When a natural disaster hits a country, the negative affects are quite obvious. The number of deaths is always devastating, along with the destruction of the land. Luckily, the number of casualties associated with natural disasters has dropped significantly in the past few decades. On the other hand, the cost of natural disasters is continuing to rise. They can have an enormous effect on the country’s GDP and economic growth. Natural disasters have been proven to drop a country’s GDP significantly.
Businesses are also greatly affected when a natural disaster hits. Not only can it destroy their factories and office buildings, it can wipe out the natural resources that the companies rely on. Insurance can help to alleviate some of the costs, but it cannot cover all of the long term negative affects that the business faces. It is a challenging task getting a business back to where it was before the disaster hit.
Research has shown that countries that are more diversified with their economic bases are less affected by natural disasters. In countries where only one or two industries support almost all of their businesses, they are very vulnerable to the extreme negative affects of a natural disaster. This is because they rely so heavily on one thing that could be taken away with one bad storm. Also, there is a strong relationship between heavy reliance on exports to one specific country or region and catastrophic losses. This shows that dependence on one industry or one region could set companies, and countries, up for devastation.
So what can be done about this? Economic diversification is the key. If countries can expand what they export or who they export to they will be less likely to be greatly affected by natural disasters. The best thing that can be done is know how you plan to deal with a disaster if one does hit, and have a backup plan for your business. There is only so much that can be done in the way of preparation, the rest is up to Mother Nature.