CHAPTER 13 Acts of God Risk

In the aftermath of Superstorm Sandy1 in 2012, various articles pointed out the gap between the size of the storm's surge and the magnitude of such an outlying event planned for by New York City and coastal New Jersey. What was expected was much smaller than what was delivered by nature. For business continuity plans and overall infrastructure, the storm aftermath led to the question of whether said plans were effective, given existing storm data and forecasted trends for potential future storms. How do we plan more effectively for such events in the future? Scenario analysis offers one useful approach.

Industry and its infrastructure have, of course, always been vulnerable to catastrophes, both manmade and nature‐based. The impacts of terrorism, earthquakes, and fraud have all impacted industry in the past decade. The problem of determining the likelihood and impact of a terrorist attack, a large oil spill, or a massive hurricane like Sandy is inherently hard to solve for. However, it is a critical step to take if one is to appropriately address each type of risk. Overestimating the size and frequency of future events can result in wasted resources. Yet, natural inertia, ingrained optimism, and pressure of the day to day can lead to a fatal failure for disaster planning to keep up with the level of potential danger as it ebbs and flows. In reviewing many business continuity plans of firms impacted by Superstorm Sandy, it is clear that this is ...

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