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There are no Black Swans


One of the things that irritate me most about the Black Swan discussion is the number of people, workshops, media articles etc. that talk about trying to find them.*

A Black Swan is by definition something you did not expect to occur. It’s something you’re not prepared for (specifically), something that took you by surprise. Once you’ve forecast an event (or at least entertained its possibility) it ceases to be a Black Swan.

But are Black Swans really a complete surprise?

Someone, somewhere may have thought of the possibility of any event. When you think about it, all events are really Gray Swans or Gray Geese (I like the alliteration better). Indeed the events usually trotted out as Black Swans (9/11, the GFC, the Tohoku earthquake and Fukushima disaster) had been entertained as possibilities by smart people working in relevant fields. Indeed proposals had been made for various actions that would have prevented or substantially mitigated these disasters. But the decision makers, the people who really count, did nothing. They either weren’t told about the risk or chose to do nothing.

However, just because these events can be foreseen doesn’t mean we need to be expending enormous effort in searching for them.

One of the problems with the ‘hunting black swans’ mentality is that there are a near infinite number of possible events, of which only a much smaller subset will actually occur in a reasonable planning horizon. Trying to address every Gray Goose you can think of will quickly get you nowhere. What’s needed are actions that will enable organisations and communities to adapt to any event – this is what much of the resilience discussion is getting at.

Yet some of the risks we face are worth addressing on their own, either because they’re very likely or easy to mitigate – the ‘low hanging fruit’ of the risk management world. We shouldn’t ignore these in our quest for resilience, yet these ‘easy’ risks are sometimes forgotten about in the resilience discussion.

The risk landscape is not static either. Some risks that were Gray Geese may become easier to mitigate or likely enough that they warrant individual attention. Others may diminish in likelihood or become harder to mitigate individually and so are better off treated as part of broader resilience processes.

That might be harder than running workshops around finding black swans, but it will be much more useful.

*I’m sure it probably irritates N.N. Taleb even more.

Big Cost Needs a Big Risk Assessment

Between 2000 and 2009 natural disasters cost the federal government about $1.5 billion. Then in the following 3 years they cost $7.7 billion, $1.6 billion and $2.1 billion respectively. That’s right, in each of the last 3 years disasters have cost more than in the previous ten years combined.

This huge increase has not gone unnoticed, the federal government will initiate a Productivity Commission inquiry into national disaster funding arrangements later this year.

The inquiry will undoubtedly consider where governments are spending on disasters, but will it look at where that money is coming from?

Although state and local governments do insure some of their assets the predominant approach to funding disaster losses in Australia has been to rely on the federal government’s ability to borrow money at rock-bottom rates. This is clearly not sustainable in the long term.

There are a range of ways governments can deal with disaster costs and their variability, from public disaster funds to catastrophe linked securities. These methods can also make the cost of disasters something that’s up-front and thus give governments strong incentive to invest in mitigation.

Up-front spending requires knowledge of how much the government will need to pay in the long term. All existing estimates for annual disaster losses in Australia are based on statistics of past events. Leaving aside the future influence of climate change and demographic growth these figures are heavily flawed. Simple approaches based on historical statistics just don’t work. Disaster losses follow a power law and statistical predictions will always underestimate the probabilities of large losses.

Fortunately there is another way – a comprehensive, bottom-up National Disaster Risk Assessment.

This process would bring together the massive amounts of existing data and modelling expertise on disaster risk in Australia, identify and address gaps and refine tools to improve risk assessment. The results would enable the estimation of not only the annual costs of disasters, but also the cost of the worst disaster seasons.

Risk Assessment is more than just modelling. To get the best outcomes requires collaboration among stakeholders to share knowledge, experience and ideas for reducing disaster risk. Governments, NGOs, academia, businesses and communities all have unique abilities to reduce disaster risks and the risk modelling activities should meet their needs.

It’s in actually contributing to risk reduction that a National Disaster Risk Assessment could really see gains. Since the 2002 COAG inquiry into Natural Disasters in Australia there have been more than 160 government inquiries into disasters, producing a wish-list of close to 4000 recommendations. Though the National Strategy for Disaster Resilience has brought together key strategic priorities, the level of its implementation is unclear.

Coming out of the twin strands of data-driven risk modelling and stakeholder-driven risk assessment a more focussed approach to resilience could be taken: A 3-year National Plan with a small number of concrete, achievable priorities and clear deadlines for implementation. As these priorities are completed new ones can be added through the risk assessment process, ensuring that the National Disaster Risk Assessment is an ongoing project rather than something done once and then shelved.

A National Disaster Risk Assessment would need a custodian to ensure this continuity and ensure national risk assessment becomes a long-term activity of government. The Productivity Commission, with its modelling and consultative expertise and long history of influence of national policy could be one potential option. Or perhaps the creation of a new agency, say a National Disaster Risk Commission, could better meet this task.

Regardless, making decisions about funding future disaster losses without even really knowing what they could be is a risky game.

Natural Disasters vs. Man-made Disasters – A Better Taxonomy?

We’re always bombarded with news about natural disasters, acts of god and stories of the wrath of mother nature. It’s a recurring meme in the public discussion about disasters and even amongst disaster management experts.

But we know that so called “natural disasters” aren’t really natural – disasters are a social phenomenon – they need something to impact on before . Even talking about natural and anthropogenic hazards doesn’t really work very well. Human practices around land-clearing and vegetation management have a significant influence on floods and bushfires. Landslides that impact on human development are very often due to modifications made to slopes. And before we started building fragile structures earthquakes would have been a curiosity like solar eclipses. Then there’s climate change – we’re beginning to drive change in the natural processes that govern many hazards.

Is there a better way for talking about hazards and disasters that goes beyond this false dichotomy?

One concept that I’ve been introduced to recently is the idea of policy domains and policy communities. A policy community is the group of all the participants in the policy making and implementation process for a particular subject.  Some players are only concerned with one policy area (such as engineering seismologists) whilst others are concerned with many policy areas (such as meteorologists or disaster recovery experts).

To see how this concept could be used in categorising hazards I used Gephi to build a map of various hazards and how their policy communities are connected. For example blizzards and heatwaves are connected because they both relate to meteorology and climate – there’s overlap in their policy community. An engineer may work in both the earthquake policy community, the dam failure policy community and the structural collapse policy community and so on. This is a very subjective process, without data on how experts in various fields are connected (using say LinkedIn), this is really just built on what I think. But let’s see if we can pull some groups of hazards out of this map:

PolicyCommunity2

Click for a larger version.

Based on the connections between the different policy communities I’ve pulled out three separate broad policy domains:

Settlements – this comprises most of the traditional natural hazards policy domain, but adds in a few other engineering related hazards such as structural collapse (which has huge overlaps with policy domains like earthquake) and dam failure (which could almost be considered a sub-speciality of the flood policy domain). The drivers and mitigation options for these hazards relate to where and how we build our houses, neighbourhoods and cities.

Society – this comprises human health, human security and agricultural hazards. This is a pretty diverse set of hazards (as evidenced by their sparse connections) but they mostly relate to people and societies. It could be broken up a bit further, but for simplicity I’ve grouped them.

Economy – this group has industrial/technological accidents, transport accidents and utilities failures, there’s pretty big overlap with terrorism (which I placed in the societal group) and a number of the Settlements policy domains. Most of these hazards relate to economic activity in the modern age and comprise most of the traditional anthropogenic hazards policy domain. I think that labelling this group Economy is instructive as it reminds us that the so-called ‘human-caused’ disasters aren’t caused by people per se, but the productive activities we do and the materials and technologies used in them. It’s this group of hazards that have evolved the fastest and continue to evolve rapidly.

So let’s forget natural hazards and anthropogenic hazards – how about Settlement hazards, Societal hazards and Economic hazards?

An Earthquake in Sydney: Could it happen here

Global Seismic Hazard MapA few weeks ago a small earthquake shook areas of Sydney around Campbelltown. The tremor prompted an article in The Fifth Estate where experts warned that most people vastly underestimate the risks of an earthquake in Australia. Prior to this I had been researching the risk of an earthquake in Sydney as part of an assignment. I found that whilst the likelihood of a Sydney earthquake are small, the consequences could be great.

Earthquake Sources

Although far from tectonic boundaries Australia is more seismically active than the interiors of other continental plates. Although these intra-plate earthquakes are less common than those that occur along plate boundaries, earthquakes with magnitude 7 or more can happen occasionally. Elsewhere in the world earthquakes of this magnitude, when they strike near major population centres, can cause significant damage and loss of life.

There are numerous faults throughout the urban area of Sydney. Although most of these show little sign of recent activity recurrence intervals on faults in Australia can measure in the order of tens to hundreds of thousands of years. At the foot of the Blue Mountains lies the 28 km long Kurrajong Fault Complex. This has been the subject of quite a bit of research as it could produce large earthquakes of magnitude 7 or greater. The likelihood of a large earthquake on this fault is highly uncertain, though it is probably smaller than 1 in 100,000 per year.

Built Environment

Sydney has a very low density. Of its 1.5 million dwellings 55% are separate houses and only 10% are in apartment buildings of 4 or more storeys. Some construction in the city survives from the early 1800s. Houses built prior to the 1930s are likely to be of poorer unreinforced masonry construction and more prone to structural damage or collapse in the event of an earthquake. Houses built since the 1980s should include modern seismic resistant elements based on the mapped hazard for Sydney at the time. Asbestos was a common construction material from 1945 to 1980 and could be disturbed by even light earthquake damage.

Sydney Airport handles 35.6 million passengers and 470,000 tonnes of cargo per year. In addition to the Airport a large amount of heavy industry is clustered around Botany Bay. This includes Port Botany, the Kurnell Refinery and Desalination Plant. All these assets are on unconsolidated or reclaimed land (notably the runways of Sydney airport) more likely to experience strong earthquake shaking.

The Earthquake Threat to Sydney

Site classes for parts of Sydney (values D, DE and E show weaker soils and thus greater amplification of earthquake shaking)

Site classes for parts of Sydney (values D, DE and E show weaker soils and thus greater amplification of earthquake shaking)

Sydney is located in a moderate earthquake hazard zone for the Australian continent. A peak ground acceleration of 0.05g has an annual exceedance probability of 1 in 500. The likelihood of of different peak ground accelerations being exceeded in the Sydney area is given in the table below. Earthquake shaking can be much worse in soft, sandy or watery soils – indeed it’s on these soils that damage is often most severe. The amplification of ground acceleration can be up to a facor of three. Although most of Sydney sits on relatively firm ground there are many areas on softer soils. The most important of these is Botany Basin, which extends north from Botany Bay almost as far as the Sydney CBD. The Botany Basin is a low-lying swampy area with a water table close to the surface. There are other smaller areas of unconsolidated sediments and fill, particularly along the foreshore of Sydney Harbour. These areas are likely to experience greater ground shaking in an earthquake than older areas which sit on consolidated rock.

1/500 AEP2 1/1000 AEP 1/2500 AEP
Peak Ground Acceleration (g) 0.05 0.1 0.15
MMI VI VII VII
Peak Ground Acceleration with soil amplification (g) 0.15 0.3 0.5
MMI with soil amplification VII VIII IX
Typical damage at higher MMI
Slight damage and cracking in old buildings. Unsecured parapets, brick gables, unreinforced chimneys and tiles may fall. Heavy damage to old poorly constructed buildings, some collapse. Some damage to reinforced masonry buildings. Houses not secured to foundations may move. Many old buildings destroyed. Damage to reinforced masonry buildings some with partial collapse. Some damage to new structures. Houses shifted off foundations. Brick veneers fall.

An earthquake on the Kurrajong fault complex could potentially produce even stronger shaking but is less likely.

Although these earthquakes are rare emergency planning should not be discounted. Emergency planning for flood and tsunami in NSW considers events this rare and rarer.

The combination of unconsolidated sediments and a high water table in the Botany Basin means that it may be susceptible to liquefaction. No investigations of this potential have been undertaken.

Impacts of a Sydney Earthquake

A Sydney Earthquake Scenario

The threat of an earthquake in Sydney has received significant attention from the global reinsurance industry. In 2005 Munich Re included a Sydney earthquake as one of its top 10 scenarios for a 1000 year PML.3 Swiss Re considers an earthquake in Sydney to be one of its reference losses; an event with likelihood of 1/1,000 would have an economic loss of $20 billion.(18)

Other insurance risk modellers have prepared scenarios for an earthquake in the Sydney Basin. The one shown, estimates a loss of $11.3 billion for an earthquake of similar size to the Newcastle quake occurring 40 km south of Sydney.

A significant hazard is the collapse of unreinforced masonry awnings in older commercial districts. This was extensive in both the 1989 Newcastle and 2011 Christchurch earthquakes and led to fatalities. These awnings are prevalent in many commercial areas throughout Sydney.

Shaking amplified by local ground conditions and the possibility of liquefaction pose a potential hazard to the large industry around Botany Bay. Possible secondary impacts on travel and freight shipped through Sydney Airport and Port Botany could have flow-on economic effects to otherwise unaffected businesses. Damage to chemical plants or the Kurnell Oil refinery could lead to leaks, posing a risk to the surrounding population and having environmental impacts.

What could be done?

Research and Risk Assessment

Despite ongoing work in the Sydney Basin on earthquake hazards there is still substantial gaps in knowledge of the risk. Further research is required to address these knowledge gaps.

The seismology of possible earthquake producing faults is still not well understood. Further research on these sites would help define the probability of an earthquake occurring.

More crucial is a proper assessment of earthquake vulnerability, particularly in areas known to have a combination of old buildings and unconsolidated soils. The methodology developed by Geoscience Australia for a report on earthquake hazards in Newcastle and Lake Macquarie could be replicated across Sydney, with initial priority given to the following areas:

  • The soft soils around Botany Bay
  • Areas with high concentrations of old dwellings in the inner city
  • Areas along Sydney harbour that have been reclaimed

Assessment of liquefaction potential in the Botany Basin and other similar areas should also be undertaken. Priority should be given to the areas that host key infrastructure, such as Sydney Airport.

A better understanding of the risk could help motivate governments to undertake mitigation and preparedness measures and prioritise areas for assessment.

Mitigation

Retrofitting of individual homes is likely to be expensive and not cost effective, however attention should be given to emergency infrastructure such as hospitals, important public buildings like schools and important heritage assets. City of Sydney Council has conducted seismic retrofitting of some of its town halls.

Special assessment should be made of masonry awnings in older commercial districts, particularly in areas where the ground conditions may lead to strong shaking. These proved to be particularly prone to collapse in the Newcastle earthquake.

Key industrial and aviation assets surrounding Botany Bay should be engaged to undertake detailed seismic risk assessments including addressing liquefaction. Retrofitting should be considered where indicated by these risk assessments. These facilities should also audit their business continuity and emergency plans to ensure minimal disruption to operations in the event of an earthquake.

Assessment of the seismic safety of bridges on Sydney’s extensive road and rail network should also be conducted.

Response Planning

The geology and urban geography of Sydney could create specific challenges for an earthquake response in Sydney. The low density of Sydney, potential for widespread shaking and areas likely to experience higher intensities due to local ground conditions will create widespread low-moderate damage with pockets of heavier damage. The low likelihood of an earthquake and lack of lived experience also pose challenges to community education and engagement. New South Wales may wish to develop a State Earthquake Emergency Sub-Plan similar to that used in Victoria. Alternatively Supporting Plans for key functions that may also be required in other disasters could be developed.

Key functions that will need to be addressed include Damage Assessment, Search and Rescue and Debris Management. Other elements of an earthquake response are already provided for in other emergency plans, however these should be reviewed to ensure that they would function appropriately in an earthquake emergency.

Damage Assessment

Damage assessment is required during the immediate response for activities like search and rescue and for the longer term recovery to determine whether buildings are safe to re-inhabit.

Use of new technologies could be used for rapid damage assessment. Creating social media and other technological solutions solely for earthquake is unlikely to be feasible, but the capacity to cope with reports of earthquake damage could be incorporated into other tools developed for hazards such as hailstorms.

Prioritising areas for longer term assessment could also be challenging, as will sourcing enough qualified engineers to conduct assessments. Rules of thumb for initial checks by unqualified personnel may need to be developed. This could identify buildings that need further inspection.

Search and Rescue

Although a substantial portion of Fire and Rescue NSW and the NSW State Emergency Service have search and rescue capabilities, including the rescue of people from collapsed and damaged structures there exists no plan for a large scale dispersed search and rescue operation.

Coordination and communication between the different rescue services will be critical to ensure that the worst affected areas receive the resources they need, yet are not overwhelmed with emergency services personnel.

Debris Management

Some areas will generate large amounts of debris as a result of destroyed structures and those needing to be demolished. Existing landfill sites are not likely to be adequate for the possibly large debris loads. This debris may also contain hazardous materials including asbestos. Careful management and disposal of this debris will be required to ensure that emergency service and waste management personnel and the broader community are not exposed.

1Local Magnitude, also known as Richter Magnitude.

2Annual Exceedance Probability: A measure of the chance per year of an event of that level or higher occurring.

3Probable Maximum Loss: A measure of the maximum loss in an insurance portfolio for a single event over a particular time period.

Risky Bites: Fukushima, is fear the real risk?

VOA Herman - April 13 2011 Fukushima Nuclear Power Plant-03Two new international and independent reports have been released on the health impacts of the Fukushima nuclear accident. They’ve found that there have been few health impacts on the workers in the plant and emergency responders. More importantly they’ve found that there are unlikely to be any attributable long term health impacts on the general population. As the Sydney Morning Herald article says: “This “perfect storm” hit a nuclear plant built to a 50-year-old design and no one died.”

Nevertheless, there’s been significant fallout (pun intended) in terms of the nuclear power industry in Japan and abroad. Japan has struggled to generate electricity over the last two years and public opinion on nuclear power has reached new lows. The psychological impacts cannot also be discounted for millions in the area and further afield. The report even found that many deaths were associated with the stress of the evacuation. In areas that weren’t highly exposed to radiation people may have been better off staying.

So here’s my question: is the fear of a nuclear accident a bigger risk than the risk of an accident itself?

NSW Planning White Paper Released

Today the NSW Government released its planning white paper. Reforming the planning system was one of the election policies of the O’Farrell Government. I feel that a lot of the discussion about ‘resilience’ are thinly veiled distractions from what we know works best – not building stuff in harm’s way.

I’ll be leafing through it and posting my thoughts (and perhaps making a submission), but at 214 pages it’s going to take me a while.

The closing date for submissions is the 28th of June, so if you’re thinking about making one get cracking. There’s a variety of other consultative mechanisms including a series of discussion forums.

Raising Warragamba Dam could lead to a greater catastrophe

This post originally appeared in New Matilda under the title “Floodwaters Could Rise In Sydney”

Queensland and NSW are again recovering from record breaking floods and again many are questioning the state of flood mitigation in Australia. While attention remains on flood affected parts of Queensland attention is starting to turn to what could be the worst flood risk in the country: the Hawkesbury-Nepean River in Western Sydney.

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