ERM-BC-COOP: DC doesn't "get" it

 

I just received an email from George S. LeMieux, Florida's junior senator.

The email missive concerned, primarily, the disaster in the Gulf of Mexico (that threatens to meander up the US' Atlantic seaboard).

Florida's junior senator wrote: "I have joined Senators David Vitter (R-LA), Roger Wicker (R-MS), and Jeff Sessions (R-AL) in introducing the Oil Spill Response and Assistance Act (OSRA), which would dramatically increase the liability of companies responsible for oil spills. It is clear that the economic damage done to the Gulf region will far exceed the $75 million cap currently in place. OSRA would raise that limit for a company like BP to $17 billion dollars. For the future, this bill also requires the best technologies and equipment are staged to respond to potential spills within 24 hours. I am closely following the situation, and will do all that I can to protect our fisheries, our tourism industry, our environment, and our economy. "

Several things concern me regarding the senator's message.

Let's start with the Oil Spill Response and Assistance Act (OSRA) that would "dramatically increase the liability of companies responsible for oil spills."

Apparently the cap for damages from an oil spill such as the one BP allowed is a mere US$75 million (US$75,000,000). Is it any wonder, then, that BP is claiming it will pay to clean up the mess, knowing as its lawyers must, that the maximum it can be obligated to fund is US$75 million. Clean-up costs in the billions - n,000,000,000 - have been suggested. The Act would raise the cap a BP would be forced to pony up to US$17 billion (US$17,000,000,000). While that seems an improvement, I think any cap is a way for a BP to shirk its responsibility.

An aside. While I read that several (re)insurers are telling everyone they will meet their contract agreements with insured clients, I also heard that at least one insurer told its insured in Louisiana that it will NOT pay for damages; if its insureds want to make a claim against BP et al, they are welcome to do so, but don't look to the insurance company for assistance. Sounds a lot like Florida after Andrew and Louisiana and Mississippi after Katrina - take the money and run. (What does that have to do with risk management aside from the Gulf? Consider any insurance coverage your organization may have as a financial risk - your insurer may decide to just "walk away.")

The senator's email continues: "For the future, this bill also requires the best technologies and equipment are staged to respond to potential spills within 24 hours."

Senator, that's just disaster recovery, sort of.

What is needed is an Act that demands avoidance and mitigation processes to be built into all projects that can turn into an ecological mess - not even a "disaster," just a "mess."

From all reports I have read or heard, BP and its vendors were woefully unprepared for any spill of consequence. The risk of a major spill was considered so unlikely (low probability) that even though the impact might be great the companies elected to risk it. After all, worst case, the damage "cap" is only US$75 million.

It's good that the senators - all Republicans in a Democrat-controlled, highly politicized Congress - are thinking about disasters and assuring that the proposed Act "requires the best technologies and equipment are staged to respond to potential spills within 24 hours."

What is needed is more PRO-ACTIVE legislation to prevent or mitigate risks and with a painful penalty for wealthy organizations (such as BP) so that the Act will be taken seriously.

US$17 billion seems like a lot of money, but (a) that's a maximum and (b) it fails to take into account long-term damage to the environment, employment, people's lives and livelihoods.

We don't need more "disaster recovery"; we need an Act that demands risk management from the beginning: identification, avoidance and mitigation, and then recovery if it becomes necessary.

Sorry senators; you just don't get it.

John Glenn, MBCI
Enterprise Risk Management practitioner
Hollywood - Fort Lauderdale Florida
JohnGlennMBCI at gmail dot com