Session No. 11

# Course Title: Business and Industry Crisis Management, Disaster Recovery, and Organizational Continuity

# Session 11: Risk Management Controls for Natural Disasters

### Time: 1 hr

Objectives:

1.  Through small group work, apply the risk-based decision model and
    risk management considerations to an assigned case study from FEMA
    publication 331 stressing natural crisis (disaster) risk management.

**Scope:**

This session starts with an explanation of the various categories of
crises in the Lerbinger text. Natural crises (disasters) become the
focus of the small-group work in this session. FEMA publication 33,
*Protecting Business Operations: Second Report on Costs and Benefits of
Natural Hazard Mitigation,* provides a series of case studies that are
business specific. Through their reading and written work, the students
are asked to apply concepts and models from previous sessions to an
assigned case study through small-group work. Each small group will
present an oral report of their case study at the start of the next
session and the modified experiential learning cycle will be completed
for objective 11.1.

**Readings:**

*Student Reading:*

Federal Emergency Management Agency. 1998. *Protecting Business
Operations: Second Report on Costs and Benefits of Natural Hazard
Mitigation,* FEMA publication 331*.* Pages i, ii, 1--41.

*Instructor Reading:*

Federal Emergency Management Agency. 1998. *Protecting Business
Operations: Second Report on Costs and Benefits of Natural Hazard
Mitigation,* FEMA publication 331*.* Pages i, ii, 1--41.

Objective 11.1 Through small-group work, apply the risk-based decision
model and risk management considerations to an assigned case study from
FEMA publication 331 stressing natural crisis (disaster) risk
management.

Requirements:

Collect the individual written assignments.

Present the general content by lecture and discussion as necessary.

Provide the remainder of this class session for the students to work in
their small groups to discuss their assigned case study and to prepare a
short (three to five minutes) oral report answering the assigned
questions. A handout sheet of questions for the group work is included.
As an example, possible answers to the questions for the Warner Bros.
Studios case study (pages 4 to 6) are included in the Supplemental
Considerations section.

Within the new groups (group membership changed at the end of the last
session) assign a group leader, recorder, timekeeper, and reporter.
Since the groups are new, circulate and monitor their work since there
may be some initial start-up problems. If a group cannot complete its
tasks during the class session, the members should arrange to meet
outside class to complete their work.

Oral reports will be made by each group at the start of the next
session. The modified experiential learning cycle will be completed
after all the oral reports.

Remarks:

I.  Background.

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A.  Controls for crises.

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1.  Lerbinger's text expands the three major categories of crises
    (natural, technological, and human induced) into seven categories by
    further defining types of human-induced crises (3 through 7 below):

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a.  Natural crises (also referred to as natural disasters).

b.  Technological crises.

c.  Confrontation crises.

d.  Crises of malevolence.

e.  Crises of skewed management values.

f.  Crises of deception.

g.  Crises of management misconduct.

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B.  The emphasis and coverage of the course texts and the assigned
    course reading to date have been on crisis categories 2--6. This
    emphasis is not intended to minimize the importance of natural
    crisis mitigation (controls), preparedness, response, and recovery
    (the traditional emergency management model and approach).

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1.  Businesses must consider natural hazards while accomplishing the
    risk assessment, BAIA, and risk management functions upon which they
    will develop their crisis management strategies and plans. As is
    stated in FEMA publication 331, page 1, "With competitive markets,
    tight overhead, and slim profit margins, losses due to natural
    hazards can make the critical difference in a business' ability to
    maintain profitability, or even survive, after a natural disaster.
    Fortunately, natural hazard mitigation is a cost-effective method to
    reduce or even prevent losses, especially when it is integrated into
    the way the business operates."

2.  Many of the risk management controls implemented for natural hazards
    will also serve as controls for technological and human induced
    hazards.

3.  Most natural crisis controls target consequence and impact reduction
    since natural phenomena are largely not preventable. Controls can,
    however, be implemented to avoid the occurrence of natural crises
    such as relocation to less vulnerable areas and even the
    construction of physical protection such as dams or flood levees.
    The FEMA publication 331 reading for this session presents actual
    case studies of how various private sector businesses have applied
    controls for natural hazards.

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II. Small-group case study work.

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A.  In the previous session, students were provided the following
    assignment:

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1.  Read FEMA Publication 331 in entirety.

2.  For an assigned case study, answer questions covering the
    application of the risk-based decision making model and the risk
    management models (causal chain and the 2 x 2 matrix) described in
    earlier sessions to explain the methodology followed and decisions
    made in the assigned case study.

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B.  Form into your small groups, choose a leader, recorder, time keeper,
    and reporter for this exercise and prepare a short (three to five
    minutes) report covering at least the following points:

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1.  What are the goals of the business that led to the actions taken in
    the case study?

2.  What were the vulnerabilities identified in the risk assessment
    process and during the BAIA and what controls were considered?

3.  How could the 2 x 2 matrix model be used to prioritize the controls
    considered?

4.  At what points do the controls that were implemented interrupt the
    causal chain?

5.  Identify an additional control that could be implemented to
    interrupt the causal chain at a different point.

6.  What were the impacts of the controls implemented?

7.  How were communications within and outside the business used to
    explain and support the risk management decisions?

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C.  You will be given the remainder of this class session to complete
    the small-group work assignment. If this is not a sufficient amount
    of time, you should arrange to meet outside of class to complete
    your group work.

Supplemental considerations:

Using the Warner Bros. Studios case study as an example:

1.  What are the goals of the business that led to the actions taken in
    the case study?

> Warner Bros. Studios employs 5,000 to 10,000 people and is located on
> 110 acres in Burbank, California. Its "intelligent and savvy
> management practices" has extended to its proactive approach to
> achieving a goal of reducing the effects of natural hazards in support
> of organizational survival and profitability.

2.  What were the vulnerabilities identified in the risk assessment
    process and during the BAIA and what controls were considered?

> *Vulnerabilities:*
>
> Earthquake damage: The Burbank area has experienced numerous
> small-to-moderate earthquakes in the past 10 years.
>
> Ground water flooding: During the years of El Niño (approximately
> every 8 years) the adjacent Los Angeles River is prone to flooding.
>
> *Controls:*
>
> Establishment of an Office of Emergency Services.
>
> Nonstructural hazard mitigation such as fastening PCs, furniture, and
> shelving systems, with emphasis then being given to life safety,
> exits, and the application of heavy duty film to windows.
>
> Training sessions including a review of historical damage patterns.
>
> Development of a flood hazard map for the facility.
>
> Drains were checked weekly to ensure their functionality.
>
> 2,500 sandbags were stockpiled.
>
> Pre-disaster purchase orders were established to ensure an adequate
> flow of post-disaster supplies.
>
> Participation in community preparedness training.

3.  How could the 2 x 2 matrix model be used to prioritize the controls
    considered?

> Controls such as fasteners for computers, shelves, and furniture are
> of low cost and have the potential of significant risk reduction in
> terms of personnel and equipment safety and were immediately
> implemented.
>
> Many of the other controls -- checking drains, establishing
> pre-disaster purchase orders, development of a flood hazard map, and
> stockpiling sandbags -- are of low cost and have varied potential to
> reduce risk. Obviously they were considered to have sufficient risk
> reduction potential for implementation.
>
> Establishment of an Office of Emergency Services is of relatively high
> cost due to salaries, benefits, office and equipment requirements,
> etc., but was considered to have a high enough potential for risk
> reduction that the control was implemented.
>
> Training is often considered to be of low cost, but in actuality can
> be quite expensive in terms of hours spent away from the job by
> trainees and instructors and training development costs. Again,
> training was seen to have sufficient risk reduction potential for
> implementation as a control.

4.  At what points do the controls that were implemented interrupt the
    causal chain?

> Establishment of an office of emergency services can interrupt the
> causal chain at all points by helping to coordinate and maintain an
> overall program of crisis management and business continuity.
>
> Training and development of flood hazard maps can reduce the frequency
> of root/basic causes by providing awareness and helping to shape a
> hazard-averse culture within the organization. The flood hazard maps
> and training can also provide individuals and the business with the
> knowledge and awareness to decrease their exposure to hazardous
> situations.
>
> Checking drains to allow proper drainage can help reduce the frequency
> of the immediate causes of flooding and reduce the impact of flooding
> should it occur.
>
> The computer, furniture, and shelf fasteners are designed to reduce
> the impact should an earthquake occur.

5.  Identify an additional control that could be implemented to
    interrupt the causal chain at a different point.

> All or parts of the facility could be relocated to areas less
> vulnerable to flooding and/or earthquakes to decrease exposure.
>
> Buildings could be strengthened or flood-proofed to reduce possible
> impacts.

6.  What were the impacts of the controls implemented?

> Warner Bros. Studios saved over \$1 million in losses during the 1994
> Northridge Earthquake.
>
> Although not quantifiable, Warner Bros. Studios's public image was
> enhanced through its participation in community preparedness training.
>
> "Warner Bros. Studios's preparedness and mitigation and mitigation
> efforts have reduced damage costs and brought increased sustainability
> in the event of a natural hazard" (FEMA p. 6).

7.  How were communications within and outside to business used to
    explain and support the risk management decisions?

> Warner Bros. Studios used training sessions to obtain input for the
> risk assessment and BAIA functions and to increase awareness within
> the company and in the community.