Improving MSME resilience and agility

Most small businesses, whether formal or informal, operating in developed or developing countries, tend to rely on personal savings and networks to cope with disasters. In the case of developed countries where special recovery funds and insurance are widely available and accessed, MSMEs lean toward prioritizing or complementing formal coping mechanisms with individual informal ones.³⁰⁸ In developing countries, informal coping strategies are often not chosen but imposed by the absence and/or insufficiency of formal mechanisms that guarantee business owners' own survival, as well as that of their business.

Noting the above, policy makers in the Asia-Pacific region where nearly 70 per cent of disruptive natural disasters take place need to identify policies in different stages of disaster management, from prevention, during disaster, recovery and re-construction for MSMEs to mitigate, respond and recover from natural disasters. For disaster prevention, while most countries in the region have programmes in the form of training, workshop, and consultancy services to provide guidance for MSMEs, only few economies mention regulation and laws for disaster management. Further on prevention, almost ESCAP countries have corresponding funding or subsidizing policies across stages from disaster prevention to disaster recovery, while other policies in the category of infrastructure, facilities, and human resources are left blank. Looking into funding policies, the most common approaches are low interest loans and credit guarantees under different scale; grants are provided to repair or purchase machineries/ equipment but not for loss compensation. Few countries have provided income subsidies for effected enterprises to pay salaries with New Zealand and Thailand having offered tax assistance for the effected businesses. Also, public-private collaboration is clearly stated by Australia though many countries in the region may have cooperation with private organizations. Japan provides Business Continuity Planning (BCP) for MSMEs post-disaster.

BCP is critical to ensuring that MSMEs contribute to economic recovery by providing continuity in income generation and employment. Disaster recovery is a subset of BCP. Disaster recovery plans involve restoring vital support systems. Those systems are mostly communications, hardware, and ICT assets. Disaster recovery aims to minimize business downtime and focuses on getting technical operations back to normal in the shortest time possible. BCP is a component of building business resilience in normal times and is especially critical in cases of large disasters. For businesses to survive, especially MSMEs, they must be able to adapt their operations to the new environment. UNDRR’s Regional Office for Asia and the Pacific has developed a toolkit on the subject to support MSMEs.

Enterprise recovery programmes that act in response to various needs of different industries, through cash in-kind and technical support, can help reverse the 'inherent' vulnerability of MSMEs to disasters by maximizing the flexibility that fewer assets and employees give to MSMEs compared to larger firms.³⁰⁹ For example, the Government of Japan provided a capital subsidy known as the Group Subsidy to help MSMEs recover from the damage caused by the Tohoku Earthquake in 2011.³¹⁰ Also, Sri Lanka established relief assistance to MSMEs that felt the immediate and longer term damaging impacts from the 2004 tsunami.³¹¹ In tourism reliant communities such as Tohoku, Japan, policy makers made a concerted effort to push for long term recovery of the region by promoting both domestic and international tourism to revitalize the economy. The tourism strategy also brought about benefits to battered MSMEs allowing the local economy to both recover and gain long term stability. Box 20 below shares Tohoku’s strategy.