catastrophe risk management | January 15, 2013

Global Risks In 2013: Erwann Michel-Kerjan On Preparing For Catastrophe

According to the World Economic Forum’s Global Risks 2013 report, rising greenhouse gas emissions ranks as the third largest threat to our society. Erwann Michel-Kerjan, a catastrophic risk management expert, says that a recent increase in extreme weather events means that we need to take action. He has argued for the development of national disaster management strategies to better prepare for the effects of these natural catastrophes. While the report listed climate change as tertiary, behind income disparity and chronic fiscal imbalances, it was noted to have more knock-on effects than the other two risks. Not adapting to climate change was shown to have a snowball effect, causing problems that were not initially forseen when looking at the risk independently. However, Michel-Kerjan explains that after years of studying global risks worldwide, we now understand how these risks interact with and affect each other. There are three main things we have learned about risk management to date, he says:

1) "It is possible to see [risks] coming from afar and prepare your organization/country in a timely fashion."
2) "Risk management has become too important to be left to risk managers alone and is now being elevated to Board and Cabinet discussions as a core strategy."
3) "There are winners and losers in this more volatile and short-termism world, and the gap is already widening. Decision makers need to take informed actions."

We need to take action now to ensure a more prosperous future—especially since the number of extreme weather events taking place each year is rising exponentially. In the past few years, in fact, there has not been a 6-month period that went by without a major crisis taking place that affected multiple countries and industries. In his lectures at the Wharton Business School, and in his keynotes, Michel-Kerjan shares his highly sought after insights on how to prepare for, and even profit from, these "black swan" risks.

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personal finance | January 14, 2013