Printer Friendly

New York, September 21, 2005—In a special cover package, FORTUNE presents a case study on risk management, using hurricane Katrina as a focal point. The stories look not at who did what wrong, but at how the world copes with the realities of risk, uncertainty, and crisis. Stories include:

A Meditation on Risk, by Justin Fox, page 50
Katrina brought out the worst in Washington and the best in business. Big business responded quickly—and did so because Katrina was exactly the kind of event for which well-run corporations prepare themselves. Still, "markets and corporations may be the greatest risk processors mankind has yet devised, but that isn't to suggest that corporations can or should supplant government," says editor-at-large Justin Fox.

A Civil War Over Claims?, by John Simons, page 57
Katrina is likely to set a record for insurance-industry payouts. The wind and rain that wrought havoc across Florida, Alabama, Mississippi, and Louisiana caused nearly three times the property damages of the Sept. 11 terrorist attacks. At issue, reports John Simons, is whether the bulk of Katrina's damage was caused by wind, which insurers cover as part of standard homeowners' policies, or floodwaters, which aren't covered.

Risk Is His Business, by David Stipp, page 61
When a monster like Katrina strikes, insurers often turn to Risk Management Solutions, a consultant that projects the harm from hurricanes, earthquakes, and other calamities. FORTUNE called RMS research chief Robert Muir-Wood, based in London, to get some perspective on New Orleans-and what comprise the biggest risks in the aftermath of Katrina.

Coming Back to Life, by Telis Demos, page 64
For many people directly in Katrina's path, there was no avoiding trauma. But the U.S. economy is tremendously resilient. Telis Demos looks at how the region—including oil, gas, ports, food, and evacuees—is climbing back from a horrific storm.

An Executive Risk Handbook, by Geoffrey Colvin, page 69
While Katrina was a monster among storms, it was a pipsqueak in the realm of risk analysis. The most important thing for managers to realize about Katrina, posits Geoffrey Colvin, is this: "If it gets you thinking more intensively about risk, that's great—but it is exactly the wrong kind of risk for you to focus on." Colvin outlines five lessons—turbocharge your imagination; build scenarios; think in probabilities; use the power of the markets; and create a culture that insists on facing reality—to get managers on track.

The Only Lifeline Was the Wal-Mart, by Devin Leonard, page 74
The world's biggest company flexed its massive distribution muscle to deliver vital supplies to victims of Katrina—this was a pivotal moment for Wal-Mart, one that it nearly fumbled. As the extent of the devastation became clear, however, Wal-Mart did a remarkable about-face. At the urging of CEO Lee Scott, its truckers hauled $3 million of supplies to the ravaged zone, arriving days before the Federal Emergency Management Agency in many cases. The company also contributed $17 million in cash to relief efforts. And the company also demonstrated how efficient it can be; as of September 16, all but 13 of the facilities that Katrina had shut down were up and running again.

For FedEx, It Was Time to Deliver, by Ellen Florian Kratz, page 83
Years of coping with calamity have taught the huge shipper to improvise. That came in handy when the big storm hit. At any given moment, somewhere in the world there is a social upheaval, a dangerous storm, a wildcat strike—and FedEx, which earns its money being dependable, can't afford a wait-and-see attitude. It moves in advance. To prepare itself, reports Ellen Florian Kratz, FedEx conducts disaster drills several times a year for everything from big earthquakes to bioterrorism to a monster typhoon hitting the company's hub in the Philippines. All of which made FedEx a national resource during the Katrina crisis.

New Lessons to Learn, page 87
FORTUNE asked eight FORTUNE 500 CEOs from companies such as Home Depot, Starbucks, and Gap how they coped with Katrina—and how the storm changed the way they think about crisis management. The upshot: Take care of your employees, keep communication lines open, and get ready for the next disaster.

The Washington That FEMA Forgot, by John Helyar, page 92
Washington Parish—a 670-square-mile expanse northeast of New Orleans—was completely cut off from the outside world after Katrina. But Parish president Toye Taylor had every reason to believe that some federal assistance would arrive. He was wrong. Day after day there was no sign of help. Only after Taylor drove to Louisiana's most powerful radio station, WWL in Baton Rouge, and broadcast a plea for help did relief arrive—but not from FEMA. Rather, private citizens and small companies provided a lifeline to the parish. ALSO.Fixing FEMA: Five provocative proposals.

Bullish on the Big Easy, by Andy Serwer, page 99
Resurrecting New Orleans will require the country to tap into most of what it knows about urban experience: principles of design and infrastructure, of course, but also race, politics, money, and social justice, not to mention food and music. "The ultimate plan, its execution and outcome, will be a very public display of our ability to think big and act bigger," says editor-at-large Andy Serwer. "We need to succeed."

For further information please contact:
Susan Brown Williams
212-522-0133
susan_williams@timeinc.com

Back to index