Summary of Learning from Catastrophes

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In terms of insurance payouts, two-thirds of the 25 most expensive disasters in the last 40 years have taken place since 2001. As the global climate changes and more people move to overbuilt and hence more vulnerable cities, the pace of cataclysmic “extreme events” is liable to increase. From the costs related to Iceland’s volcano to the impact of the catastrophic oil spill in the Gulf of Mexico, far too many organizations already face extreme problems. Authors and editors Howard Kunreuther and Michael Useem, both Wharton School professors, join 20 other experts to examine risk assessment and management. Although their book is made up of scholarly essays, getAbstract finds it pertinent and useful. Leaders can apply the directives in this intelligent, informative, thought-provoking volume to develop strategic planning for major catastrophes.

About the Authors

Howard Kunreuther and Michael Useem are professors at the Wharton School at the University of Pennsylvania. Kunreuther directs the school’s Risk Management and Decision Processes Center and Useem heads its Center for Leadership and Change Management.

 

Summary

Ready for the Next Big Disaster?

Unfortunately, catastrophic events abound: Recent disasters include the 2004 tsunami that killed more than a quarter of a million people in Southeast Asia, Hurricane Katrina that caused $150 billion-plus in damages in 2005, the 2008 subprime mortgage crisis and market collapse, and the 2009 global recession. In the past, disasters largely were exceptional events. This is no longer the case. Today, major natural and man-made disasters occur at an alarming rate. Worldwide economic losses from natural catastrophes reached $620.6 billion from 2000 to 2008, primarily due to hurricanes in 2004, 2005 and 2008. In comparison, economic losses from 1950 to 1959 were $53.6 billion, less than a tenth of that sum. Expect the increasing rate of megacrises to become even more of a factor in the future. Preparations for major calamities fall into three areas of study: “risk assessment, risk perception and choice, and risk management strategies.”

Risk Assessment

The science of predicting disasters has inherent limitations, but available data do allow experts to create educated estimates. These risk assessments, which serve...


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