How to profit from catastrophe

DAILAN, China – For most companies, risk is something to be managed, avoided and contained.

But for a handful of businesses thriving amid the global financial meltdown, risk is the currency of trade. Take Qiagen for example. A Swiss biogenetics company that develops and sells genetic testing products, it’s grown by 20 percent annually, even through the economic crisis.

That growth, the CEO says, has come from taking calculated risks — many of which have paid off. Among the payoffs: developing a new, reliable and fast test for the H1N1 flu strain, with results available within 40 minutes (hours ahead of other test products). The company also sells test kits for avian flu, HIV and the human papillomavirus (HPV), the precursor to cervical cancer and is continuing research on emerging diseases. In other words, Qiagen’s business is partly to be on the cutting edge of diseases that could wreak havoc on the world’s population. If there’s an emergent pandemic threat, their research teams likely will be developing a test to sell to hospitals and public-health agencies in affected areas and around the world.

“We have bet on one application area, genetic applications,” Qiagen CEO Peer Schwartz said in an interview. “We were just looking at a way to get to a critical mass very quickly and not have to depend on outside financing.”

Schwartz was among a panel of executives and experts who spoke about risks this month at the World Economic Forum’s summer meeting in the Chinese seaside city of Dalian. The forum focused on how businesses and governments will emerge from the financial crisis.

Their take on risk: Globalization and urbanization have created a wealthier, more connected world. They’ve also made that world an increasingly dangerous place to live, with more frequent pandemics, more deadly natural disasters and greater economic peril to every country when the global economy suffers. There are major and emerging risks to human health, fertility and food supplies. And amid all that, there is also business opportunity for companies bold enough to embrace and jump into risk.

“You may not like it, but the evidence is here and you will see more and more catastrophes,” said Erwann Michel-Kerjan, head of the Center for Risk Management at the University of Pennsylvania’s Wharton School.

Michel-Kerjan said that as the world pushes for more growth and more development, greater concentrations of people live in urban areas. The interconnected world is more dangerous on a larger scale than the smaller, fragmented one of generations past. Rising nationalism becomes a problem in certain areas, as some countries fast gaining power haven’t yet had time to develop a global outlook. Some countries will be more concerned with handling their own internal risks rather than dealing globally. “As rising powers such as India and China enter the world stage, they have a very sovereign view, rather than an integrated view,” said Robin Niblett, director of the London-based think tank Chatham House.

For Qiagen, China has become a major market, particularly since its experience of dealing with the 2003 SARS epidemic. Victor Shi, head of the company’s Asia operations, said China takes emergent disease threats very seriously and has become a big customer for test kits for H1N1 and other diseases. The company has dealt with issues like stolen copyrights and pirated products, but believes its reputation will hold its place in the market.

Globally, Schwartz said, the company’s continued growth and success depends on innovation and staying ahead of trends. The trick now, Schwartz said is “the classic innovator’s dilemma”: figuring out which risk to take next.