Disaster Economics

The Effects of Disasters on Our World of Business
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Financial Planning and Economic Disasters

by Jody S. Ginther

This is a brief overview of financial planning for disasters from the large or community perspective. The personal perspective for disaster preparation will be discussed in future articles. You can see some good information on small business disaster planning at: Small Business Disaster Planning

The Center for Disease Control provides specific disaster preparation pdfs for download at: Personal Disaster Planning

Sound financial planning must include and increased awareness and preparation for economic disasters. Whether caused by nature or man, disasters will strike.

Disasters have and will occur in increasing frequency and intensity. Economic, market, and stock investment must take into consideration the management of disasters and their aftermath. The current management or mismanagement of the oil spill in the Gulf of Mexico is a perfect example. The interruptions and economic losses experience by airlines and businesses because of the dust of a volcano are another example.

Any researcher or student of economics, technology, world events, or business must become increasingly aware of disasters and disaster management. This article will give a very brief introduction to the topic.

Considerations that the common person hearing of a disaster often does not consider may include:

  1. After effects of loss of crops, livestock and useable property.
  2. Damage to the economic infrastructure.
  3. The time and available resources required to rebuild the infrastructure.
  4. The efficiency of funds or resources actually getting to the right people for maximum benefit.
  5. Production losses, income losses, medical costs, and security.
  6. Political stability and efficiency.
  7. Social unrest response and psychological issues.
  8. Ecological and environmental changes.
  9. Epidemics and ongoing health issues for people, animals, and plants.
  10. Financial complexities like cash flow, creative financing, and corruption.

The task seems overwhelming. There are many intangible costs of a disaster little or nothing can be done about, from an economic viewpoint. The resulting list of the effects of a disaster must be categorized into manageable portions. To divide and conquer is the strategy. One must get an overview of the scale and scope of the disaster; and categorize the tangible costs and losses caused by the disaster. Where costs or losses cannot be accurately determined, the best estimates must be used. Short, medium, and long term effects must be estimated with consideration for the recovery of the economic and social structure.

Awareness of potential disasters, their effects, and competent management of the tangible losses and recovery is vital to anyone who wants to understand possible future economic conditions. Personal portfolio development, businesses, industries and government agencies must seriously prepare for the disasters that can or will affect our lives. Reducing losses and a plan for recovery in the event of any disaster is a vital part of financial planning.

If you would like more information from a personal survivalist's perspective you can visit: Survival Disaster Planning

Source: United Nations Disaster Management Training Program, Disaster Economics 2nd Edition, 1994, Module prepared by Ross Bull.