Mitigating the Impact of Extreme Events: A Private Sector Perspective on the Value of Public Private Partnerships

Mitigating the Impact of Extreme Events: A Private Sector Perspective on the Value of Public Private Partnerships

Doaa Taha (GMI, Ltd., USA)
DOI: 10.4018/978-1-4666-8159-0.ch003

Abstract

Years have gone by since 9/11/2001. Still, it seems as though it were only yesterday: the shock, the tragedy, the heartbreak. Of all the questions, one keeps coming back, “Have we learned what we need to know to mitigate the impact of such events in the future?” The answer is a hesitant “Perhaps.” Today, still dealing with an economic disaster the magnitude of which has not been experienced in decades, there is great concern that any gains made from lessons learned by 9/11 will be further eroded. In this chapter, original research considering four corporations directly involved in the September 11 attacks is revisited in view of today's emphasis on public private partnerships and economic environment. In reexamining the original research, this chapter considers the value of public private partnerships as part of the emergency management community, and as part of an effective response to future incidents.
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Introduction

Since 9/11 the long-term economic and social impacts of “extreme events” on the private sector have been the object of an incredible amount of research. However, there is still a lack of rigorous, quantitative information and descriptive models about the impacts of extreme events and large-scale disasters across the corporate organizational level. For example, research related to business (economic) impacts of disasters is often limited to specific events of a singular nature. The research presented here originally aimed at capturing the current state of emergency management (circa 2004) in order to expand the body of knowledge and facilitate the development of best practices in emergency management across corporations. The importance of developing these best practices cannot be understated. With the global economic downturn, the development and integration of these best practices into mainstream daily business operations is critical. One solution to dealing with a bad economy is to partner with like organizations and organizations that can provide complimentary goods and services. Through these partnerships any single company can maximize the allocation and utilization of their own scarce resources.

Years after the fact the numbers from 9/11 are still staggering, even without normalization or adjustment for inflation. The insured property losses directly suffered during the September 11, 2001 attacks against the WTC are greater than the combined insured losses resulting from Hurricanes Hugo and Andrew and the Loma Prieta and Northridge earthquakes (Murphy, 2001). The two World Trade Center towers alone housed 435 companies employing 40,000 people. Including the WTC and surrounding area, the attacks displaced over 45,000 workers in the financial industry. 108,500 jobs were lost as a direct consequence of the attacks and 13.4 million square feet of office space were destroyed. In October 2001, 3,500 jobs were lost in the hotel industry and Wall Street lost 160 million dollars in commissions. Individual companies were severely impacted: Merrill Lynch had 9,000 workers relocated (Hagg, 2001); Morgan Stanley Dean Witter Co. had 3,700 employees displaced from the WTC (McPhee & O’Shaughnessy, 2001); Marriott lost two hotels in the immediate vicinity of the WTC and saw its occupancy rate plunge to 38% nationwide from an average of 70% before the attacks (Bloomberg News, 2001); similarly, the aviation industry’s business decreased after 9/11 taking three years to rebound (Office of the Asst Sec for R&D: Trans Statistics, 2005).

Preliminary results of an economic impact analysis (Harrald, Coppola, Yeletaysi & Taha, 2003), however, led to surprisingly counter-intuitive conclusions indicating that there was no clear relationship between the magnitude of the impact of September 11 on the individual corporations surveyed and their subsequent performance and capacity to recover. This was true based only on their stock value. Companies were most affected by the catastrophic loss of employees and the knowledge and skills that they possessed, i.e. assets critical to the businesses survival and continued operations. In the WTC, Cantor Fitzgerald lost 733 of its 1,000 employees, AON Corp lost 200 of its 1100 employees, and Marsh and McLennan lost 331 employees. Small businesses incurred even higher proportional losses: Fred Alger Management lost 36 of its 55 employees; Carr Futures lost 70 out of 141 employees; (Ballman, 2001).

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