Erwann Michel-Kerjan, managing director of the Wharton Risk Center at the University of Pennsylvania, argues that “extreme events are on the rise” and, as a result, “governments must implement national and integrated risk-management strategies” to meet the challenge. [“How resilient is your country?” Nature, 21 November 2012] Michel-Kerjan penned his article following Superstorm Sandy that left devastation along the northeast coast of United States in its wake. He writes:
“As the United States continues to mop up after Superstorm Sandy, we see again our vulnerability to extreme events. The destruction was massive: US$50 billion in economic losses; large-scale evacuations; thousands of businesses closed in anticipation; and millions of Americans without power for days. But the catastrophe had a silver lining: the way that science was used to improve decision-making. Still, much more is required to make nations truly resilient to extreme events — we need to develop national risk-management strategies.”
Natural disasters inevitably remind governments that even the best disaster plans can be improved. If citizens are lucky, politicians not only get smarter in the aftermath of extreme events they actually do something with their new-found intelligence. That’s what has been happening in Japan since a combined earthquake/tsunami devastated parts of that country in March 2011. Sarah Murray reports that the country is now awash in smart city initiatives aimed at making the country more resilient and sustainable. [“Smart cities: Tsunami brings rethink on sustainability,” Financial Times, 3 December 2012] Murray reports that the meltdown at the Fukushima nuclear power plant whetted Japan’s appetite for alternative energy sources and, as a result, the country “is pushing ahead with ambitious smart city plans.” Lluís Gomez, director of international business at the Smart City Expo World Congress, told Murray, “The earthquake changed the agenda.” That is exactly what Michel-Kerjan is recommending for all nations — a change in agenda to make themselves more resilient. He continues:
“The United States’ response to Sandy contrasted vividly with that to Hurricane Katrina. In 2005, the inability to foresee and effectively communicate the possible failure of the levee system in New Orleans, and the incapacity of the government to address the basic needs of those affected, surprised the world. Katrina caused 1,300 deaths in the United States, many of them avoidable. Many fewer died from Sandy. Comparisons are never perfect, but it is clear that the systematic use of scientific evidence by the government and the media led to more effective crisis management. Information on the most likely path Sandy would take and on conditions at landfall (based on national and international forecasts of wind speed and storm surge) all helped.”
He reports that with Superstorm Sandy still fresh on people’s minds, those attending the final round of G20 meetings in Mexico City “formally recognized disaster-risk financing and management as a priority.” Michel-Kerjan asserts, “This sends an important signal to the international community because Sandy was not an outlier. It could even be the new norm, as continuing development in high-risk areas combines with intense disasters to produce ever-increasing damage.” As I’ve pointed out in past posts, losses caused by natural disasters are on the rise. Michel-Kerjan reports:
“Worldwide, economic losses from natural catastrophes rose from $528 billion in 1981–90 to $1,213 billion during 2001–10. In 2011 alone, they amounted to $380 billion, in large part because of the earthquake, tsunami and nuclear accident in Japan. The previous year, earthquakes caused massive losses in Haiti, Chile and New Zealand. Large-scale floods have struck Australia, China, Pakistan and Thailand, and in the past decade, a series of hurricanes has generated economic losses of hundreds of billions of dollars in the Americas.”
Whether you believe that climate change is being affected by human activity or is simply part of a naturally recurring cycle, the results of such change are becoming ever more clear. “Given this situation,” writes Michel-Kerjan, “governments should be able to answer, comprehensively and quantitatively, five questions that I see as pillars of national risk management.” Those questions are:
- What risks do we face and where?
- What assets and populations are exposed and to what degree?
- How vulnerable are they?
- What financial burden do these risks place on individuals, businesses and the government budget?
- How best can we invest to reduce risks and strengthen economic and social resilience?
He claims that “many governments do not know the answers” to those questions. That shouldn’t come as surprise since fiscal crises currently facing a myriad of nations, including the United States, demonstrate that politicians don’t appear to be very good long-range thinkers. Michel-Kerjan continues:
“In a 2011 survey by the Organisation for Economic Co-operation and Development, more than half of the governments that responded could not assess aggregate amounts of insured losses from disasters (this would require merely collecting data from the insurers). Most do not have systematic and publicly available data on total losses, which is necessary to assess disaster vulnerability.”
Granted we are in the early stages of big data era; but, governments are less and less able to claim that necessary information to plan better isn’t available to them. Going forward, big data collection and analysis is going to be even more critical in order to help countries and cities become more resilient. Michel-Kerjan puts it this way:
“Preparation for disasters — from early warning systems, urban planning and zoning, to mitigation and financial protection — requires detailed estimates for all segments of society, including the economic exposure of the government itself. Yet even the United States has no public national database of residences and buildings in flood-prone areas. This is particularly frustrating given the tremendous improvement in our capacity to do large-scale probabilistic catastrophe risk assessments; to measure hazards; to assess the vulnerability of buildings, infrastructure and livelihoods; and to calculate the resultant expected losses. The estimates are still not perfect, but they continue to improve. The insurance industry already uses them to manage trillions of euros of coverage around the world. Done on a national scale, they could form the basis of a coherent and science-based national risk-management strategy. It will not be cheap, but it would be a wise investment.”
Cities along the world’s coastlines shouldn’t wait for their national governments to act. They should start doing their own analyses since they are home to the largest populations and appear to the be the must vulnerable. Michel-Kerjan concludes:
“To do that for all the extreme events that a country can face, and to mitigate and finance them and overcome behavioural barriers, demands multidisciplinary work and strong coordination, both among scientists and across government ministries. I recommend that governments appoint cabinet-level national-risk officers, similar to what is done for enterprise-wide risk management in the private sector. … A growing number of heads of states want to make resilience a priority, but are unsure of the first step. Good practice demands a combination of quantitative knowledge and leadership at the top. Shall we start?”
Risk management plans don’t have to be viewed only as insurance policies against disaster. In Japan, they are using the lessons learned from the earthquake/tsunami to implement smart city initiatives that have both the benefits of making the country more resilient as well as more sustainable. Smart city initiatives have a greater return on investment than disaster prevention and recovery plans alone. Murray reports:
“Globally, smart city initiatives cover a range of technologies and infrastructures, many of which promote environmental sustainability. These include energy efficient buildings, use of clean energy, information technology-enabled transport systems and water supplies, and digital control of everything from traffic management to street lighting.”
Murray reports that “the 2011 earthquake raised awareness in Japan of the need for these technologies in securing sustainable urban power supplies.” The result has been that “Japan has launched its ‘Smart Communities’ projects, to develop smart grids and promote clean, renewable energy generation and energy efficiency in cities.” Although I’m not sure how the upgrade to Japan’s electrical grid is progressing, many analysts in the United States recommended that utility lines be taken underground to prevent the kinds of power failures experienced during and after Superstorm Sandy. If that recommendation is heeded, utility companies would be wise to partner with internet service providers to run high speed cables in the same channels to save money and upgrade information networks simultaneously with electrical grids.
Partnership is really the name of the game when it comes to smart city initiatives. Governments alone can’t foot the bill to make cities smarter and more resilient. All stakeholders need to get involved so that the protections and benefits discussed by Michel-Kirjan and Murray can be achieved. Murray reports that in Japan governments are partnering with “IT and engineering companies, and consultancies,” including, Fuji Electric, General Electric, IBM, Nippon Steel, Accenture, Toshiba, Panasonic, Meidensha, and Nissan. Citizen groups also need to be involved since the most important data that will be collected and analyzed in order to make cities smarter and safer must come from them.
