* Globalisation increases impact of extreme events
* Key sectors severely affected after a week
By Nina Chestney
LONDON, Jan 6 The global economy could
withstand widespread disruption from a major natural disaster or
attack by militants for only a week, a report by UK-based
think-tank Chatham House said on Friday.
The frequency of natural disasters, such as extreme weather
events, appears to be increasing and globalisation has increased
their impact, the report found.
Events such as the 2010 volcanic ash cloud, which grounded
flights in Europe, Japan's earthquake and tsunami and Thailand's
floods last year, showed that key sectors and businesses can be
severely affected if disruption to production or transport goes
on for more than a week.
"One week seems to be the maximum tolerance of the
'just-in-time' global economy," Chatham House said.
The world's economy is currently fragile, leaving it
particularly vulnerable to unforeseen shocks. Up to 30 percent
of developed countries' gross domestic product could be directly
threatened by crises, especially in the manufacturing and
tourism sectors, it said.
It is estimated that the 2003 outbreak of severe acute
respiratory syndrome (SARS) in Asia cost businesses $60 billion,
or about two percent of east Asian GDP, the report said.
After the Japanese tsunami and nuclear crisis in March last
year, global industrial production declined by 1.1 percent the
following month, according to the World Bank.
The 2010 ash cloud cost the European Union 5-10 billion
euros and pushed some airlines and travel companies to the verge
In the event of continued disruption, some businesses would
cut investment and jobs or consider closing down, leading to a
permanent reduction in countries' growth, the report said.
In general, governments and businesses are under-prepared to
respond to high-impact, unpredictable events, the report said,
and it can be difficult to coordinate across borders.
The think-tank recommended various ways to improve responses
from governments and businesses to extreme events, covering
areas such as communication, transparency, insurance,
investment, training, cost and impact analysis.