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The New Age of Risk Management: Lessons from Super Storm Sandy

By: Sander Flaum

Now that some time has passed since Sandy pounded our shores and inundated our subways, I’d like to offer two perspectives. First, it’s clear that we as a country must undertake certain initiatives before the next “storm of the century” arrives. And since that now seems to happen every year or two, there’s no time to waste. Second, while City Hall, Albany, and Washington dither, we as business leaders can and must begin preparing our organizations right now for the next disaster. Further, such preparedness is important wherever you are located—a natural crisis can occur anywhere in the world.

While much attention focuses on Sandy, do recognize that the advice here is relevant for government and business leaders located everywhere?

Advice for Elected Officials

Here are some must-do's for our elected officials.

1. Bury the power lines. It is nuts to have an above-ground power grid suspended on poles that are vulnerable to everything from falling branches to drunk drivers. When a single pole goes down, not only is power lost, but there’s a risk of fires and electrocutions. Utilities don’t want to underground lines because they’re intimidated by the investment costs. A combination of tax credits for modernization and fines for power outages might help utilities see the light.

2. Gas stations must be able to operate-—even in a blackout. This means that every filling station must have a generator in order to stay in business. We can help operators buy generators with low-cost loans, if necessary, but we simply can’t allow them to shut down during a crisis.

3. One way or another, we have to protect our subways and tunnels. We can do it the old-fashioned way with sandbags. Or we could pioneer new technologies like the balloons now in development that can be rapidly inflated within tunnels to provide a virtually watertight seal. The method doesn’t matter--we just need to make sure that our transit systems don’t flood any time the heavens open.

4. Speaking of flooding—we need sea walls! Let’s hire some experts from the one country famous for keeping the sea at bay—The Netherlands. And when they make recommendations, let’s listen to them.

5. We can also put nature to work. Create grassy parks and even tidelands in low-lying areas around the city. Beach grass and marshes work as barriers in costal areas to mitigate the surge of sea and sand. They could do the same for New York and look great too!

These are must-do's. But why not step back and consider hurricanes themselves? In past years, we’ve become experts in predicting their paths. If you were one of the millions tuned to the weather channel during the storm, you’ll recall the uncanny accuracy with which meteorologists anticipated Sandy’s every twist and turn.

My question: Why can’t we find a way to block hurricanes? Perhaps we could weaken them in their earlier stages. Or steer them away from the coast and let them rage harmlessly in the mid-Atlantic. Science fiction? Maybe, but not too long ago so were trips to the moon and photos from Mars. Let’s face it. Global warming is real, and sea levels are getting higher. We need to consider all options and begin preparing today to address the threats.

Must-Dos for Business Leaders

That’s my two cents about what we as a society should do. Now I’d like to share what I know that CEOs and business leaders can start doing now to manage risk within their own organizations.

Obviously you take disaster threats seriously. You don’t spend 39 seconds on disaster preparation which was the case with a power company on Long Island; and waste hours on rebranding. You do take care of your office and equipment. During Sandy, Goldman Sachs got full marks in this department. They had back-up power and also used aggressive sandbagging to protect their generator—something several other organization leaders neglected to consider.

But more important than guarding your bricks and mortar, you must take care of your people! It’s both a moral and a business mandate. As a responsible CEO—acting with your management and HR team—you’ll assess the risks and consequences of myriad disasters, from hurricanes to fires, and even earthquakes. You’ll then develop detailed contingency plans to protect your organization. Here’s what you need to cover:

Emergency shelter. Every employee needs to be able to contact the office in case he or she is rendered homeless. The company will arrange for temporary refuge, whether it’s with other employees or even in hotels. A company intranet can help ensure that everyone is kept in the loop during a disaster.

Food. In emergency situations, employees should be able to travel to the office to pick up food and water. If they can’t reach your office, get the food to them.

Offsite working. Build the potential of working from home into your operations. Once or twice a year, hold a mandatory “work from home” day. This can function like the fire drills office workers typically joke about, but which they know will save lives in an actual emergency.

Partner with other firms—even competitors. During Sandy, competing cell phone companies shared their cell towers to help keep lines of communication open. When I was CEO at the Becker agency, we partnered with LLMP, a sister agency in the same network, to share facilities during Hurricane Gloria.

Think global. Disasters like hurricanes, tornadoes, and earthquakes hit locally. If you have clients nearby, you may be able to combine resources to provide mutual support. However, if your clients are 2,000 miles away, they may be sympathetic to your plight as it unfolds on CNN, but they can’t put their business on hold while you dig out. If you have made plans for helping your clients when you’re in a crisis, they’ll be better able to keep working with you. If the shoe is ever on the other foot and a disaster hits one of your clients, you’ll be in a position to offer support to help them out and better cement your relationship.

Natural disasters are simply a fact of life. But if we fail to learn from them—each disaster will inflict more and more harm. And that’s an event we as leaders cannot accept.

About the Author(s)

Sander Flaum is Principal of Flaum Navigators, an agency specializing in marketing and sales effectiveness and chairman of the Fordham Leadership Forum, Fordham University Graduate School of Business Administration.