• Marsh launches Center for Risk Insights to provide guidance on business risk issues
NEW YORK, Sept. 6, 2007 -- With less than three percent of the world's water now reachable and fit for human consumption -- a figure that is shrinking -- 40 percent of Fortune 1000 companies surveyed said the impact of a water shortage would be severe or even catastrophic. Despite this, less than one-in-five (17%) say they have prepared for such a crisis, according to research sponsored by the Marsh Center for Risk Insights.
The findings are based on work conducted for the Marsh Center by Public Opinion Strategies, an internationally respected polling firm that spoke to senior officials from more than 100 executive suites from a cross-section of Fortune 1000 companies.
Marsh Inc., the world's leading insurance broker and risk advisor, formed the Marsh Center for Risk Insights as a working forum for experts to identify, debate and tackle the most critical global business risks -- with water being one of the newest threats on the horizon. The founding advisors of the Marsh Center, which launches today, include:
Dean Alexander, Director of the Homeland Security Research Program and Assistant Professor, Homeland Security, at Western Illinois University (USA)
Philip Armstrong, Head of the Global Corporate Governance Forum (South Africa)
Carol Browner, Principal of The Albright Group and former Administrator of the U.S. Environmental Protection Agency (USA)
Dr. Sheikh Faisal F.J. Althani, Deputy General Manager Anadarko Petroleum Corp., (Qatar)
Dr. Rohan Gunaratna, Head of Singapore's International Centre for Political Violence and Terrorism Research (Singapore)
Dr. Howard Kunreuther, Co-director of the Risk Management and Decision Processes Center, Wharton School, University of Pennsylvania (USA)
Harvey Pitt, Chief Executive Officer of global business consulting firm Kalorama Partners and former Chairman of the Securities and Exchange Commission (USA)
Andrew Winston, Founder of Winston Eco-Strategies and co-author of "Green to Gold" (USA)
"From terrorist attacks to natural disasters to droughts, businesses today face a new breed of risks that can threaten supply chains, stall expansion plans and harm profitability," said John Merkovsky, executive director of the Marsh Center for Risk Insights.
Almost half of the Marsh Center survey respondents, 47 percent, said water is critical or very important to their day-to-day operations, but only 6 percent believe it is likely that in the next five to ten years access to water for manufacturing and drinking will be significantly reduced because of quality degradation or scarcity.
"Many corporations across seemingly unrelated economic sectors are exposed to water scarcity and pollution risks, usually in their supply chains," said Ms. Browner. "Changes in our global climate, along with rising consumption levels, will dramatically alter water distributions and availability over the coming decades. Businesses need to take time to identify the challenges and opportunities posed by local and regional changes in water availability."
Water-related costs already are climbing, as manufacturers must treat both source water and waste output to improve quality. Even non-water-intensive businesses are being affected as suppliers pass on their own water-related costs.
Whether it's a loss of water, the outbreak of potentially fatal disease or the aftermath of a terrorist act, executives today are being tasked with risk-management responsibilities their predecessors never faced.
"Business leaders have a fiduciary responsibility to their board, shareholders, employees and customers to understand the implications of emerging threats and take steps to address these challenges," said Pitt. "It's no longer acceptable for CEOs to stand up and say, 'I didn't realize it could happen' after a crisis occurs."
Other Risks Beyond Water
Survey respondents were asked about preparedness for eight different potential risk scenarios, including natural disasters, terrorist attacks, oil price spikes, global climate change, housing market collapse, risks associated with nanotechnology, access to water and pandemics. Despite the growing number of threats, 44 percent of respondents said one of the main reasons their companies didn't bother to prepare for crisis situations because they felt these types of risks weren't relevant.
"A number of business leaders today are taking a short term view of risk and operating under the false assumption that even though these risks are on the horizon, they don't need to act on them promptly," said Kunreuther of Wharton. "While these decisions may not affect them in their term of office, it could have dire effects on their successors and those connected to their companies years later."
Complete survey results are available on the Marsh Center for Risk Insights' Web site
The Marsh Center for Risk Insights is a growing assembly of leading authorities on global risk issues working to identify, debate and provide guidance on the world's most critical business risks.