Learning from Catastrophes
How can we learn from major catastrophes so as to react accurately in such circumstances?
Author(s): Michael Useem, Howard Kunreuther
Publisher: Wharton School Publishing
Date of publication: 2009
Manageris opinion
Two-thirds of the 25 most expensive catastrophes in the past half-century occurred after 2001. The 9/11 attacks in the United States, the tsunami of December 2004 in Southeast Asia, hurricane Katrina in New Orleans in August 2005, the Eyjafjöll volcanic eruption in Iceland in April 2010 and the stock exchange crash of October 2008 are just a few of the most notable disasters, with consequences on a planetary scale.
Based on this observation, the authors of this book attempt to draw relevant lessons from these terrible events. First, they show that these events had a serious impact precisely because they were not particularly probable or even predictable. They explain the psychological phenomena which cause people to be unaware of the facts that contradict their predictions, and delay taking action in such circumstances. As exceptional as these catastrophes seem to be, they offer companies valuable lessons for their day-to-day life. Events such as the explosion of a factory, the sudden death of the CEO, the sudden emergence of a game-changing competitor are all highly improbable, and yet they can and do happen! So, what can be learned from these great catastrophes to respond better in such circumstances?
After reviewing various types of risk – financial, industrial, political, economic, personal, etc. – the authors offer some best practices to serve as inspiration for companies hoping to respond more effectively to the unexpected. Some of these practices are a matter of good common sense and classic risk management theories. The most interesting, in our view, specifically concern highly improbable or unpredictable risks. These types of risk effectively require a very specific approach, which, paradoxically, the best risk management practices have trouble providing. Indeed, what do you do when careful planning is an obstacle to responsiveness?
This book will leave you feeling uncomfortable. You will become aware that no one is really safe and that the only solution is to admit this fact and deal with it.
