Friday, January 13, 2012


Mitigate or face court date


In an article headed "TEPCO shareholders to sue utility's directors for 5.5 tril. yen", 42 shareholders of Tokyo Electric Power Co. may sue the directors on their own for 5.5 trillion yen.

The stockholders contend that TEPCO calculated in 2008 that a tsunami of 15.7 meters could hit the nuclear power plant if a magnitude-8.3 quake occurred off Fukushima Prefecture, the board members failed to take countermeasures such as raising the height of tsunami barriers protecting the plant.

The tsunami the damaged the Fukushima was the result of a 9.0 earthquake.

The stockholders said that if they prevail, they will use the funds to compensate victims of the crisis.

While the stockholders' action may have to play out in court - did the board have any reason to suspect a stronger earthquake possible in the region? - the lesson for risk management practitioners is simple:

    When faced with a threat that can be mitigated or avoided, failing to act can - and likely will - result in someone bringing legal action. In America, that usually means "all concerned" - boards, executives, and perhaps even the risk management practitioner.

Ignorance is not bliss, at least for the practitioner.

We, as risk management practitioners, are expected to at least warn our employers of a potential threat.

Boards and executives are like horses that can be led to water but cannot be forced to drink.

Still, it IS our responsibility to make threats, however remote, known to management,

Fortunately for most practitioners, we don't face a combined earthquake-plus- tsunami threat, but we all have threats with which we must deal.

How great a threat is determined by the evergreen Probability vs. Impact exercise.

Given the location of the Fukushima n-plant, the earthquake-plus-tsunami threat had a real probability of occurring.

In my part of the world (Atlantic coast), neither earthquakes nor tsunamis are very probable. We do have to protect against a hurricane's storm surge , a minimal tsunami perhaps. We also have our own special concerns, sink holes among them.

Like Fukushima Prefecture,, we are home to n-plants, several in fact. These plants are located to take advantage of sea water for cooling. Did NextEra Energy/Florida Power and Light (FPL) plan for storm surge? Sink holes? Tornados? Probably. Did it plan for a combination of threats? Since I live between two plants, I hope so.

The main point of this article is to make all risk management practitioners aware of their responsibility to considerer all threats and logical combinations of threats, and to make certain that management is aware of the practitioner's concerns.

I suspect that even if TEPCO's directors had Officers & Directors insurance, that the insurer would balk at paying out 5.5 trillion yen, no matter how much that equates to in anyone's $s or €s or NIS.

How would a risk management practitioner KNOW there was a risk and the level of risk? The same way the risk management practitioner knows about all other risks: the practitioner asks the experts.

In the case of threats to the two n-plants that flank my home, many of the experts reside in local universities; some experts may be found far away.

Granted, a commissioned study might be expensive - but if the object of the threat is a nuclear power generating plant the expensive probably is justifiable - but a great deal of information can be gathered with little or no outlay.

The practitioner must be industrious to seek out resources, but in most cases they are available and the people staffing those resources almost always are pleased to share their expertise. (Based on personal experience as a reporter and technical writer.)

We may not be able to force the "horse" to drink the water, but we must at least lead it to the water.

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