Exceptional natural circumstances have led to earthquakes being identified as the number one business risk in for Turkish business leaders, according to our sample of respondents. The Lloyd’s Risk Index 2013 is based on a global survey of over 500 C-suite and board level executives conducted by Ipsos MORI for Lloyd’s during April and May 2013.
Istanbul sits 20 kilometres north of the North Anatolian fault line. In 1999, an earthquake hit the Marmara region, 45 miles from Istanbul. It killed 17,000 people and injured a further 27,000. In the aftermath, Turkey’s GDP dropped by 6.1%.
Seismologists state that earthquakes have historically moved west along the fault line, slowly moving closer to Istanbul. The question being asked about the next major earthquake is not if, but when? Around 93% of Turkey, 70% of its population and 75% of its industrial facilities are exposed to large-scale earthquakes – moving to a less-earthquake prone area is not an option.
Before the Marmara earthquake, take-up of residential earthquake insurance was relatively low: around 3% of residential buildings. In the aftermath of Marmara, the Turkish Government, with assistance from the World Bank, introduced a compulsory earthquake insurance for all registered buildings on registered land in urban areas via the Turkish Catastrophe Insurance Pool (TCIP).
The Turkish Government is investing heavily in disaster risk reduction, without which both insurance and reinsurance are unaffordable for most. A Natural Disaster Law has been enacted, allowing the government to survey, draft and implement renovation of any area under threat of natural disaster. For Turkey, achieving adequate risk mitigation and transfer is effectively a race against time until the next major quake strikes.
The number two priority, rapid technological change, is understandable given the very high number of Turkish internet companies and the significant potential for growth as Turkey’s young population take to the internet and social networking. Failing to spot the ‘next big thing’ has serious commercial consequences.
While Turkey has so far had relatively few entrepreneurs willing to put money into start-ups and new technologies, the first generation of founders are now starting to invest. The government, too, is starting to respond to the challenge, making grants available to new companies investing in research and marketing, and announcing tax breaks for ‘angel investors’.
While Turkey’s young population may be the envy of ageing European countries such as Germany, the implications of demographic change are clearly being felt by our sample who ranked it as their number three business risk.
The high birth rate, which has declined only since 2005, has created a young and growing population which is placing pressure on state finances and urban infrastructure and presents a challenge to the state in terms of providing adequate jobs.
Countries all over Europe are recognising the dangers a ‘lost generation’ of young unemployed present to social stability and future economic prosperity. For a country with the largest youth demographic in Europe, these dangers can only be amplified.
The 2013 Turkish data involved a low number of respondents, predominantly from the Istanbul area. The top three priority findings should not therefore automatically be assumed to be an accurate reflection of the risk priorities of Turkish business leaders as a whole.
Category: Climate/natural disasters: Disaster risk, Earthquakes