Whose responsibility is it? #24B -Climate Change and Hurricane Harvey

I am following up on a previous article on climate change in light of the “lucky miss”, or “escape from Harvey” which at the time of writing is ravaging coastal Texas. It has not yet completed its path, and is still severe enough to prevent many local rescues where people are stranded and rescue teams are still pinned down. We can only pray that the aftermath will not be as devastating as Katrina proved to be for New Orleans.

Sadly, the worlds’ largest economy cannot prevail over the forces of nature, and self-preservation through building away from coastlines and areas prone to surf and floods is not the “flavor of the month”. It is desirable to live in beachfront areas or places where seemingly calm waters flow, and in fact real estate prices in vulnerable areas are higher, as too the status associated with those areas.

There are always choices. I live near the top of a hill surrounded by green mountains, hearing the river far below sending the soothing night sounds that induce a peaceful sleep; I am more exposed to high winds; but I have no drainage problems. My neighbours who live on the side of the hill below the road level are protected from the sheer wind blasts, but are in danger of run-off water, land slippages and mudslides. The old peanut vendor at Sabina Park hollered out ‘salt or fresh, pick yu choice the wholla dem nice”.

Business is a series of risks that are not always able to be analyzed in isolation, but require the connection of a series of dots that may seem infinite, and therefore the analysis seems so difficult that we choose only a few and think that we have done enough. But that is not the case and it is dangerous to intentionally narrow the research of connectivity in the known major areas. It is what I call “the convenient myopic view of relative connectedness”. It is like applying Porter’s 5 forces to Cross Roads alone.

I will try to illustrate this using a hurricane as the analogy. It presents a real set of risks that can be financially transferred through many forms of insurance (if available)  or  totally  unprotected  in  the  case  of  self-insurance  that  is  greatly underfunded. But that is only the financial side. There is also life insurance (that does not protect the insured but provides for the beneficiaries).

“A hurricane is coming” seems like just words for several persons for a number of reasons:

  1. There is little memory retention as the documentary on the television does not effectively motivate. To persons who have never experienced the terrors associated with 140 mph winds, this is merely a movie. This is called “loss of institutional memory”. In a real sense Hurricane Charlie in 1951 was a month before my birth, and 1988 found me as a business manager, father of four, with no practical storm experience. What an awakening! No electricity for nine weeks in Norbrook!
  2. Similarly, 2004 Hurricane Ivan found me as an experienced person dealing with disasters, so we issued the warnings and only the older persons heeded the advice. In just fourteen years the majority of staff members were below 30 and they had no real adult memories of life without power and water. On the third day post-Ivan they had no clean clothes, bathing facilities, potable water, and couldn’t come out to work.
  3. The younger persons in senior positions, similarly had never really had experience in filing and expediting claims, getting back into production, and gaining competitive advantage.
  4. Disruptions in remote events that seem unconnected to our own physical place are often not included in the serious top layers of Risk Management, forgetting that in poor countries (and some wealthy ones) the Human Factors may be unable to respond physically and all the money in the world makes little impact. Helicopter rescues in the midst of a storm is, quite frankly, a Hollywood invention.
  5. Modern communications advances like the internet and cellphones are susceptible to power outages, cell tower failure, downed land lines, and the perceived redundancy of a battery operated radio presents no alternative to a new generation.
  6. In a physical sense, blocked roads, flooded roads, bridges destroyed, and impaired medical facilities require even greater attention than the electronic failures.

However, we must consider the present aftermath of Hurricane Harvey and the impacts on Jamaica.

What will happen on the USA and global stock markets, and will those outcomes influence our own markets?

Will shipping via damaged Gulf ports be affected and will deliveries and shipping rates be affected?

Will damages or shipping difficulties affect oil production and our own benchmark prices used to determine our ex-Petrojam weekly pricing? How much will we pay for fuel in September and how will this affect product prices at wholesale and retail?

What will the claims impact have on insurance and re-insurance pricing at the next renewal periods?

These are a few of the major performance inputs in a country where government and firms are engaged in a struggle for growth, debt reduction, and productivity improvements. Quite frankly, risks are thought of in tangible and measurable ways that fit pre-designed scorecards, but I contend that intangibles connected in remote ways should be considered in the efforts to ensure continuity and sustainable growth.

Competences in forecasting and fore sighting are skills that complement those that are centered on the analysis of last month and who only vaguely anticipate next month. In reality, the numbers of variables require thought and planned actions if these affect us in any way that may seem abnormal. Expect the unexpected; Murphy is alive and resides in Jamaica.