--> Gill Blog: Katrina's Impact Analysis Issues

Gill Blog

Saturday, September 03, 2005

Katrina's Impact Analysis Issues

The casinos that once operated on floating barges in Mississippi and now litter the landscape of what was once a pristine gulf coast are a stirring metaphor to how "The House" - in the past always being assured of winning - would one day lose. The magnitude of the loss is now beyond comprehension, given the economic contribution casinos make to Mississippi's fragile coffers. Somehow the industry will have to rebuild. Another high stakes riverboat gambler that finally took a hit when the odds went the other way was the U.S. Government.

Gambling, as most of us know is all about playing percentages and probabilities. The average patron in a casino will sometime go with long odds in the hope that maybe, just maybe the numbers will work in his favor and he'll hit the jackpot. Bigger players - national governments included - tend to take the safe, low risk approach. Therefore, when planners talked about the probability of a Category 4 storm hitting New Orleans AND levee systems being breached, planners were told that the numbers were too small to take serious action.

In fact last night Lieutenant General Carl Strock, Commander and Chief of the U.S. Army Corps of Engineers, mentioned in an interview on CNN that the probabilities they were dealing with were a 99.5% chance against such a sequence of events occurring. In other words, there was only a .5% chance of occurrance. Like any good gambler, the government played the sure bet and didn't commit the funds required to fortify the levees, chosing instead to allocate them elsewhere, thereby staying within the limitations of a budget.

Of course the only part I didn't hear from Lietenant Strock was if government officials adequately matched these probabilities against the impact of what would happen if that particular 0.5% event were to occur. It is one thing to dismiss a low probability of occurance if the impact is rather benign and maybe results in a couple of days of downtime, quite another if the impact results in the absolute shutdown of a major city for a period of months. In other words, probability and impact assessment go hand in hand; yet the common tendency in policy making on this level is to focus more on current costs than on future risks.

It's all hindsight now, and frankly the process used to evaluate whether to move forward with the project or not still seems logical. More than anything, however, this is a tragic example that vividly shows the types of issues that are considered when doing any kind of impact analysis. It also shows that no model can ever remain stagnant without being periodically updated. The fact that higher water temperatures in the Gulf of Mexico are leading to a marked increase in the occurance of catastrophic hurricanes, makes it necessary to revise those statistical probabilities that underpin a particular course of action.

If there's a couple if little lessons to learn here, they're simple: never underestimate the importance of conducting a thorough impact analysis as a critical component of a well-rounded business continuity plan; and always make sure those plans are continually updated.

Updates of Hurricane Katrina impact analysis are here and here.