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Several Japanese Industries Could Suffer Earthquake Damage Equal To More Than One Year Of Pre-Tax Earnings, ABS Consulting/EQECAT Research Study Reveals
Chemical, Precision Machinery, Petroleum Industries At High Risk, Says Report To Be Issued At November Seminar In Tokyo
October 30, 2007
Japan
Japan’s chemical industry surprisingly could suffer financial losses equal to more than two years of pre-tax earnings, while the precision machinery and petroleum industries could suffer damage equal to more than one year of pre-tax earnings, from a very large earthquake, according to a just-completed study to be issued by ABSG Consulting Inc. (ABS Consulting) and its subsidiary, EQECAT, Inc., the leading authority on extreme-risk modeling.
“The study, to be presented at a seminar here on November 14, also shows that “the five other industry groups in the study also have significant loss exposure,” said Dennis Kuzak, senior vice president of EQECAT. The additional five groups are steel, non-ferrous metals, automobiles, electronics and pharmaceuticals. Mr. Kuzak said “the study does not represent all Japanese industrial companies, but demonstrates that the earnings impact for many industries can be very substantial.”
“The study used EQECAT’s highly advanced, probabilistic JapanQuake TM earthquake model to simulate the ground motions from earthquake events and to estimate the consequent industry damage,” he said.
That model, based upon rigorous science and engineering research, incorporates the most recent Japanese government findings of increased risk in portions of Japan, including the potential for a magnitude 8-plus earthquake caused by a rupture in the Tonankai deep sea ocean trenches. Such an event is estimated to have an occurrence probability of 60-70 percent during the next 30 years, according to Japanese scientists.
“Interest and concern by Japanese business leaders in earthquake risk has been heightened by recent earthquake events,” Mr. Kuzak said. “ After the Niigata prefecture Chuetsu-oki earthquake earlier this year, the automobile industry suffered a production drop of about 120,000 units caused by damage to a critical supplier’s facility that manufactured piston rings. It is obvious earthquakes can inflict heavy property damage and loss of life, as well as severely affect business revenue and profit. To help protect their businesses and control possible losses, senior corporate officers should initiate studies to fully understand all their earthquake exposure, and if warranted, implement prudent, pre-emptive risk mitigation strategies to manage earthquake risk.”
“Even earthquakes such as the Chuetsu-oki event, well below a magnitude 8 at a magnitude 6.8, caused considerable business losses,” Mr. Kuzak said. Japan’s Ministry of Economy, Trade and Industry estimated that industrial production in Japan shrank by 0.4 percent due to that earthquake.
The ABS Consulting/EQECAT study examined the potential earthquake damage and loss for 32 corporations in the eight industry groups. The number of enterprises in each group ranged from three to nine. An executive summary of the report is available on each of the websites listed below.
ABS Consulting will host a free, half-day seminar on November 14 at the Toranomon Pastoral Hotel, Tokyo, to present the research findings and discuss new ways to assess and manage supply chain risk. For conference reservations, please contact:
ABS Consulting
Address: Toranomon 5-12-1 Toranomon Waiko Bldg 5f
Minato-ku, Tokyo 105-0001
Fax: 03-5425-2720 / Tel : 03-6825-4885
E-mail: seminar@absconsulting.co.jp
ABSG Consulting Is A Leading Global Provider of Risk Management Services
ABSG Consulting Inc. is a leading independent global provider of risk management services combining industry specialists, risk modeling and practical engineering and technology solutions to help business, finance, industry and government manage risk. Through a comprehensive and integrated risk management approach, ABS Consulting is committed to helping clients reduce business interruption and manage catastrophic, operational, and security risks. ABS Consulting is headquartered in Houston, Texas. For additional information, please visit www.absconsulting.com
EQECAT Software Enables Clients Worldwide To Assess, Manage Wide Range Of Risks
EQECAT and its parent ABSG Consulting Inc. (“ABS Consulting”) serve the global property and casualty insurance industry, major multinational corporations and financial institutions. EQECAT is known as the technical leader and innovator in the development of analysis tools and consulting services to quantify insurers’ and major corporations’ exposure to natural and man-made catastrophic risk.
Through its extreme-risk modeling software platform, WORLDCATenterprise™, EQECAT enables clients to assess and manage potential damage and loss from wind, earthquakes, flood, wildfire, and terrorism, among other perils. WORLDCATenterprise™ includes 177 natural hazard software models for 89 countries spanning six continents.
EQECAT was founded in 1994 and is headquartered in Oakland, California. For additional information, please visit www.absconsulting.com and www.EQECAT.com.
For more information, contact:
Bob Healy
EQECAT, Inc.
1-510-817-3100 | rhealy@eqecat.com
Eric R. Samansky
The Samansky Group
1-516-319-0858 | eric@samanskygroup.com
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