Friday, September 04, 2015

Floods, human pandemic biggest risks to Ahmedabad, Surat: Lloyd's city risk study

By Rajiv Shah
A high-profile study by top international consultants, Lloyd’s, has found that Ahmedabad’s 11.82 per cent of the annual gross domestic product (GDP), or 14.01 billion dollars out of the city GDP of 118.50 billion dollars, would be at risk because of manmade or natural threats. The study, titled “Lloyd's City Risk Index 2015-2025: Analysing the economic exposure from 18 threats”, has been carried out on 301 top world cities.
Based on an index worked out by the Cambridge Centre for Risk Studies at the University of Cambridge Judge Business School, the study has chosen ten Indian cities – two of them from Gujarat – for assessing the risk factor. The Indian cities chosen are Mumbai, Delhi, Kolkata, Chennai, Bangaluru, Hyderabad, Ahmedabad, Surat, Pune and Kanpur.
The study shows that flood is the biggest threat to Ahmedabad, accounting for 3.45 billion dollars or 24.67 per cent of the city GDP at risk. Interestingly, the next to come is human pandemic, accounting for 23.54 per cent, or 3.30 billion dollars, of city GDP at risk.
Both the risk factors, floods and human pandemic, also figure at the very top for the other Gujarat city, Surat, analyzed. Surat’s city GDP at risk has been assessed at 12.07 per cent (8.09 billion dollars) of its annual GDP of 67.03 billion dollars. Floods account for 24.15 per cent of the GDP at risk in Surat, followed by human pandemic (23.09 per cent).
While Ahmedabad’s city risk ranking is 87th out of 301 world cities, Surat’s city risk ranking is 142nd.
Of the 10 Indian cities chosen, Mumbai’s international risk ranking is the highest in India, and 21st among 301 world cities. Mumbai is followed by Delhi with a city risk rank of 25th, Kolkata 53rd, Ahmedabad 87th, Pune 96th, Chennai 127th, Surat 142nd, Kanpur 155th, Hyderabad 162nd, and Bangaluru 176th.
The study, interestingly, has found that Mumbai faces the highest risk of terrorism than any other of the world, and for this it has singled out the November 26, 2008 Lashkar-e-Taiba assault on “major public locations”, especially Taj Hotel, which led to the death of 167 people.
The study says, “Terrorism remains a priority for businesses in India. Mumbai suffered bombings in 2003 and 2006 and another attack in July 2011. The frequency of attack highlights the difficulty of forecasting and preventing these events.”
Despite terrorism being the top-of-the-world risk for Mumbai, accounting for 7.94 billion dollars, this is 16.77 per cent of Mumbai’s city GDP at risk – 47.38 billion dollars – which is 11.44 per cent of the city’s annual GDP of 414.12 billion dollars.
A much bigger threat to Mumbai, the study suggests, is of human endemic, accounting for 11.44 billion dollars, or 24.14 per cent of Mumbai’s city GDP at risk.
The study says that globally, “the index identifies three important emerging trends in the global risk landscape.” Thus, over the next one decade, the “emerging economies will shoulder two-thirds of risk related financial losses as a result of their accelerating economic growth, with their cities often highly exposed to single natural catastrophes.”
“Manmade risks such as market crash, power outages and nuclear accidents are becoming increasingly significant, associated with almost half the total GDP at risk. A market crash is the greatest economic vulnerability – representing nearly a quarter of all cities’ potential losses”, the study warns.
Then come the “new or emerging risks”, it says, pointing towards “cyber attack” as an example. The new or emerging risks, it adds, “together account for more than a third of the total GDP at risk with just four – cyber attack, human pandemic, plant epidemic and solar storm – representing more than a fifth of the total GDP at risk.”
Meant basically as a guide for international insurance companies on where to invest and how, the study says, “Insurers must continue to innovate; ensure their products are relevant in this rapidly changing risk landscape, offer customers the protection they need and, as a result, contribute to a more resilient international community.”

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