Katrina: why risk management failed

A new paper by Jean-Pierre Berliet, a senior manager at Ernst & Young, explores the risk management lessons that can be learned from the experiences following the impact of Hurricane Katrina.

Published in Ernst & Young’s Spring 2006 ‘Cross Currents’ magazine, the article says that the central lesson of Katrina is that the long-held view that a ‘big one,’ a disaster devastating enough to hurt every company, would not be a huge concern since, under such circumstances, regulators and the federal government would have to intervene. However, Katrina calls this conventional wisdom into question. It suggests that an extreme event may not be equally devastating to all companies; better-prepared companies may be more resilient and suffer comparatively smaller losses. Such companies would be better able to refinance themselves and take advantage of the market disruption caused by an extreme event. They could have their choice of the available business and this could leave competitors weakened or even insolvent. Such successful recoverers might also be able to make acquisitions on favourable terms because sellers would have fewer options.

•Date: 14th March 2006• Region: US • Type: Article •Topic: Disaster recovery
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