Free Management Essays - Risk is often defined as a circumstance, action, situation or event with the ability or potential to affect the core processes of organisations
Risk is often defined as a circumstance, action, situation or event with the ability or potential to affect the core processes of organisations with events being able to be seen in terms of both natural and man made disasters, (Hopkin, 2002). It is vital to mention that the impact of risks however is able to result in both negative and positive effects and more importantly that in defining the nature of the impact of risks they should be considered within the context of the core processes affected within the organisation. This is to say that when risks occur the negative effects which are felt afterwards are in a real sense the meaning of disaster, which may result in serious damage to the core processes or be the key issues nationwide or be so in the entire organisation. Therefore according to Wolf Dombrowski at the catastrophe research centre at Kiel University in northern Germany disasters do not cause effects. However the effects are what we call a disaster in the sense that careless and ineffectively planned catastrophe management by organisations, government and companies are critical components in considering how negative the impact of a disaster is, (John-Paul II, 2005). Particularly there is a tendency for risk management principles to be adopted in the separation from the situation that may have an effect in rising the risks thus Hopkin (2005) claims that it is critically important to manage risks in the context which the impact of risks in different situation and environment are not always disasters that result in bad outcomes.
The losses caused by natural catastrophes seem to be much more visible since the late 1980s and some of the highest losses can be seen as a result of Hurricane Andrew in 1992 and more recently Hurricane Katrina which all but destroyed a major city in America, (Professional Safety Organisation, 2005). It is fair to say that the effects of natural disasters which have been far beyond the ability to control by people have resulted largely in detrimental destruction and damage afterwards. The risk factors involved in natural catastrophes then can be both environmentally based and human based. Additionally in light of the current estimates of the losses suffered as a result of the terrorist attacks of September 11th 2001 in the USA the management of man-made disasters has focused both the public and government’s attention on the results of catastrophic events, (Nell & Richter, 2005). Of note also is that in the 1990s disasters in terms of natural catastrophes occurred six times more frequently than man-made disasters. Yet by 2001 the latter were three times more frequent due to terrorism related risks, (Zanetti et al, 2003). As a result after September 11th the role of government in safety and health policies in society has become an increasingly important issue.
What is Risk: definition, styles and nature.
The meaning of risk has changed over the centuries in the sense that risk has often been conceptualised as being more about objective factors and events that may cause danger to the public but shifted to subjective risks namely man made risks which are often excluded in risk management, (Lipton, 1999). Giddens (1991) claims that changes in the use of risk are closely linked with the emergence of modernity hence risk does not have a purely technical meaning but can be considered also from economic and financial perspectives. From the economic point of view modernists argue that the notion of risk includes both positive and negative aspects. Hopkin (2005) believes that the impact of risks can be negative, positive or uncertain. Additionally it is vital to consider the impact of risks in the context of key issues and core processes or namely that risk factors only arise when they have an impact on core issues and process particularly where this impact is significant. In most cases because these key issues are associated with financial, infrastructural, reputation or marketplace components means that to a large degree strategic risk management is often adopted by organisations, (Banks, 2004). As a result it is unsurprising to observe that both organisations and individuals have tended to seek transfer techniques in managing risks and that in turn insurance linked securities have become increasingly an important element of risk management. The insurance market is premised on the principles of transfer risk from a single party to a broad group or pool which share the losses by members in the wider group in order to decrease the possible effects on any single entity, (Banks, 2004). However insurance losses linked with business interruption, life and liability in the terrorist attacks in September 11th in the US have ranged from 30 to 77 billion USD thus the emerging insurance market in terms of protecting against catastrophic threats is not only supply side driven but demand side driven also, (Frenkel, Hommel & Rudolf, 2005).
It has been noted that risks can be disastrous in certain circumstances but in other types of different situations dependent on the key impacts of risks on key processes and components within that context may not be so. For example Wolf Dombrowski declares that rich nations such as the USA, Japan have not given serious attention to their Indian Ocean neighbouring countries in that they never installed an Indian Ocean branch of their Pacific Ocean seismic warning system when they established it to manage and predict natural catastrophes, (John-Paul, 2005). It is fair to say that the scale of the disaster which ocurred in Indonesia and other Asian counties as a result of the tsunami 2004 to a large extent was due to the lack of a sophisticated warning system as well as well a poorly organised plan and systems in managing hazards by local governments. Because of the serious damage to properties and the economy the demands of Indonesia and others from developed countries to assist after the disaster in terms of funds and economic assistance was a significant challenge for developed countries and any multinational corporations involved. From this perspective the real meaning of disaster can in a sense be viewed as the negative influences and damage which occurred after the natural hazard. Tobin and Montz (1997) argue that the management of natural hazards depends intimately on public policy and community attitudes and adjustments towards the impacts of natural hazards and disasters. Additionally the costs of natural hazards for a society forces economic meanings in evaluating and managing the impacts of disasters. The losses attributed to natural disasters are concentrated on the large amount of deaths and damages such as that caused by Hurricane Andrew in 1992 and deaths are considered to be the highest source losses from natural hazards from 2001 onwards, (Zanetti et al, 2003). However the economic aspects of disasters can be seriously influential on the nature of the problem solving process not only including the damage to property but also in terms of experiencing decreasing national economic growth rates as the economic losses are absorbed in the following year. Similarly the estimation of the economic of individual life loss is an indeterminate estimate and source of much debate,
As Carroll and Webb (2001) point out risk factors can originate from environmental factors such as disasters and contingencies however they may also able to be generated by people. This view is evident in the terrorism related disasters particularly the attacks of September 11th in the US. It is fair to say that terrorist related disasters themselves are serious threats the society in that they cause incredible losses in terms of deaths, properties as well as economic effects. Particularly the emerging situation for insurance companies has illustrated the requirement for an improved role for government in controlling and reacting to these kinds of man-made hazards. These ways of governing reflects the public discourse on risk in fields such as medicine, crime prevention and public health however the speed of risk aware government has been argued to be far more negative in terms of social consequences which again can be seen as having major negative effects after hazards, (O’Malley, 2004). From a corporate perspective there is an emerging situation of survival after serious hazards since the huge losses in terms of insured life and liability while at the same time the key effects such as those for tourism industry as well as related industries contribute to poor performance in national economies in the years following disasters.
9/11
In September 2001 the terrorist attacks again the United States has brought people’s attention on the strategic risk management planning of government regarding to prevention against terrorism enemy. The Bush Doctrine three part strategic configuration has been challenged to a large extent (Laver, 2005). The attack itself presented serious threats to the whole society in terms of health and safety however the major effects came afterwards the attack. At this point the disaster situation was caused by poorly organised defensive and recover strategies, (Nell and Richter, 2005). The nature of the consequences of the 9/11 attacks on New York City which were the most damaging terrorist attack on American soil resulted in the loss of over 4,000 lives. Similarly the damage to property was extensive in terms of the complete destruction of the World Trade Centre. However in many ways it is what occurred afterwards in terms of the psychological impacts of 9/11 both in the United States, and the UK and further a-field in tandem with the responses of the American and other governments that have further defined the meaning of the disaster which was 9/11.
American public attitudes after the event represented the increased recognition of a new threat in terms of terrorist attacks that had since then been relatively externalised to other ‘problem’ countries. Tourism both from and to the US dropped as both American grew more wary in terms of travelling abroad and others feared the risks of further attacks in the US. More importantly the effects of the terrorist attacks caused even worse disasters in terms of the war in Iraq and to a lesser extent the war in Afghanistan. Linked to this the psychological fear felt by Americans in a sense also became manifest in an increasingly hostile international political environment. This means that the terrorist attacks in terms of being a disaster and in the sense of the impact of the attacks not only influenced one nationality but also international relationships, between Western Countries and Arab and other Muslim countries. The US in particular has exercised its political power towards management of perceived risks in terms of terrorism which has heightened the sense of risk among other countries, including those suspected by the US of harbouring terrorists such as Pakistan. Perhaps one of the most significant economic impacts of the attacks were felt in the insurance industry which had to absorb both the damages and increased risks for assets of various organisations internationally given the heightened risks of terrorist attacks. Insurance as a risk transfer system has required a growing regulatory role for governments in systems of insurance given the new international conditions post 9/11, (Lansford, 2005). The most significant condition has been the increased reliance on insurance and a growth in the industry in terms of insuring against security related risks from terrorist attacks, (Banks, 2004).
Natural disaster
Strategic risk management again became an issue in the case of the United States, but this time in the face of nature with Hurricane Katrina in 2005, (Tierney, 2005). Hurricanes are an established part of the year for both the Caribbean and the Southern States of the USA and as such a number of established disaster plans already exist. However the number and strength of hurricanes in what was a record breaking season illustrated failures at many levels, strategic and operational of disaster plans. In one sense natural hazards represents potential interactions between humans and extreme natural events. Particularly they can constitute threat to entire societal structures as the aftermath of Hurricane Katrina in New Orleans demonstrated to the world, (Tobin and Montz, 1997). Indeed even the term ‘natural disaster’ refers to an event which has a huge and significant impact in terms of destructive forces on society. The results of natural disasters can be seen as mortalities, such as the tsunami disaster in South East Asia, destruction of property but also these events have long reaching and widespread economic effects. According to Wolf Dombrowski these impacts of the aftermath of events are the core meaning of the term disaster.
Traditionally people have viewed natural disasters from a physical perspective which has meant that researchers have suggested that only reactive options exist to deal with the physical consequences of disaster, (Burton and Kates, 1964). By the end of the 1970s researchers had begun to explain natural disasters in a manner which placed the role of humans in a more central position in explaining natural disasters. For example the American Geological Institute (1984) defined natural hazards as a condition or phenomena which can be caused by nature or as a result of man-made effects which in turn generates a potential danger or capability to harm life and/or property. With this perspective in mind we can view disasters as resulting from conflicts between physical events and people or namely natural event and human related systems. Indeed in some cases human induced events may be the predominant causes of disasters rather than naturally occurring events.
Smith (1992) suggests that in order to reduce environmental disasters and hazards the focus should entirely be on the whole of societal structures rather than the actual physical process itself. This means in one sense then that catastrophic events can affect people’s everyday lives, disruption to a community’s life and result in economic losses over the long term. The example of Hurricane Katrina was a stark message of the inadequacy of both risk assessment and the management of risk in the context of the USA. Hurricane Katrina caused massive damage to the city of New Orleans both in terms of loss of life, property and infrastructural damage. The levees which protected New Orleans for flood damage had been constructed with a Category 3 hurricane in mind and as such when Hurricane Katrina (which was a Category 4 and 5 hurricane at times) struck the levees were breached. Scientific experts had predicted that not only would New Orleans be hit by a hurricane of this strength at some time and that the levee and flood control systems within New Orleans would not be able to withstand a hurricane of this strength. The general public attitude at the time (replicated arguably within governmental departments) was that the damage management systems in New Orleans were adequate to protecting them from all possible hurricane incidents.
Indeed reports were produced by experts on the need to upgrade the levees in order to withstand a Category 5 hurricane but both the federal and state authorities did not act on this recommendation. However the culpability of the disaster management procedures went further than this as the US weather service was able to monitor the strength and track and predict the path which hurricane Katrina was taking. Thus authorities were aware that it was more than a category 3 hurricane and that it would hit New Orleans. However it was believed in the face of the scientific advice against that New Orleans would be protected from the storm by the controls already in place. The cost of the damage to New Orleans from hurricane Katrina along with the rebuilding and re-structuring of almost the entire city along with the value of the lives lost in the disaster, such as for example the extreme shortage in emergency and law enforcement personnel which was experienced afterwards, was out of proportion in a critical manner to the way in risks has been assessed and also the ways in which risk management in terms of the delayed and ineffectual response by authorities in the immediate wake of the hurricane.
This situation closely relates to the statement that the ultimate consequences of disasters come not from the natural event in question but the reactions and actions which occur after the event. Here in this instance ample warning and ample predictions existed of what would occur if a storm like hurricane Katrina was to strike. If such advice had been followed it is arguable that while some damage would have been sustained to some property it would have been within a manageable amount. However it was not only the authorities who failed to heed advice as despite belated evacuation orders many people stayed put, though some it must be said did so due to the lack of a system to evacuate New Orleans en masse. Due to the ignorance in people’s attitudes both public and officials and the knock on effect of this ignorance in terms of there being no strategy for responding to the natural event the costs of the disaster in terms of economic and loss of life represented one of the most severe ‘natural disasters’ to occur in the US.
Conclusion
The concept of risk management has been used as describing approaches responding hazard risks. However there is a growing recognition in terms of management towards controlling risks even in such a method as the management of opportunity risks. This means then that the notion of risk can be viewed not solely as a destructive, damaging or depressing force on the core processes within a society or within an organisational context. Much of the literature on hazards and risks focuses on risk itself as conceptually and practically being a problem and a source of conflict between scientific communities and governmental actors, (Lupton, 1999, Hopkins, 2002). More recently the cognitive approach to risk management suggests various psychological models of human behaviour in responding to and recognising risks, (Douglas, 1985). This is to say that the objective future of risks in terms of both natural disasters and man-made catastrophes are not oppositional to subjective characteristics and the impact of risk related events. To return to Dombrowsk’s comment the nature of subjective narratives as the result of disasters, such as the method of managing the consequences, is the site of the meanings of disaster, in both subjective and importantly objective terms.
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