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Learning from Catastrophes

Learning from Catastrophes

Strategies for Reaction and Response

Howard Kunreuther, Michael Useem

Dec 2009, Hardback, 352 pages
ISBN13: 9780137044856
ISBN10: 0137044852
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£25.99
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Events ranging from Hurricane Katrina to the global economic crisis have taught businesspeople an unforgettable lesson: if you don’t plan for “extreme risk,” you endanger your organization’s very survival. But how can you plan for events that go far beyond anything that occurs in normal day-to-day business? In Learning from Catastrophes, two renowned experts present the first comprehensive strategic framework for assessing, responding to, and managing extreme risk. Howard Kunreuther and Michael Useem build on their own breakthrough work on mitigating natural disasters, extending it to the challenges faced by real-world enterprises.

Along with the contributions of leading experts in risk management, heuristics, and disaster recovery, they identify the behavioral biases and faulty heuristics that mislead decision makers about the likelihood of catastrophe. They go on to identify the hidden links associated with extreme risks, and present techniques for systematically building greater resilience into the organization. The global best-seller The Black Swan told executives that “once in a lifetime” events are far more common and dangerous than they ever realized. Learning from Catastropheshows them exactly what to do about it.

Foreword by Klaus Schwab xiii

Preface by Howard Kunreuther and Michael Useem xv

Part I: Setting the Stage

Chapter 1: Principles and Challenges for Reducing Risks from Disasters 1

Howard Kunreuther and Michael Useem

Chapter 2: Acting in Time Against Disasters: A Comprehensive Risk Management Framework 18

Herman B. “Dutch” Leonard and Arnold M. Howitt

Part II: Linking Risk Assessment, Risk Perception, and Risk Management

Chapter 3: Forecasting and Communicating the Risk of Extreme Weather Events 41

Geoff Love and Michel Jarraud

Chapter 4: Cognitive Constraints and Behavioral Bias 64

Séan Cleary

Chapter 5: The Five Neglects: Risks Gone Amiss 83

Alan Berger, Case Brown, Carolyn Kousky, and Richard Zeckhauser

Chapter 6: Can Poor Countries Afford to Prepare for Low-Probability Risks? 100

Michele McNabb and Kristine Pearson

Chapter 7: The Role of Risk Regulation in Mitigating Natural Disasters 121

Bridget M. Hutter

Chapter 8: Hedging Against Tomorrow’s Catastrophes: Sustainable Financial Solutions to Help Protect Against Extreme Events 139

Erwann O. Michel-Kerjan

Part III: Applications to Catastrophic Risks

Chapter 9: A Financial Malignancy 156

Suzanne Nora Johnson

Chapter 10: Climate Change: Nature and Action 170

Thomas E. Lovejoy

Chapter 11: Lessons from Risk Analysis: Terrorism, Natural Disasters, and Technological Accidents 177

Detlof Von Winterfeldt

Chapter 12: Turning Danger to Opportunities: Reconstructing China’s National System for Emergency Management After 2003 190

Lan Xue and Kaibin Zhong

Chapter 13: Dealing with Pandemics: Global Security, Risk Analysis, and Science Policy 211

Jiah-Shin Teh and Harvey Rubin

Part IV: Innovation and Leadership

Chapter 14: Long-Term Contracts for Reducing Losses from Future Catastrophes 235

Howard Kunreuther

Chapter 15: Developing Leadership to Avert and Mitigate Disasters 249

Michael Useem

Endnotes 269

About the Authors 307

World Economic Forum Global Agenda Council on the Mitigation of Natural Disasters 313

Index 317

Breakthrough, business-focused techniques for managing the growing risks of catastrophe, from world’s leading experts.

  • Indispensable “extreme risks” guidance for decision-makers in a world that is becoming increasingly unstable.
  • Powerful assessment models, decision-making techniques, and best practices for building resilience into any organization, public or private.
  • Edited by the leading experts who recently introduced influential new techniques for managing extreme risks at the World Economic Forum.

Howard Kunreuther is the Cecilia Yen Koo Professor of Decision Sciences and Public Policy at the Wharton School, and Co-Director of the Wharton Risk Management and Decision Processes Center. He has a longstanding interest in ways that society can better manage low-probability, high-consequence events related to technological and natural hazards. He is a member of the OECD’s High Level Advisory Board on Financial Management of Large-Scale Catastrophes, a fellow of the American Association for the Advancement of Science (AAAS) and distinguished fellow of the Society for Risk Analysis, receiving the Society’s Distinguished Achievement Award in 2001. He is the recipient of the Elizur Wright Award for the publication that makes the most significant contribution to the literature of insurance.

Michael Useem is William and Jacalyn Egan Professor of Management and Director of the Center for Leadership and Change Management at the Wharton School, University of Pennsylvania. He is author of numerous books, including The Go Point, The Leadership Moment, and Investor Capitalism. He has presented programs and seminars on leadership and governance with corporations, government agencies, and non-profit organizations worldwide and has consulted on organizational development and change with the U.S. Agency for International Development, U.N. Food and Agriculture Organization, and companies and other organizations in Latin America, Asia, and Africa.

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