Floods are among the most common disasters in Sri Lanka and small and medium-sized enterprises (SMEs) are some of the most vulnerable businesses to these events. They were impacted with huge damages and losses due to recurring floods in recent years. SMEs are the backbone of the national economy. They drive economic growth, employment generation, and poverty reduction. The impacts of any natural disaster on the SME sector are directly linked to adverse effects on the national economy. The most common repercussions are a drop in sales volume and a severe impact on business operations following these climate-related disasters.
The damages and losses due to floods and landslides to the productive sector reported in 2017 primarily affected agriculture and industry and commerce. These losses amounted to 17 billion Sri Lankan Rupees and accounted for 25% of total damages and losses. Some SMEs suffered damage due to flood water, while others incurred heavy losses due to inaccessibility by employees, customers, and suppliers, etc. The majority of affected SMEs are not properly prepared for disasters and are reliant on government relief schemes for their revival. Additionally, access to relief programs is difficult for a large number of SMEs as they are not formally registered.
The current pandemic has further exacerbated the impact on the business sector with particular impact on SMEs. Some of these enterprises have failed to revive themselves in light of COVID-19 and multiple disaster events because they have no adequate contingency measures. The apparel and tourism sector is the most promising in the context of national economic development. Unfortunately prolonged pandemic conditions and multiple disaster vents have rapidly hindered their sectoral operationalization.
A new tool to reduce losses
Though the business communities are an important element in disaster risk management (DRM), there are only a few initiatives for improving the resilience of businesses in Sri Lanka. A few programs have recently been launched to encourage improved preparedness of entrepreneurs and contingency plans for “Business Continuity” to cope with disruptive events to promote the resilience of individual businesses. Nevertheless, we must acknowledge the fact that most SMEs lack both technical and financial capacities. The ‘‘Building Businesses’ Climate Resilience’’ project is a timely, and very specific initiative that particularly addresses these aspects for the SME sector in the country.
The ‘‘Building Businesses’ Climate Resilience’’ (BBCR) app is a new tool for Sri Lankan businesses to reduce their damages and losses. The BBCR tool has developed as a mobile app following extensive consultations and discussions with Sri Lankan business communities and related services providers. The app is in line with increasingly emerging digital solutions that provide resilience information to the fingertip of entrepreneurs. The tool is a good platform for sharing information as well as linking the required resources to enhance emergency preparedness and contingency planning within the business community. The app provides easily accessible guidance and recommendations to enhance the ability of SMEs to prepare for and reduce the negative impacts of flooding events. The app created more opportunities for SMEs to proactively build their resilience.
Based on realities
In order to engage small and medium-sized businesses in this project and ensure that the tool is based on the realities of their situation, actual needs and priorities a comprehensive baseline mapping exercise was carried out between September 2018 to September 2019. The aim was to examine the current situation of these enterprises, characterize flood impacts and losses, identify current adaptation strategies and examine how effective have they been in reducing flood risk. The baseline study further mapped the governance framework formulating policies and financing mechanism that currently supports flood affected businesses.
Three flood-prone districts, namely, Gampaha, Kalutara and Ratnapura were selected as the study areas. The study collected feedback from a survey of flood-affected SMEs in the selected districts. Garment sector as well as other flood-affected sectors, such as, fast-moving consumer goods (FMCG), light engineering, shoes and bag manufacturing, printing, packaging and food processing, retail outlets and small hotels were covered under the sample survey. Information was collected from over one hundred business owners to understand their exposure and vulnerability to recurrent floods, impacts on their assets and revenue, current strategies used to protect against disasters and their willingness to utilize tools for preparedness against disruptive events. The data obtained through the questionnaire was further supported by observations and exploratory and in-depth interviews with key stakeholders, including government departments and institutions, banks and insurance organizations.
It was clear from the surveys and interactions with various stakeholders like enterprises, government departments and institutions and banking and insurance companies that they would be willing to cooperate with experts and deliberate on possible solutions for flood risk mitigation. There was interest in utilizing a disaster preparedness and climate adaptation product to build resilience against future climate risks. Drawing on the findings of the baseline study, a co-creation workshop in October 2019 brought together business owners and key support agencies including public and private sector institutions to discuss and validate the findings to guide the development of user-oriented and sustainable products that will allow businesses to adapt and reduce recurrent losses from climate related events.
Created with input from business-owners
A prototype of the BBCR app was developed for the purpose of piloting the tool. For a more comprehensive understanding of perception on the BBCR app, individual piloting sessions were conducted with selected business owners, relevant government agencies and service providing institutions to test the usability of the prototype tool in July 2020. A further pilot testing of the beta version of the app was also tested with materials in English Sinhala and Tamil languages for use by different local groups in January 2021. Due to the COVID-19 pandemic situation, the piloting sessions were held adhering to the health guidelines published by the health authorities.
Following a co-creation phase and piloting of the app SMEs owners, a number of essential features have been incorporated into the app. It shares available data and information in coordination with various partners as a tool to benefit business communities.
The app allows near real-time rain data tracking within the last 24 hours. It corroborates with government-sourced rainfall data and a feature that collects crowdsourced rainfall data. Enterprise owners are encouraged to input data to measure rainfall which is uploaded into the app for the benefit of fellow entrepreneurs. The adverse changes in rainfall notify the responsible persons in a timely manner and it can guide the activation of their organizational contingency plans to reduce damages and losses.
Key features of the BBCR App
The BBCR app also shares several flood hazard maps that are modeled with scientific data by relevant institutions. This feature supports zooming into the business location so that locational flood risk can be determined. The existing businesses within flood hazard zones may utilize the information for retrofitting the premise against imminent flood events.
The tool has built-in features for self-assessment of the specific vulnerabilities and the flood risk levels of individual SMEs based on their geography, physical, and financing measures. The tool assesses the risk of key business elements such as equipment, premises, operations, inventory, and employees. It also evaluates the degree of risk categorizing these levels at low, medium, or high.
The app has been built to provide tailored recommendations for businesses based on the answers given through the survey. These recommendations are listed in three categories of financial, structural, and general. Moreover, key resilient measures are recommended to reduce specific risks. The app provided links to access agencies and services to achieve the proposed recommendations. It seeks to develop an enabling environment through a new resilient business ecosystem. One of these key actions is prioritizing structural interventions to minimize the damages and losses by retrofitting the existing structures and infrastructure to withstand floodwaters.
Business continuity management (BCM) is a key aspect of retaining a business’s capability to meet obligatory commitments even at reduced levels. Nonetheless, BCM is somewhat new to Sri Lankan businesses. The Disaster Management Center (DMC), Ceylon Chamber of Commerce (CCC), and Asian Disaster Preparedness Center (ADPC) have taken a number of initiatives to build the knowledge and capacities of business communities by introducing them to BCM. The training is crucial as major factors such as financing schemes, including insurance for natural disasters, are largely unavailable to businesses. Furthermore, residual risk financing options such as insurance for natural disasters have yet to meet the necessary standards in Sri Lanka.
Apart from the intended services of the BBCR app, there are additional features benefiting the business and service providers apart from the intended services of the BBCR app. Financing for resilience measures is a major factor of concern with only limited dedicated financing schemes available for businesses. Even the residual risk financing options, such as insurance for natural disasters, are yet to be improved in the country. As such, there are also several new opportunities prompted through the app for servicing and providing preparedness interventions.
The BBCR app is the result of a project launched in September 2018 to support local small enterprises in Sri Lanka to be better prepared for disruptive flooding events that are rapidly worsening due to climate change. The project is led by the UNEP DTU Partnership in partnership with ADPC Thailand and Sri Lanka, CCC, and MPEnsystems India with funding support from the Nordic Climate Fund (NCF).
The project and the app have gained recognition from relevant government agencies in the country who are working on disaster management and supporting business development in the country, including the Ministry of Industries and the Disaster Management Center.
Following the experience from implementing the project and app in Sri Lanka, the aim is for further dissemination in the Asia region. This will allow countries with similar circumstances to benefit from the many features of the BBCR app.
This project is supported by the Nordic Climate Facility