Homeland Security Watch

News and analysis of critical issues in homeland security

March 10, 2010

Is the Private Sector Prepared?

Filed under: General Homeland Security — by Mark Chubb on March 10, 2010

Last Thursday afternoon, the Senate Committee on Homeland Security and Government Affairs‘ ad hoc subcommittee on state, local, and private sector preparedness held a hearing on private sector preparedness. Three distinguished experts on homeland security and disaster preparedness appeared before committee chairman, Senator Mark L. Pryor (D-Ark.).

The themes of each presentation struck a familiar chord with regular readers of this blog and those policy wonks familiar with the growing literature on community resilience. Nevertheless, one can only wonder whether it made the necessary and desired impression, given the absence of so many members of the committee.

Stephen Jordan, executive director of the Business Civic Leadership Center of the U.S. Chamber of Commerce, lead off the testimony by highlighting the business community’s commitment to investments in resilience. Business, he noted, knows all too well that disaster costs keep rising, no single agency or entity can be relied upon to respond when disaster strikes, and investments in disaster preparedness and community resilience not only reduce risks but also lower costs by improving operational efficiency.

Mr. Jordan emphasized the important role of government in supporting information sharing and coordination both among businesses and between government and the private sector (including nonprofits and civil society). He noted that efforts to map responsibilities and raise awareness of roles would make coordination more efficient and effective.

Next up was Dr. Jack Harrald, chairman of the National Academies Disaster Roundtable, who emphasized the opportunity presented by heightened awareness of our vulnerability to catastrophic events. Dr. Harrald highlighted three policy challenges that must be addressed to improve private sector preparedness and community resilience:

1.     Implementing policies that recognize and make allowances for local and regional priorities;

2.     Ensuring that federal funding is adequate and coordinated (with an emphasis on coordinated); and

3.     Creating trusted relationships based on open and frequent information sharing.

Dr. Harrald argued that the sciences (physical and social) and new technology will play increasingly important roles in helping us achieve these goals. This assistance will help us manage the large volumes of information associated with preparedness and disasters and allow us to expand relationships and create networks as required for each event. (The CrisisCamps run by ad hoc groups of volunteers around the country following the Haiti and Chile earthquakes seem particularly salient example of this.)

The final presenter, Dr. Stephen Flynn, president of the Center for National Policy, remarked on the importance of community resilience to national security. He noted that the new battlespace is not military but the civil and economic spheres. Demonstrating resilience to our adversaries requires us not only to show that we can deliver a punch (militarily) but also that we can take one (socially and economically). The capacity to cope with disruptions and discontinuities will distinguish those who succeed in the future from those who fail.

Dr. Flynn noted that Americans possess the two ingredients vital to such success: self-reliance and a willingness to volunteer. Public safety, he noted, is not a partisan issue, but rather a public good to which we can all contribute.

It should come as no surprise that the presenters made a number of complementary and consistent points worth reflecting on:

1.     Decentralized, systems approaches that focus on networks rather than individuals or even organizations work better.

2.     Incentives for good behavior such as investments in risk reduction and preparedness are needed.

3.     Collaboration across sectors and levels of government, especially in the areas of grant administration and financial assistance to businesses before and after disasters, depends upon federal leadership and support.

In the question and answer period that followed, all three presenters seemed to agree that developing a resilient society depends on breaking the cycle of co-dependence in which citizens depend on agencies and officials to meet their needs after a disaster in proportion to the desire by such officials to be needed. Treating citizens not as victims but rather as resources is the first step in the process of creating more resilient communities.

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Comment by William R. Cumming

March 11, 2010 @ 7:53 pm

Is the private sector prepared? For what? My belief is that business continuity has progressed substantially in the last two decades. Business interruption does in fact cause lost profits but business also realizes that the context in which it conducts its business including role conflict of its employees and concern over there families may interrupt a smooth return to norm operations. I still believe that the regulated sectors of the economy often those charged with special benefits because of their essential nature or specific importance to our society are probably the least prepared. Why? Increasingly they want to be subsidized for their insured or uninsured losses (note the 10% uninsured casulaty loss deduction also applies to business as well as individuals) and therefor hope to have greater subsidies and first priority in restoration post event. I think the scenario based target capabilities should be modified to analyze postential disrumptions on a systems basis? For example there is no surge or backup supply of transformers and generators for the electric grid! Just in time for that sector means NO RESILIENCY!

Comment by Mark Chubb

March 11, 2010 @ 11:18 pm

Bill, I think you’re right about targeting incentives. Indeed, I don’t think the presenters at the hearing disagreed significantly with that notion, although they might have trouble reaching consensus on the details.

For the most part, the testimony suggested that businesses should be rewarded for good behavior, not bad. They gave a few examples, but I think the principles sill need further elaboration.

I would argue that we need to think just as carefully about incentives (if not more so) than we do disincentives, and use them to encourage the production of public goods. This approach minimizes but does not eliminate the likelihood or costs of adverse selection and moral hazard that currently attend interventions like the National Flood Insurance Program.

When it comes to collaborating to facilitate restoration (a part of recovery but certainly not the whole thing), we should allow ourselves a bit more leeway. Working with businesses to meet the essential needs of individuals–food, water, building materials for shelter, energy, clean water, medicines and medical supplies–seems reasonable so long as it is tempered by appropriate regulation to prevent price gouging and avoid the moral hazard associated with just-in-time efficiencies in lifeline utilities that tend to come at the expense of reliability.

The most intriguing issue arising from the testimony, for my money at least, was the apparent agreement among the presenters that we need to encourage and facilitate ad hoc responses using modern technologies like social media and open source applications. Most of our efforts in recent years have focused on reducing the uncertainty that comes from ad hoc approaches and freelancing rather than using the power of open systems and crowd-sourcing to engage people in ways that help decision-makers respond to ambiguity by synthesizing information to improve clarity, engage creativity, facilitate collaboration, and secure commitment (the new C4I).

I just hope the other members of the subcommittee or someone on their staffs reads the testimony and takes the time to consider these challenging and complex ideas thoroughly.

Comment by William R. Cumming

March 12, 2010 @ 1:32 am

Having just returned from several days discussing flood risk analysis Mark’s comments are right on. Unfortuantely, the NFIP which is NOT an insurance program but a mitigation, risk reduction, and land use program, was turned into a program of subsidation of poor decision making by State and local governments instead of an incentive program for good decision making by State and locals. Some would argue the NFIP and free disaster relief subsidizes the Negligence, perhaps even Gross Negligence, State and local governments. And now other hazards not subject to human intervention in their occurrence or destructiveness are becoming new candidates for federalization of losses. Can the private sector be far behind state and local governments in seeking subsidation (sic) {Is this a word?] of their bad decision making?

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