Risk management

The emergence of COVID-19 was not something that we were prepared for. Not enough protective equipment for healthworkers, not enough ventilators, no economic plan, and some political leaders and commentators dismissed it as another hoax (just as the same people dismiss climate change).

Catastrophes, whether local or global, seem to happen much more frequently than humans expect. These include share market crashes, extreme weather events, geological events, terrorism, and pandemics. Perhaps we are mentally working on the normal distribution when in fact catastrophic events have fatter tails than the normal distribution. For example, we seem to hear about once in a thousand year floods or droughts almost every year.

Since 2000 some of the catastrophes that have occurred include:
• The September 11 2001 attacks in USA with the loss of nearly 3,000 lives;
• Hurricane Katrina which devastated New Orleans in August 2005, with the loss of over 1,800 lives;
• The Boxing Day 2005 great earthquake in Sumatra and the resulting tsunami, with the loss of over 200,000 lives;
• The March 2011 great earthquake in Japan and the resulting tsunami, with the loss of 16,000 lives and the destruction of a nuclear power plant which could have had even more widespread consequences;
• The European heatwave of summer 2003, which killed over 70,000.

This is just a partial list selected to show that both rich and poor countries are affected. Other earthquakes with a high death toll which have occurred since 2000 include: Haiti 2010, 220,000 killed; Sichuan 2008, 87,000 killed; Kashmir 2005, 73,000 killed; Bam 2003, 27,000 killed. There have been deadly cyclones in Myanmar (138,000 killed) and the Philippines (6,000 killed).
Then there have been three recent incidents of flight disruptions due to volcanic ash clouds. Much more severe eruptions occur at the rate of one per 100 to 200 years which are capable of disrupting air travel globally. Such eruptions occurred in Iceland in 1783 and in 1815 in Indonesia. Less frequently, mega eruptions can severely cool the planet for several years leading to huge numbers of deaths by starvation and freezing.

Solar flares are a hazard for electronic communications. The last major disruption was the Carrington event in 1859, in the days of the telegraph. A huge solar flare followed by a large coronal mass ejection struck Earth induced huge currents into wires causing extensive and costly damage. Lesser events struck in 1921 and in 1989, the latter causing a huge blackout in Canada. In 2012, there was an event of similar magnitude to the 1859 Carrington event which passed through Earth’s orbit – fortunately, the planet was in a different quadrant of its orbit. A repeat of the Carrington event today would severely disrupt all forms of communication, power transmission, GPS and other navigation, and damage pipelines. The recovery time has been estimated at four to 10 years and the cost at up to $2 trillion in the first year.

In 1908, a large comet or asteroid caused a major explosion over Siberia (the Tunguska event). The energy released was up to 1,000 times greater than the atomic bomb dropped on Hiroshima in 1945. Fortunately the area was sparsely populated, but such an impact on a major city would be catastrophic on an unprecedented scale.

The 1918 to 1920 Spanish Flu pandemic infected up to 500 million people worldwide and killed 50 to 100 million of them. Today, the speed of transmission would be much greater (due to air travel) and so there would be little time to develop a vaccination. There have been lesser epidemics since, such as Hong Kong flu. It was only a matter of time before there was another pandemic and 2020 happened to be the year it happened. We don’t know how long it will last, whether immunity or a vaccine will be developed, or when the next pandemic will occur.

This listing of potential catastrophes suggests that planners should develop scenarios to cope with such rare but devastating events. Some are local but some are global.

Planners should consider how they can prepare to survive in the event of such catastrophes. In some cases, they may also represent a profitable opportunity. At a presentation to the Australian Mushroom Growers Association, I said that they could save the world in the event of crop failures due to a major volcanic eruption blotting out sunlight. Mushrooms grow in the dark!

The annual World Economic Forum Global Risks Report is a good source of information about potential catastrophes, including human caused ones. Their January 2020 analysis perhaps under-rated the likelihood and potential severity of a disease pandemic. We need to learn from that understatement and be better prepared. We also need to factor Government response in to the analysis.

Charlie Nelson