Lots of discussions are taking place lecturing Nepali industries on disaster preparedness. The lecturing has become even more frequent since the earthquake of 2015. And a lot of improvements have already been made by the industries. However, these preparations have proved to be simply incomplete as the unexpected disasters striking Nepal have shown. The latest being the massive floods, inundation and landslides this year.
While the 2015 earthquake caused damage to properties located in Kathmandu and the central hills, the 2017 floods and inundation have damaged properties mostly in the Terai where most of the big factories are located. With the roads and bridges damaged, the 2017 disaster is likely to prove more serious than the 2015 earthquake. Though cases of damage to factory buildings are few, as such buildings are strongly constructed, the inundation has halted factory production.
One important change adopted by businesses after the earthquake was setting up data centres in two or more locations. Though that was a good move, this year’s problems indicate that something more has to be done. And the seriousness of the problem this year is intensified by the fact that most of the industries, even those located in the Terai, are not insured against the risk of floods and inundation as these factories are located in places where the history of such damage so far has been minimal.
But obviously the situation has changed. And the major reason for this is not simply change in the environment. The construction of roads blocking the natural flow of flood water, as well as disregard to the natural river courses in other constructions are also to blame. In this situation, the business firms have to buy proper flood and inundation insurance. But that again is not going to be enough. While the flood insurance policy will cover only the damage caused by the flood to the insured property, the business loss caused by damage to the public property such as roads and bridges will not be covered by that insurance. Against this background, it is necessary for the businesses to buy another policy as well that covers the probable loss of business. But as that is a costlier policy, that may not be possible for all businesses. Therefore, there is a need to make other changes as well in the style of business. One such possible strategy could be arranging enough warehousing facilities in different market centres to store products thereby ensuring the continuous availability of the goods even in difficult times.
But this too is going to cost extra. There will be warehouse construction costs or rentals. And more needs to be produced to be thus stored. That will mean using additional quantities of raw materials and a longer cycle of stock turnover. However, these additional costs will be paid back in times of such calamities, whether caused by natural disasters or man-made, such as strikes, unavailability of fuel to operate trucks etc. Some Nepali businesses have already been following this strategy for some years, and reaping the benefits. It is time for others to follow suit.