Disaster Due Diligence April 16, 2010
Join Firestorm Principals Jim Satterfield and Suzanne Loughlin
You are invited to join us for an important event, hosted by the law firm of Keesal, Young & Logan, where a distinguished panel will focus attention on the immediate risks posed to your business by natural and man-made crises and disasters. You will get the chance to participate in a hands-on crisis exercise and obtain input from industry leaders who will share personal experiences in significant crisis environments. The event will be held Monday, April 26 from 3-5:30 p.m. PDT, followed by cocktails and lively discussion from 5:30-7:30 p.m. at the penthouse offices of our host, Keesal, Young & Logan, overlooking the port of Los Angeles at 400 Oceangate, 14th floor, Long Beach, CA 90801.
Click here to register: http://kyl.com/crisis-rsvp/index.html
Natural disasters
HEADLINE: Insurers’ Disaster Costs to Surge, Swiss Re Says
SUMMARY: The surge in natural disasters may cost insurers as much as $110 billion worldwide in 2010, five times more than last year, Swiss Reinsurance Co. said. “We have already seen significant events in 2010,” Thomas Hess, chief economist of Zurich-based Swiss Re, said. “The industry is therefore well-advised to prepare for much higher losses.” Munich Re, the world’s largest reinsurer, has said losses from natural catastrophes caused by climate change -- including the long-term trend toward severe flooding -- will rise. U.S. forecasters have predicted an active Atlantic hurricane season.
STORY LINK: http://www.bloomberg.com/apps/news?pid=20601087&sid=a.usbqUub5A0&pos=6
ANALYSIS: A 500 percent increase in losses is significant. Natural disasters have shown a significant impact already this year. In addition to the projections of Swiss Re and others, there are billions in uninsured losses. In many disasters, only a portion of the impacts are insured. In other regions like Haiti and China, most losses are not insured at all. Terrorism is not generally covered and business interruption insurance does not cover all losses, so total 2010 disaster impacts could easily exceed a trillion dollars. How do you know that you have covered your exposure?
Insurance only addresses some economic impacts after the fact. Lost revenues and customers may never be recovered. Actionable, tested plans are the best way to ensure that your business survives. Does everyone in your company understand their role in your plan? Have you tested it?
HEADLINE: Volcanic ash still causing travel chaos
SUMMARY: Ash from a volcano eruption in Iceland severely disrupted air traffic across Europe this week, causing the cancellation of thousands of flights. The ash has spread to parts of northern and eastern Europe and has forced the closure of some of Europe's busiest airports, causing more disruption to worldwide air travel than 9/11. The U.S. Air Force said two bases in England, RAF Mildenhall and RAF Lakenheath, are shut down, meaning dozens of U.S. Air Force F-15s and other fighter jets and tankers are not flying, and flights to Iraq and Afghanistan through that airspace are being diverted.
STORY LINK: http://www.cnn.com/2010/TRAVEL/04/16/iceland.flights.volcano/index.html?hpt=Sbin
ANALYSIS: We automatically think that events abroad have minimal impact on us. Air traffic has been grounded in the UK and other countries in Europe. No air mail. No overnight delivery of packages. Meetings cancelled. No military flights from bases across Europe.
Obviously, what happens in Iceland doesn’t stay in Iceland.
Travel security
HEADLINE: Drug violence scares off tourists to Mexico
SUMMARY: Despite the bulk of drug-related violence being far removed from Mexico’s tourist destinations, fear is driving away visitors and threatening a crucial industry, already battered by last year's swine flu outbreak. Gory news reports of daily shootouts between drug cartel hit men are fueling concerns that Mexico is increasingly unsafe, even if most of the violence is along the U.S. border, far from top tourist areas. The number of international tourists flying into the Pacific beach resort of Acapulco fell by almost a quarter in the first three months of this year. The U.S. State Department has warned against nonessential travel along the U.S.-Mexico border, especially in the violent cities of Ciudad Juarez and in Tijuana, where hotel occupancy rates have dropped to around 30 percent.
STORY LINK: http://www.reuters.com/article/idUSN1323416220100413?type=marketsNews
ANALYSIS: The accounts of drug-related skirmishes and violent acts in Mexico are regular spots in the news. What is not typically reported is that the majority of these acts occur in a ribbon along the northern border with the U.S., and for the majority of Mexicans, life is pretty much status quo.
Hotels and other tourist-dependent businesses report significant declines in revenue and traffic. These reports vary widely with each business and destination. A significant percentage of the drop in Mexico’s tourist economy can also be attributed to the slumping U.S. economy and the H1N1 flu outbreak.
The liaise-faire attitude of American tourists partying in Mexico has shifted to a more guarded mindset. The precautions needed now to vacation in Mexico should be similar to visiting any U.S. city that has pockets of high crime. Tourists account for a very small percentage of victims in these conflicts. When you are booking a destination, it is important to pick a location away from the known hot spots as you would in the U.S. Like being in an unfamiliar city, you should travel in numbers, keep to the main streets and exercise additional caution venturing out at night. Before you select a hotel, pick an established company that has and wants to keep a positive reputation. Contact them directly and ask questions about their security measures, private security guards and medical facilities.
Business travelers need to take additional precautions as they could be viewed as a potential kidnapping victim or a target of opportunity. The risk of kidnapping is a very real problem and adequate procedures need to be in place. Companies need to have plans in place for their employees and visitors. Kidnappers want money, not the person. Kidnapping procedures need to be rehearsed and individuals need to be trained. Contracting with executive protection professionals is a huge step in prevention. Hiring reputable U.S. companies with experience in Mexico is a logical choice. If you engage with a Mexican-based security company, U.S. laws and regulations will be worth little.
Many financial institutions provide this coverage for key employees. The loss of key personnel can be just as devastating to a company as a natural disaster, catastrophic fire or large criminal activity. Companies that operate in Mexico, have a supply chain linked to Mexico or employees working near the hot spots of the border region, need very detailed business continuity plans and training to address the various threats and vulnerabilities that come with operating there.
Food safety
HEADLINE: Many food makers unchecked by FDA for years
SUMMARY: Many food manufacturing plants are going five years or more without being inspected, a government investigation revealed. The lack of oversight puts the public at higher risk for food-borne illnesses, according to a report from the Department of Health and Human Services. A shrinking workforce at the Food and Drug Administration – gutted during the Bush administration -- is responsible for much of the drop in inspections, including at facilities deemed high risk. Food-borne illnesses cost the U.S. $152 billion a year.
STORY LINK: http://www.msnbc.msn.com/id/36234287/ns/health-food_safety/
ANALYSIS: The illness costs from food-borne problems exceeded the losses from natural disasters last year. We expect food to be safe. Unfortunately, sometimes it is not. When we travel to some undeveloped countries, we recognize the potential to experience a food-related illness. The reality is that we should have similar expectations here.
Food recalls in the U.S. are growing. The level of imported food increases each year as inspections decrease. The ability to track food origination sources is limited. Once identified, all vulnerabilities must be monitored. Food is no exception. How do you know your food is safe?
Communicable illness
HEADLINE: Study shows wild birds could spread avian flu
SUMMARY: A study by scientists from the U.S. Geological Survey and the University of Tokyo showed that wild ducks could be spreading the H5N1 virus far and wide. Satellites tracked migrating northern pintail ducks from a bird flu-infected marsh in Japan to nesting areas in Russia. The ducks did not necessarily carry the virus, but the species can be infected with H5N1 with no ill effects. H5N1 has been circulating in Asia and the Middle East, with occasional outbreaks in Europe, since 2003. Alaska is thought to be the most likely place for it to enter the Americas.
STORY LINK: http://abcnews.go.com/Technology/wireStory?id=10357061
ANALYSIS: The nature of science is to seek empirical proof of what we know intuitively. Disease must be communicated – carried and delivered by someone or something – to be communicable. The source of avian flu is, as the name suggests, birds. It makes sense that when that source, what is termed the “reservoir,” travels, so too does the disease. When West Nile virus first appeared in New York City in 1999, it was not the human victims who facilitated identification of the disease but rather the unusually large number of birds dying in the region.
Whether by human or animal transmission, the fact that disease can be spread is the relevant issue. Once pandemic influenza falls out of the media spotlight, it also tends to lose our attention. The basic preventive and planning measures stressed over the past year – frequent hand washing, cough etiquette, immunization, monitoring travel, responsive sick leave policies, and a well-rehearsed and familiar disaster plan – remain highly relevant. Illness and disasters may never be prevented, but their impact can be minimized through a culture of preparedness.
HEADLINE: Wash. day care stayed open after E. coli found
SUMMARY: A health official said he let a Washington state daycare center remain open for several days after children were hospitalized with a deadly strain of E. coli because of concerns the infection would spread farther if parents took their children elsewhere. A 4-year-old boy died after being infected at the daycare center and three other children were sickened.
STORY LINK: http://www.msnbc.msn.com/id/36349575/ns/health/
ANALYSIS: Without knowing the specific details of this outbreak, it would be imprudent to speculate on what appears, on surface value, to be a public health decision that places children at risk. This incident focuses attention on one of the many possible and practical reactions to a disease outbreak. Until the source and means of transmission of a disease are identified, hasty reactions may actually worsen the situation. For example, closing a high school in the face of an influenza outbreak may be appropriate. If many of the parents are working or otherwise not home and a shopping mall is nearby, teenagers will tend to become restless and congregate, thereby not only negating the preventive measure of school closing but also exposing a far wider population.
Understanding the optimal course of action often requires many “what if” considerations and prior planning. We typically defer disaster planning and practice, at times at our own peril. A risk analysis, the beginning of prevention and response planning, and creating a knowledgeable and resilient workforce, community, or family are first steps in avoiding disaster. “Every crisis is a human crisis” assumes tremendous meaning when you are that human.
Economic crisis
HEADLINE: Foreclosure rates surge, biggest jump in 5 years
SUMMARY: As banks accelerated their rate of processing troubled mortgages, a record number of U.S. homes were lost to foreclosure in the first three months of this year. RealtyTrac Inc. said the number of U.S. homes taken over by banks jumped 35 percent in the first quarter from a year ago. In addition, households facing foreclosure grew 16 percent in the same period and 7 percent from the last three months of 2009. "We're right now on pace to see more than 1 million bank repossessions this year," said Rick Sharga, a RealtyTrac senior vice president.
STORY LINK: http://www.msnbc.msn.com/id/36547572/ns/business-mortgage_mess/
ANALYSIS: The surge in lost homes will have impacts that seep into the workplace, as the stress and hopelessness of foreclosure affect more employees nationwide. Building domestic and/or financial problems often boil over into workplace violence, and the warning signs should be heeded.
Companies should have processes for the reporting of troubling behavior and procedures for monitoring employees who have exhibited signs of being overstressed. Co-workers are often the first to see these signs, and should be encouraged to come forward for the benefit of the troubled employee and the organization as a whole.
OSHA recognizes workplace violence as a known hazard. Does your company have plans in place to mitigate the risk?
Preparedness groups
Join Firestorm’s LinkedIn groups and help build a Culture of Preparedness for your family and organization:
DISASTER READY PEOPLE: http://www.linkedin.com/groups?gid=1914314&trk=myg_ugrp_ovr
WORKPLACE VIOLENCE: http://www.linkedin.com/groups?gid=1898572&trk=myg_ugrp_ovr
COMMUNICABLE ILLNESS: http://www.linkedin.com/groups?gid=1899278&trk=myg_ugrp_ovr
SWINE FLU: http://www.linkedin.com/groups?gid=1921222&trk=myg_ugrp_ovr
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