Where Were Risk Managers When The Lights Went Out?
The threats posed by terrorism have loomed large in the minds of risk managers and their insurance industry partners since the World Trade Center was destroyed on Sept. 11, 2001.
However, as last month's extraordinary blackout demonstrated, our greatest vulnerability might not be from outside forces of evil, but from our own inattention to basic risk management planning.
It is hard to believe that so great a portion of the United States could be crippled by a simple series of power surges and bad risk management, but that is the reality of the situation.
Many were quick to blame terrorists, but government officials were equally quick to squelch any such concerns.
Some paranoids might continue to suspect that terrorism must be at fault and that the government is afraid to reveal the truth to us. (This theory is not entirely implausible given recent reports about the federal government doctoring Environmental Protection Agency press releases to minimize the health hazards facing those breathing the air in downtown Manhattan following the Sept. 11 attacks.)
However, we believe this latest catastrophe–with power going down from Ohio all the way to New York–is indeed an accident, if only because terrorists do not operate anonymously. There is no point in destroying something or wreaking havoc and then hoping no one finds out. Terrorists want people to know the damage they can cause, and they have plenty of outlets through which to claim credit.
However, terrorist groups are likely to carefully study the causes behind the blackout and the vulnerabilities it exposed for future reference. Terrorists will want to know how they might trigger a similar incident, either as an end in itself or as a prelude to a secondary attack of some kind.
In any case, risk managers and the insurance industry should work together to head off another such catastrophe. There is simply no excuse for so many people to be deprived of power for so long. The economic cost is devastating, and the threat to human life is substantial.
Trade associations representing public and private sector risk managers, insurance companies and producers need to combine their lobbying might to push Congress for quick action.
The problems posed by our nation's "Third World" power system are no secret. Substantial funds are needed to upgrade the multistate power grid. In addition, a new oversight agency should be put in place to force the various state power utilities to better coordinate their respective risk management plans so that another massive blackout cannot occur.
Getting legislation passed will not be easy as long as any discussion of the electrical grid is tied to a broader energy bill. Disputes over whether or not to drill for oil in protected wildlife areas, or whether to raise or lower fuel-efficiency standards for cars and trucks should not be allowed to keep the country from taking action this year to begin upgrading the power grid and improving the system that manages it.
In the meantime, risk managers need to examine their own loss control and safety plans to make sure their firms are prepared individually to cope with a blackout, since until the power grid is reinforced, we are all vulnerable.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 1, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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