With a weekend barrage of news updates of the earthquakes and tsunami in Japan combined with the increasing threat of multi nuclear plant meltdowns looming over the devastated islands, I began to wonder if the average person can put into perspective how natural (and even man made) disasters impact us all. Also, do we all understand that even the tiniest little shift in world causes a trickle effect that affects us all? No matter where disasters strikes, it can cause a dent to the world’s business activities.
At this moment, we are currently experiencing the effects of several major world tragedies and uprisings in the following countries: Japan, Libya, Iran, Iraq and Egypt. Though these counties are seas away from the U.S, the ripples are very evident. Plus, we are still healing from our own wounds from 9/11, Hurricane Katrina, Tennessee floods and the oil spill in the Gulf that have bruised our own economy.
But besides paying more at the gas pump (which is usually the first ripple felt), how else do natural disasters effect the world of business?
Let’s tackle the trickle….
One country is the major supplier of an important raw material for a product that is manufactured in another country. A flood destroyed the town where the material was being produced. As a result, it cannot export the materials to the country needing them to manufacture the product. Since, they are unable to produce the product, they are unable to bring anything to the stores to sell the product or export it to other countries. If they produce other products as well, their revenue will definitely reduce even further. In order to survive, the major factories in the country will have to take drastic measures; including terminating employees or at worst, closing their doors. Countries that used to import the products from this devastated town will have their revenues reduced due to the fact they have less one product to sell.
But…not only can this country not export any items…they also can not import them! This now effects the countries that ship items to them. Trickle…trickle….
A nation’s capability of producing a product or service may also be affected if it became impossible to import services that are required after a disaster has stricken. For example, a country relies on another country for expertise in helping it to develop an important technology for its people. When disaster strikes the country providing the assistance, it is unable to send out its people. As a result, the project will have to be halted. When the project is halted, this leads to more employees losing their jobs. Trickle….trickle…
Another layer; A business with a branch which has been destroyed by a natural disaster in another country will also have to suffer some revenue lost because the branch no longer exists to generate income. With communications down as a result of a natural disaster, it has become impossible for businesses to trade with one another effectively. Revenue down = employees out. Trickle….trickle….
With the latest disaster striking Japan, an economic superpower in the world, everyone will be feeling some pain. And as many of us reach into our pockets to give what we can to help the organizations aiding these countries, we may begin to notice that there is less in our pockets than before. Trickle….trickle….
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Author: Charmaine Hollaway, Director of Operations for PANTHEOS
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