emergency contingency plans â€“ businesses in the extraction sector, like oil, or
the mining sector (with stored mining waste) and where organisations are par-
ticularly vulnerable to environmental risks when catastrophes occur.
The risk of hazardous materials being released into the atmosphere unin-
tentionally in an emergency or act of terrorism is higher that thought; for example,
the New Jersey Work Environment Council issued a report citing 110 facilities
Chapter 8 â€“ Business interruption and risk management 177
that could pose chemical risks to neighbouring populations should terrorists or
catastrophic disasters strike and that a disaster or accident striking six of the
reported facilities would place over 1 million people at risk (Ung, E. â€˜Chemical
risks abound in N.J.â€™ in the Philadelphia Inquirer, 24 May 2006).
Risk mitigation measures include:
Identify their potential exposures and develop contingency plans to handle
any fallout from a disaster;
After acknowledging their hazards, organisations should prepare for their
disaster plans to be tested;
In order to improve safety, organisations should ramp up worker training,
improve physical security, and develop safer plant designs, i.e. after the wave
of recent terrorist attacks many energy producers have improved perimeter
Switch to lower risk processes, or use of less hazardous materials where prac-
ticable. Examples are that:
Since the 11 September 2001 terrorist attacks, no fewer than 225 US indus-
trial plants have decided to use safer chemicals according to a report called
Preventing Toxic Terrorism, quoted in the New York Times on 25 April
2006 (Lipton 2006); and
Many sewage and water treatment facilities have substituted the dangerous
chlorine gas for systems like ultraviolet light systems.
Due to the rapid pace of technological advances, a timely response to an EHS
crisis is more critical than ever. Because of the widespread availability of elec-
tronic mail, cell phones and other forms of immediate communication, there is
a growing belief that there is no excuse for delayed response. In the US both the
public and regulatory agencies, such as the Environmental Protection Agency
(EPA) and the Occupational Safety & Health Administration (OSHA), have
raised their expectations considerably. Regulatory agencies have also stepped
up enforcement activity in the wake of such accidents. Moreover, computer
technology has assured that, not only will a companyâ€™s EHS crisis make the
11 oâ€™clock news, it will also be posted on numerous websites, complete with
all the details and pictures.
These reasons make it an absolute necessity for companies to have in place
well thought out, usable and responsive EHS crisis management plans. Because
of the myriad complex issues involved in crisis management, it is extremely
important that a multidisciplinary team develop the plan. Too many companies
make the mistake of having a plan developed solely by lawyers, a public rela-
tions firm, or engineers. Such plans are inevitably missing critical elements.
Once a plan is complete, it is also important to make certain that all of the play-
ers involved in EHS crisis management, from top to bottom, are familiar with it.
An example of a crisis that has not yet emerged is the pandemic of H5N1
avian influenza. However, most commentators are saying that it is still a case of
Part B â€“ Overview of the Economic Aspects of Business Risks
when this occurs, not if, as large-scale influenza outbreaks have been common
in human history. It is estimated that if avian flu reaches the UK, then the bank-
ing system could almost be brought to the point of collapse and that average
staff levels will be only 50% of normal.
So planning for pandemic influenza is critical. To assist you in your efforts,
most countries have produced information and risk registers. In the US the
Department of Health and Human Services (HHS) and the Centers for Disease
Control and Prevention (CDC) have developed a checklist, which can be found
It identifies important, specific activities you can do now to prepare. Many
are specific to pandemic influenza, but a number also pertain to any public
health emergency. For your global operations there is a global map of the inci-
dence on H5N1 by country at: http://www.pandemicflu.gov/
Bird flu â€“ a health crisis case study by Yeshi Seli
For nearly a decade bird flu has been raging with varying intensity across
Indians should consider themselves fortunate that despite poor quar-
antine procedures and low level of awareness they have managed to han-
dle the situation fairly well.
The virus was first detected in 1996. In south-east China a virus from
a dead goose was identified as previously unknown subtype H5N1. A year
later it turned up in Hong Kong (infecting 18 people and killing six) but
their authorities acted promptly and culled the regionâ€™s entire 1.5 million
poultry population and contained its spread. In 2003 zoo animals fed on
chicken died in Thailand and the cause was the same virus. By December
chicken farms in Korea and in 2004 in Vietnam, Japan, Indonesia and
Malaysia reported similar cases. In 2005 there were reports of the virus
emerging in Mongolia, Russia, Siberia, Turkey and Romania. One
imported parrot in the UK died from the virus. Then it hit India.
The most likely explanation of this pattern of spread is that migratory
birds carry it and local birds get infected. However, the virus can spread
through the transportation of infected birds as well as by vehicles, cages,
equipment and peopleâ€™s clothing that have become contaminated with bird
droppings or secretions and the virus can mutate and spread to humans.
In India reports have confirmed that the poultry in Nandurbar district
in Maharashtra tested positive for the H5N1 avian virus. As a result of
which over a million birds were culled and around seven countries have
banned poultry imports from India. In a developing country like India â€“
where poultry is the livelihood of many households â€“ this has come as a
big blow. Itâ€™s probably for the same reason that when it was first detected
in India a decision was taken to cull only those birds within three kilo-
metres radius and only vaccinate those in the next 10 kilometres, though
it would have been prudent if birds were culled in the next 10 kilometres.
Chapter 8 â€“ Business interruption and risk management 179
Many people didnâ€™t cooperate and tried to hide their fowl, as some felt
that since their birds appear healthy they would unnecessarily be killed.
In such a situation a way of preventing the spread of bird flu is providing
incentives for people to report sick birds and compensating farmers for
birds culled, as was announced by agriculture minister Sharad Pawar.
However, compensation should ideally cover not only the cost of the
slaughtered bird but also the loss of income the farmer suffers as a result of
the time lag between culling and restocking.
Close to 200 people around the globe have died of the disease and
there are reasons for taking this matter more seriously. Obviously there is
the potential for large-scale loss of life, but also the vast economic and
social impacts of potential losses of Indiaâ€™s estimated population of 490
million domestic birds.
In response to these types of risks, drug companies in India have
launched generic versions of drugs like Tamiflu and Roche that are effect-
ive against the disease and to that extent they are now probably more
widely provided for other countries under threat. But as with all poten-
tially deadly diseases, prevention is better than cure.
There have been authoritative reports on how to minimise the risks and
in order to have long-term benefits the recommendation of the National
Commission on Farmers on setting up a National Centre for Biosecurity
should be considered seriously. In a situation where administrative respon-
sibilities are divided between the Centre, the state and several agencies there
is a need to act in unison so that this proposed Centre can act as a nodal
agency for early warning. If this is done then timely action can be taken
to counter biological threats to Indian agriculture, animal husbandry and
The panic that was created because of the SARS outbreak in East Asia
two years ago resulted in travel advisories against the countries that were
inflicted. As a result huge economic losses were made as there was a slow-
down in trade.
Thereby monitoring the situation not just now but in the future would
be judicious to protect India and South East Asiaâ€™s booming economy.
The extent of environmental hazards
Globally, natural and manmade hazards are causing an increasing human and
financial toll. Sudden physical or catastrophic hazardous events, which result
from statistically consistent but extreme natural geological or/and meteoro-
logical events, are now having great impact on an increasingly industrialised
and urbanised â€“ and hence more vulnerable â€“ society. While the natural event
frequency is unchanged, the cost to society is rising. This has been witnessed
more and more often both at home and abroad.
Part B â€“ Overview of the Economic Aspects of Business Risks
Increasing industrialisation and urbanisation has also led to many more
catastrophic accidents involving contamination of the environment by man-
made chemicals. Insidious chemical pollution and natural contamination or
degradation of, or natural deficiencies in, the environment are also recognised
as having significant long-term impacts on human health. In terms of human
impact, the early 1970s saw an annual global average of two to three significant
natural or manmade incidents. This increased to 10 to 12 in the late 1990s.
More recently everyone has witnessed the disasters caused through the
tsunami in India at the end of 2004 and the Katrina and Rita Hurricanes in the
US in the summer of 2005. The following table exemplifies hazard magnitudes
and costs on a more historic basis.
Type of hazard Example of human impact Example of financial cost
Earthquake China, 1976; 250 000 dead Japan (Kobe), 1995; $150 billion
Turkey, 1999; 17 000 dead total losses
Tsunami (earthquake Papua New Guinea, 1998; 83 events worldwide since
induced â€˜tidalâ€™ wave) 2200 dead 1990; several $100 millions
Volcano Colombia, 1985; 24 000 dead US (Mt St Helens), 1981; $2.7
billion economic losses
Landslip/mudslide Aberfan, South Wales, 1966; US; over $5 billion annually
144 dead (incl. 116 children)
Subsidence/mine Britain (Lofthouse Colliery), Britain; over Â£400 million in
collapse 1973; 7 dead insured losses in 1998
Flood/storm India, 1999 flood; more than US and Caribbean, 1998
17 000 dead cyclone; $3.3 billion in
Manmade ground or Japan (Minamata) 1956; seabed Italy (Seveso) 1976; Â£35 million
water contamination mercury contamination; 1250 land remediation costs of dioxin
(plus flow-on to deaths; 17 000 affected (clean-up contamination
food chain) cost Â£300 million)
Natural ground or UK, radon in homes; possibly Bangladesh/W. Bengal;
water contamination as many as 2000 lung cancer 30 million people affected by
deaths annually, with arsenic in groundwater â€“
healthcare costs over Â£3 million remediation costs of $50 million
Land degradation Worldwide, annually; selenium Worldwide, annually; estimated
and mineral or iodine deficiency; over 1.5 production loss and healthcare
deficiency billion people at risk of brain costs related to selenium and
or heart disease, or retardation iodine deficiencies $2 billion
Research and planning can mitigate impacts. For example, a 1989 Californian
earthquake of magnitude 7.1 caused 62 deaths. An Armenian earthquake of half
the size (magnitude 6.8) in 1988 caused 25 000 deaths. Both struck populated
areas, but the lower death toll in California was due to better engineering standards
and construction practice. This problem continues (e.g. Izmit, Turkey, 1999).
Chapter 8 â€“ Business interruption and risk management 181
Hazards in Britain
The threat to life due to UK hazards is not as great as many other countries,
but the economic and social costs are high. Those UK hazards with the
greatest impacts are ground subsidence and mine collapse, flood, and nat-
ural and manmade ground contamination. Landslips and coastal erosion
also cause some financial cost, while rising mine waters are likely to lead
to future environmental costs. The location of the wide range of land sta-
bility hazards is only partially documented; there is still sparse informa-
tion on important pollutants such as cadmium, mercury, organochlorines,
poly-aromatic hydrocarbons, pesticides and other toxic organic sub-
stances. There is only a patchy understanding of how trace elements are
important in diet and human health. In addition to costs, the public is
aware of, and has legitimate concerns about, environmental risks to
health. Such concerns need to be addressed by an opening of the scientific
debate, and by easy availability of information regarding longer-term risk
from sudden hazards, contamination or dietary trace element imbalances.
Cost assessment of hazards and mitigation of risks
Detailed studies of earthquake hazards and their associated risks have revealed
that, while prediction of individual events remains elusive, statistical estimates
of their future costs can be made. In general the earthquake risk assessment
process is as follows:
Hazard identification, detection and monitoring:
Locate the hazard, or hazardous event (e.g. earthquake spatial distribution);
Monitor its temporal pattern and behaviour (e.g. pattern of energy release).
Behaviour simulation and modelling:
Determine the â€˜causeâ€™ of the hazard (e.g. geological fault associations;
regional tectonic mechanisms); and
Model the link between cause and effect (e.g. fault movement to ground
Regional impact assessment â€“ on people, infrastructure and the environment:
Determine the impacts of the hazard effect through historical and/or pre-
dictive analysis (e.g. the extent of building and other structural failures as
a function of ground motion).
Prediction of statistical losses:
Model future hazard, or hazardous event scenarios that reflect past, identi-
fied patterns, e.g. possible future earthquake patterns that reflect past
Model impact scenarios (e.g. patterns of loss of life and structural damage);
Assess future cost patterns (e.g. insurance, remediation and rebuilding costs).
Part B â€“ Overview of the Economic Aspects of Business Risks
The â€˜riskedâ€™ selection of mitigating strategies:
Identify and cost a range of hazard mitigation strategies (e.g. improved con-
struction standards and codes at risk areas); and
Select appropriate cost-effective responses to assessed risk (e.g. insurance