Denise Kingsmill: When disaster strikes

Natural disasters cannot always be foreseen or avoided - sometimes the best we can hope for is to mitigate their effects.

by Denise Kingsmill
Last Updated: 24 Sep 2015

Earthquakes, floods and other such catastrophes used to be called acts of God and were characterised as retribution from on high to punish man for his sins. Then, as secular society developed, they became described as acts of nature, as if people were at the mercy of unpredictable forces beyond their control.

However, with greater scientific understanding, we are now starting to recognise how our personal, political and corporate decisions can shape these traumatic events. We are beginning to take responsibility for so-called natural disasters.

Even the insurance industry recognises that calamities such as the floods in Australia and the Philippines, the mud slides in Brazil and the heat wave and drought across Russia last year can only be plausibly explained by global warming, caused, according to scientific consensus, by human activity and in particular the burning of fossil fuels to satisfy our insatiable appetite for energy. We are being forced to appreciate very directly how our consumption choices can have real and tragic consequences for others.

In a perverse way, there is comfort to be found in this, despite the huge human and economic costs, because it would seem there is something that can be done about it. If we consumed less, recycled more and used renewable energy sources, everything would be fine. If only it were that simple.

The scale and horror of the earthquake and tsunami in Japan earlier this year, broadcast non-stop by the rolling news media, have been exceptionally shocking. Not only because this particular tragedy took place in one of the richest countries in the world, well prepared and used to these phenomena, but also because there is no scientific evidence that human behaviour affects this sort of seismic event. The tectonic plates heaved and buckled because that is the way the planet is built and there is nothing we can do about it. So, are we back to the sort of helpless acceptance of disaster displayed by our forefathers? The answer has to be a resounding no.

We may not be able to stop some of these natural events but we can learn how to mitigate their consequences, whether it is constructing better sea defences or not building homes and factories on flood plains. Cheap, earthquake-proof housing that flexed with the tremors rather than crumbled would have saved many lives in the catastrophe in Haiti last year, while renewing and modernising the levees surrounding New Orleans would have alleviated the all-too predictable tragedy of hurricane Katrina in 2005.

While lessening the risk to human life must be the priority in these circumstances, economic and corporate risk and disaster planning are also important. With the benefit of hindsight, it does not seem like good risk management on the part of the Tokyo Electric Power Company (Tepco) to have built its nuclear plant on the coast in a part of the country known for tsunamis, although it had prepared for the risk of earthquake. The leaks from the Fukushima plant has meant confidence in this form of 'green' energy has plummeted, even in parts of the world where earthquakes and tsunamis are unknown.

The effect on the world economy is potentially enormous. Germany has closed seven of its nuclear reactors and other European countries are rethinking their commitment to low-carbon nuclear power, with the inevitable impact on the achievability of climate change targets. The price of oil and gas has rocketed, as these are required to make up the energy shortfall. Car manufacturers, including Honda in Swindon and General Motors in the US, have ceased production of some models because they cannot obtain essential components from the affected area.

Fukushima is the nuclear equivalent of the beating of the butterfly's wings in today's global economy, and the knock-on consequences will probably be greater than the direct threat.

There is an increasing trend on company boards for the audit committee to encompass risk, and for the risks contemplated to be much wider than financial ones. Loss of data as a result of a disaster is widely anticipated and prepared for by most companies, as is the loss of key personnel.

But there is a limit to how far a company can go in managing and planning for the risk of natural disaster.

Around this time last year, I was stranded in the US by the closure of European air space by regulators. They were overconcerned, as it turned out, by the risks to aircraft safety of volcanic ash following the eruption of an obscure and unpronounceable Icelandic volcano, which had never caused a problem before and only had the potential to do so on this occasion because of unprecedented wind conditions. Although airlines will now add this to their risk register, how could they have ever predicted such an event? Experience is the best preparation for disaster but it is expensive to come by both in human and economic terms.

War is perhaps the worst human disaster of all, at least for the participants. Some corporates on the other hand benefit greatly from it. It can be no coincidence that, as the second biggest arms-dealing nation in the world, the UK has been involved in 22 conflicts since the end of the Second World War, a fact underlined by the granting last year of export licences worth £231m for supplying arms to Libya, including teargas, small arms ammunition and sniper rifles. Unlike earthquakes, tsunami and volcanoes, war is a man-made disaster and, with very few exceptions, could be avoided.

- Baroness Kingsmill is currently a non-executive director of British, European and US boards. Lady Kingsmill can be contacted on editorial@managementtoday.com

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