Managing Disaster Risk: Five Behaviors to Overcome

CEOs tackle tough issues every day, including cybersecurity, innovation, human capital, operational excellence, customer retention, and corporate reputation, to name a few.

However, disaster planning typically only makes the top-five list after something has happened. The reason: Many companies fail to advance plan for the impact of earthquakes, floods, hurricanes and other potentially devastating events—even though they can undermine every one of the priorities mentioned above.

“When it comes to risk, we all have tendencies that can lead to faulty decision-making. Knowing our predispositions, though, may help us correct them.”

Why do natural disasters get overlooked? It’s our nature to be reactive rather than proactive. Additionally, when it comes to risk, we all have tendencies that can lead to faulty decision-making. Knowing our predispositions, though, may help us correct them. Here are 5 behaviors to watch out for and eliminate. Doing so will help put our disaster risk management process back on track.

1. Denial. We see it every year. In the weeks and months after a major natural disaster, companies become keenly aware of the wisdom of hardening or relocating vulnerable facilities. Yet, as catastrophes fade from memory, we shift our focus to more pressing matters. We forget the long-term likelihood or potential severity of a recurrence. We need to overcome this behavior and look coolly at the true risk our facilities (and our suppliers’ facilities) may be exposed to.

2. Selective attention. We like to feel smart, so we tend to discount data that makes us uncomfortable and overvalue information that confirms our existing views. To counteract this behavior, we need to create a comprehensive disaster response plan to deal with contingencies we’d rather not think about, even if we’re convinced a disaster won’t happen.

Thomas A. Lawson :Thomas A. Lawson is president of FM Global, a $5.6 billion mutual insurance company dedicated to property risk management. Visit http://www.fmglobal.com.