Sharing Lessons of Disaster Recovery

Late last year I was invited to attend an ASEAN conference in Manila to present to all ten ASEAN countries lessons learned from the Christchurch earthquake from a business perspective.

ASEAN countries are prone to disasters of many types, including significant seismic activity, typhoons, hurricanes and floods. Their preoccupation with recovery is very much related to how individuals are protected in a post-disaster environment. My presentation in Manila was about how we protected the corporate infrastructure of Christchurch post-earthquake through various interventions with remarkable success.

The rationale for this intervention from a social protection perspective (looking after the people) is that by protecting the fabric of the companies you protect employment and therefore ensure optimal outcomes for people in a post-disaster environment.

This was a foreign concept for almost all the attendees at the ASEAN seminar in Manila. They were intrigued to hear how the Government supported a wage subsidy post-earthquake which meant that companies could maintain and protect employment relationships even though their businesses were seriously compromised.  I told them that our Government invested in excess of $250 million into Christchurch companies by way of a wage subsidy that was a lifeline for thousands of earthquake impacted companies. I also advised them of the behavior of our banks in affording extra facilities to affected companies and our insurance companies who in many instances provided part payment of insurance settlements to ensure continuing cashflow and the IRD who delayed payments on GST or provisional tax to ensure companies cashflows were optimised. The big lesson was that it was all about maintaining cashflow in companies and protecting employment relationships.

I was involved in some serious questioning with respect to the affordability of such interventions. I was told that it was all very well for a wealthy first world country to provide financial support for its businesses but how could poorer economies afford to do this? My response was to advise them that this was not a cost to Government but rather an investment. The millions invested in protecting corporate structures in Canterbury will have been repaid many times over through continuing PAYE payments, GST payments as well as corporate tax payments. Of course, the Government had far fewer people to pay the unemployment benefit to because people stayed in work.

My message to these communities was that this was a good way of protecting economic activity and social outcomes post-disaster and should be seriously considered as a proven disaster recovery mechanism.

The normal churn rate for businesses in Christchurch (in other words those businesses that go out of business every year for one reason or another) is around 11.4%. Since the earthquake, it has been around 11.6%. A remarkable statistic when you consider that up to 30% of our companies were predicted to collapse post-earthquake. Work done by the IRD demonstrates that GST payments, PAYE payments and corporate tax payments have continued to grow from immediately post-earthquake until today. Which is another good sign of corporate health and payback to the public purse.

Recently I was approached by the International Labour Organisation to present to another seminar in Mongolia on exactly the same topic. What we did in Christchurch has increasing interest in the Asia Pacific region. We should not underestimate the positive commercial outcomes that occurred in Christchurch post-earthquake and the lessons the world can learn from that. It is a great credit to all institutions involved, including our Government, who saw the merits of protecting cashflows in a post disaster environment as a means to optimise long term positive economic outcomes. It has worked in Christchurch and it can work elsewhere.