quickly do so,'' said Mr Durieux.

Currently, Thai companies are not well prepared for natural disasters whether it is due to costs or cultural issues, he said, adding that the Thai government should encourage all companies to have BCPs in place at all times.

An international standard should be quickly adopted, some related regulations passed, auditors certified to review and endorse plans, and some enforcement activated.

''To help ease to this model, as adopted in the UK and Singapore for example, the government should assist by using tax breaks or incentives over the next two or three years,'' Mr Durieux said.

To help determine the risks of serious natural disasters, insurance companies do statistical analysis of major events such as earthquakes, typhoons, droughts and floods.

''From what is reported in the newspapers, the amount of water for this flood seems like around the same as 50 years ago, and should be more than in the major floods of the 1990s and 1970s. So this type of flood is likely to happen one time every 50 years,'' he said.

The seven-year-old Coverage Ltd, which provides business continuity planning services and crisis management, provides BCPs for all sizes and types of companies, covering events such as pandemic, terrorism, protests, earthquakes, tsunamis, typhoons and storm surges.

In most cases, Coverage recommends first creating a generic system that will cover a company for all types of disasters using standard components that can then be adapted for specific risk events.

This includes proactive or defensive actions designed to minimise the chance of an event, such as building a flood wall, or removing sources of fires, or anti-virus software, or training workers in the safe use of equipment, or even something as simple as fitting locks to doors or gates or limiting the effect of an event.

Mr Durieux said companies should consider the specific risks that are likely and should also have in place a general plan for all risks at anytime.

''Being in a flood zone does not preclude an earthquake. As the Toyota example shows, being in an area away from flooding [Chachoengsao] does not mean it will not be the victim of a flood [through the supply chain],'' he said.