Learning from Catastrophes: Strategies for Reaction and Response

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.

Table of Contents:
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

About the Author :
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.