About The Author Prof. Stephane Garelli, is Professor Emeritus at IMD Business School Lausanne. He is considered a leading authority on world competitiveness, having founded the World Competitiveness Center. Formerly a managing director of the World Economic Forum and of the Davos Annual Meetings, he was also chairman of the FF Sandoz Financial and Banking Holding.

A second wave? These three words will impact our level of anxiety during the second part of the year. Because if another disaster happens, can we manage it?

Nations and companies will need to develop the ability to manage disasters. How can we deal with a major event which could take place at any moment that has a minimal level of probability but that has potentially enormous consequences?

Crisis management already exists. It deals with the sudden disruption of a supply chain, the kidnapping of an employee, blackmail, or a ransom demand. Disasters are of a different order of magnitude.

They can be natural (tsunamis, hurricanes, floods, earthquakes), human-made (Chernobyl, climate change) or health-related (SARS, MERS, COVID 19). Paradoxically, they are well studied.

In 2015, Bill Gates made an online presentation entitled “The Next Pandemic: We are not ready”. In October 2016, Great Britain conducted a planning exercise called “Cygnus” on the same matter. In October 2019, the Center for Health and Safety in the United States held an “Event 201” conference that simulated a global pandemic.

At the same time, the Global Preparedness Monitoring Board (GPMB) published a report in Geneva, highlighting the lack of preparedness in the event of a severe respiratory virus. While we can intellectually grasp the notion of disaster, we still find it difficult to act. Why is this?

It seems that we are incurably optimistic. We assume that we are not affected or that we shall escape the consequences. An example of this illusion of invulnerability: during the pandemic, British Prime Minister Boris Johnson boasted that he would continue to shake hands in every hospital. We know what happened next.

We rely on mass instinct. If other countries are not taking measures, there is no reason for us to act first. Finally, we underestimate the power of exponential growth. A few weeks of delay in reacting, as in the United States or Great Britain, and we are overwhelmed by how quickly a disaster can develop.

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From an economic point of view, we have become accustomed to living in a global world economy, managed just-in-time and extremely cost-efficient. As a result, inflation has disappeared. Today we realize our vulnerability to global disasters. But what price are we willing to pay to be sheltered from them?

For example, a hospital director will be praised for good management if his beds or intensive care units are always optimally occupied. Should we now ask him to keep 20% additional facilities unoccupied in case of a pandemic? And to write off the cost at the end of the year?

Do we also need to re-establish emergency stocks of food, health care supplies, or raw materials, knowing that they will probably not be used? And to pay taxes for this?

Management is the rational and systematic use of resources in an organization. But what is logical about managing an unforeseeable event that immobilizes recurring resources? Disaster management involves “unnecessary” costs and the impossibility of calculating probabilities, which explains the reluctance of insurance companies to cover such risks.

Yet disaster management will be with us in the coming years. Nations will respond by protecting their so-called strategic industries and national champions. Companies will acquire new skills, simulate disaster scenarios, and increase firewalls.

It will cost significantly more money and time and will be ongoing. Are we willing to accept the price for such security? And do we have the choice?

This article is authored by Prof. Stephane Garelli- Professor at IMD business school – Professor at University Lausanne – Chairman Le Temps newspaper
The views expressed in this article are of the author and not necessarily the views of the publisher.

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