Unmastered risks: From crisis to catastrophe
An economic and management insight
Andrea Schenker-Wicki ⁎, Matthias Inauen, Maria Olivares
Institute for Strategy and Business Economics, University of Zurich, Plattenstrasse 14, CH-8032 Zurich, Switzerland
Institute for Strategy and Business Economics at University of Zurich, Chair Performance Management, CH-8032 Zurich, Switzerland
a b s t r a c ta r t i c l e i n f o
Article history:
Received 1 April 2008
Received in revised form 1 November 2008
Accepted 1 February 2009
Keywords:
Disaster management
Theoretical framework
Research
Risk
Prevention
Response
In contrast to sociology, economics, and above all, business economics has not yet discovered disaster
management as a research topic even though this subject affects many areas of economics due to its
interdisciplinary character. The enormous economic losses suffered by private parties, businesses and public
institutions in crisis events, the huge amounts of money which are spent in disaster prevention, as well as the
challenges that providing emergency management and disaster control present, contain many issues and
have an increasing social and economic relevance. This article takes a close look at the concept of disaster
from an economic and management point of view to mitigate the impact on human beings and environment.
Based on the rational choice approach the study analyzes the state of preparedness that is mainly responsible
for good or poor disaster prevention and presents a theoretical framework for a comprehensive disaster
management including examples of practical applications. The conclusion outlines several important areas of
future research in business economics.
© 2009 Elsevier Inc. All rights reserved.
1. Introduction
Due to the enormous impact of disasters on local and global
economy, this paper examines the following research questions: what
economic theory and research can contribute to the disaster theory?
And what can be learned from economics and management to
mitigate the impact of disasters on human beings and environment?
This article builds from the theory of rational choice. This theory
assumes the existence of costs and benefits for all kinds of actions and
focuses on institutions in an inefficient market environment. The first
part of the article presents some descriptive statistics about losses
evolved from natural disasters and fundamental definitions with
respect to disaster follow. The second part presents the concepts of
disaster in sociology and economics and concludes with a framework
for analyzing and studying issues related to disaster management. The
last part of the article discusses perspectives for future research.
2. Starting point: impacts
A particularly high number of disasters occurred recently. Whether
human-made emissions or altered sun activity caused the disasters is
not of importance at this stage. Fact is that almost 270 large natural
disasters have appeared since 1955. Approximately 1.8 million people
have lost their lives, 80% of them because of storms or flooding. Fig. 1
shows a clearly increasing number of large natural disasters (MunichRe,
2006a,b; Van Aalst, 2006).
Further to that, the last decade has also especially shown a clear
increase in disaster-related losses (Fig. 2). This is primarily due to a
higher population density and a higher standard of living.
Tables 1 and 2 show the natural disasters with the greatest impact
from 1950 to 2006 (Plate et al., 2001), updated with data from the
annual statistics of Munich Re and Swiss Re from 1999 to 2006.
As Tables 1 and 2 show, the geographical distribution of the
number of deaths and the economic losses from natural disasters are
not even. The disasters with the highest number of deaths occur
mostly in poor countries (such as Bangladesh, China, or Peru, for
example), whereas the disasters with the highest economic impact
occur primarily in highly developed countries. Socioeconomic factors
thus significantly influence the extent of disaster (Dombrowsky,
2001). The largest losses–approximately US$ 125 billion–were a result
of Hurricane Katrina in the US states of Louisiana (primarily New
Orleans), Mississippi, Alabama and Florida in 2005 (SwissRe, 2005).
In addition to losses of human life and property, disasters also
cause considerable ecological damages. Damaged soil, destroyed
woods and flooded agricultural areas recuperate only very slowly.
Oil or stored chemicals often seep into the ground water or explode, in
the case of fire or earthquakes, and ruin canalization systems which
leads to polluted drinking water and endangers the health of humans
and animals (Cruz et al., 2006; Maier, 2006). The effects of these
damages may last for years and sometimes for several decades. This
outcome is a huge burden for the environment, society, and the
economy, particularly in poor countries (Plate et al., 2001). Disasters
Journal of Business Research 63 (2010) 337–346
⁎ Corresponding author. Tel.: +41 44 634 29 00.
E-mail address: andrea.schenker@isu.unizh.ch (A. Schenker-Wicki).
0148-2963/$ – see front matter © 2009 Elsevier Inc. All rights reserved.
doi:10.1016/j.jbusres.2009.02.021
Contents lists available at ScienceDirect
Journal of Business Research
impose psychological stress on the victims. Symptoms can range from
trauma to depression and can result in collective reactions such as a
loss of trust in government and politics (Clausen and Dombrowsky,
1990).
3. Definitions
The word catastrophe–often used as a synonym for disaster–has its
roots in the Greek word καταστροϕɛιν. The prefix κατα indicates a
reverse or downwards direction and the noun στροϕη means
basically a change or turning (Claessens, 2005). Combined, the two
define an event as a catastrophe or a disaster when a downwards
spiral is unleashed which basically leads to a collapse of a system.
Under normal conditions, risks are static, continuous, or cyclical. A
crisis–as a precursor of a disaster–is an undesirable situation with a
significantly increased risk (Mayer, 2003). In contrast to disasters,
however, it is possible to restore order in a crisis based on changed
steering parameters. A crisis occurs sequentially, in a relatively orderly
manner, while during a disaster, processes, which are not controllable,
cause permanent and non-reparable damage within a system. Risk,
Fig. 1. Number of large natural disasters between 1950 and 2006 (MunichRe, 2006b, p. 47).
Fig. 2. Economic and insured losses in billions of US $ (MunichRe, 2006b, p. 47).
338 A. Schenker-Wicki et al. / Journal of Business Research 63 (2010) 337–346
crisis and disasters are thus possible states of one and the same system
(Fig. 3).
Because of the close relationship between crisis and disaster,
disaster management can adopt some concepts from the field of crisis
management, at least in the beginning phase of an event. These are, in
particular, procedures for risk analysis and early warnings.
Besides, to differentiate between an accident (e.g. a reactor leak, an
oil spill) and a disaster is often difficult. A strong earthquake in an
uninhabited place is hardly a disaster while a weak earthquake in a
metropolitan area built without seismic design can have catastrophic
consequences (Dombrowsky, 1998).
Research reflects the difficult delineations and the frequent
confusion of terms as well. Different interpretations of a disaster
exist in sociology, law, and economics. To make the situation even
more complicated, sometimes no agreement exists even within a
discipline.
The United Nations and the UNDRO (United Nations Disaster Relief
Organization — since 1998 called OCHA/ISDR Office for the Coordination
of Humanitarian Affairs), a UN organization defines catastrophe:
“A disaster is an event in which a society is pulled into serious danger
and suffers human loss or material damage to the extent that the local
social structure collapses and all or some of the essential functions of
the society can no longer be fulfilled” (UNDRO 1987, in Hanisch, 1996,
p. 22).
To illustrate the term disaster, the chart in Fig. 4 shows possible
events as well as a classification scheme (Adam, 2006, following
Pointner, 1995) that differentiates events as man-made (avoidable)
and natural (unavoidable) disasters. Whereas appropriate prevention
measures can avoid man-made disasters the effects of natural
disasters cannot be completely avoided but mitigated through an
appropriate disaster management.
4. The concept of disaster management in sociology
and economics
4.1. The concept of disaster management in sociology
Contrary to economists, sociologists have already been studying
disasters since the 1920s but exclusively in Anglo-American literature;
however, the field of disaster sociology was only established in
1945 as a proper discipline (Müller et al., 1997). Large societies or
their larger subunits can respond to disasters in many different ways:
they can just absorb the impacts with little or no premeditated action
and rely on improvisation or they can use planned and formally
directed arrangements. As a result, disaster researchers can draw a
variety of social action types before, during and after the disaster
(Kreps, 1984).
Critiques on traditional ways of conceptualizing and explaining
disasters based on natural sciences and rational calculations have led
to a paradigm shift: the constructivism detached the positivism. In
this context sociologists developed the socioeconomic and sociocultural
concept of vulnerability where they defined disasters in terms
of their impact on a society in relation with human values. If the
context includes no human values, the notion of disaster does not
apply even if the event was external, no matter what magnitude (Voss
and Hidajat, 2002). The socioeconomic concept of vulnerability bases
primarily on system theory, decision-analysis as well as structuretheory
— approaches and frameworks commonly used in economics,
too.
German sociologists include another aspect to the concept of
vulnerability and refer to risk societies and intern threats. Whereas a
vulnerable society is being aggressed from outside–externally–, a risk
society is threatened by itself–internally–for example through the risk
of using certain technologies (biotechnology, nanotechnology, internet),
energies (atomic energy) or favoring a certain life style (CO2
emission, travelling) (Rudolf, 2007).
However, the most important change in sociology in the last
decade has been a greater emphasis on both organizational and
collective social behavior during the whole hazard cycle. This includes
the acknowledgement of social solidarity and social conflict in
disasters as well as the influence of gender, class and other dimensions
of diversity (Tierney, 2007). In that context researchers often used the
theory of rational choice to explain social behavior (Frey, 2004). Since
the 1990s, realist and event-based perspectives have dominated the
field of disaster research (Kreps, 1984; Quarantelli, 1987; Tierney,
2007).
Although disaster sociology is an established research field, in fact,
this focus is of small relevance for the whole community of
sociologists. Tierney assumes, “the field is unlikely to overcome its
Fig. 3. Ambivalence of a crisis (Saynisch, 1994; Adam, 2006, p. 67).
Table 1
Number of deaths in natural disasters between 1950 and 2006 (Plate et al., 2001;
MunichRe, 2006a,b).
Year Country or region Event Deaths Rank
1970 Bangladesh Flooding 300,000 1
1976 China Earthquake 290,000 2
2004 Southeast Asia Tsunami 260,000 3
1991 Bangladesh Flooding 140,000 4
2005 Pakistan Earthquake 88,000 5
1970 Peru Earthquake, mud slide 67,000 6
1990 Iran Earthquake 50,000 7
2003 Iran Earthquake 27,000 8
1978 Iran Earthquake 25,000 9
1988 Armenia Earthquake 25,000 10
1985 Columbia Volcanic eruption 23,000 11
Table 2
Total economic losses in natural disasters between 1950 and 2006 (Plate et al., 2001;
MunichRe, 2006b).
Year Country/region Event Total damages
(in mill. US$)
Rank
2005 USA: LA,MS,AL,FL Hurricane Katrina 125,000 1
1995 Japan/Kobe Earthquake 100,000 2
1994 USA/Northridge Earthquake 44,000 3
1998 China/Yangtze region Flooding 30,700 4
2004 Japan Earthquake 28,000 5
1992 USA/Florida Hurricane Andrew 26,500 6
1996 China/Yangtze region Flooding 24,000 7
2004 USA/Caribbean Hurricane Ivan 23,000 8
1993 USA/ Mississippi Flooding 21,000 9
2004 USA/Caribbean Hurricane Charley 18,000 10
2002 Europe Flooding 16,000 11
339A. Schenker-Wicki et al. / Journal of Business Research 63 (2010) 337–346
marginal status without significant efforts to link the sociology of
disasters with the related fields of risk and environmental sociology
and, more broadly, to focus on core sociological concerns, such as
social inequality, diversity and social change” (Tierney, 2007).
4.2. The concept of disaster management in economics
Contrary to sociologists, economists are much more involved in the
area of crisis management than in disaster management. Disaster
management is a very rare research topic in business economics. A lot of
publications exist with respect to crisis management, whereas most
articles analyze business crisis. The reason for the asymmetry in
economists' involvement in crisis management versus disaster management
is probably because business units have to cope repeatedly with
various levels of crises and have learned to deal with them. In contrast and
fortunately, disasters (as defined earlier) rarely occur in business units,
thus disaster management is not their core competence.
In spite of these limitations, disaster management is not only a
sociological problem for sociologists, but rather a genuine business
economic problem: Gutenberg describes disaster management as an
extreme case of business adaptation, where short-term qualitative and
quantitative system modifications are necessary and cooperation is
compulsory (Grün, 2005; Flynn, 2007). Disaster management, in other
words, is about production functions, and related to substitutionprocesses
between capital and work as well as betweenprevention and intervention
measures. The difference between disaster management and a classical
production function of a firm, however, is an important one: the
framework production conditions for the expected goods and services
can radically change and are everything but stable. This is especially true
for the intervention measures which the management can only partially
anticipate due to the high uncertainties involved.
To better understand the effects of good or poor disaster management
from an economic point of view, the study uses rational choice theory,
which is also applied in sociology. The basic assumption of the rational
choice approach is that different actors behave rationally in a broad sense
and tend to increase their benefits. They have goals and preferences and
are confronted with constraints such as financial resources, time and
mental capacities. The world in which they live is uncertain, but they can
copewith this uncertaintyand the restrictions from outside and maximize
their utility or benefits. Individuals and in an aggregated form, collectives,
act in a consistent manner. They are also aware of the constraints and are
able to deal with the restrictions in a rational way (Frey, 2004).
4.2.1. General characteristics of disaster management: costs and benefits
Disaster management generally involves two phases: the prevention
phase and the intervention phase. To analyze a good or a poor
disaster management the authors concentrate on the preparedness of
an organization and assume that high prevention leads to a high
preparedness and to a good disaster management, whereas few or no
prevention measures lead to a weak preparedness and a poor disaster
management. Thus, a collective has the choice to invest either in
prevention measures or finally pay for intervention.
First, consider the benefits of the prevention activities and assume
that the benefit will increase the more activities the state or government
undertakes to diminish the potential losses. However, this curve is not
linear. From a certain point the benefits to the public get smaller and
smaller due to the fact that nearly everything has been done to protect
the people and the environment concerned. Additional activities will
only have a small impact but will be very costly. Therefore, the curve is
concave representing a classical benefit curve with a diminishing
increase (see Fig. 5). Normally, political and social environment such as
the population, the parliament and the administration highly influence
the government which has to decide about prevention measures. Hence,
the final shape of the benefit curve results from negotiation processes
between government and various political stakeholders and can
considerably differ from government to government.
Fig. 5. Curve linearity of total benefits and total costs with A0⁎ as production
equilibrium.
Fig. 4. Classification of disasters (Pointner, 1995; Adam, 2006, p. 70).
340 A. Schenker-Wicki et al. / Journal of Business Research 63 (2010) 337–346
In contrast, the cost curve shows a somewhat different shape. A
positive progressive slope exists due to the fact that the costs arise
with the amount of prevention measures. First of all, the government
or management chooses those activities which are easy to implement
and show the greatest impact to protect the people and the
environment. After having chosen the most promising prevention
measures, to find other ones will be increasingly difficult. If additional
measures are taken, they involve much higher costs. The costs for
prevention measures mainly involve costs for special buildings,
technical instruments and salaries for professional intervention staff.
Based on cost–benefit considerations, rational choice theory allows
deriving the optimal bundle of possible prevention measures.
Intersecting the marginal cost curve and the marginal benefit leads
to the optimal bundle (see Fig. 6). At that point–the production
equilibrium–the government gets the highest benefits to the lowest
costs, which means that the difference between cost and benefits is as
large as possible (Fig. 5). The equilibrium reflects the most favorable
extent of prevention activities in disaster management.
4.2.2. Prevention measures and risk assessment
The prevention measures involve risk assessment, risk allocation, risk
monitoring and the implementation of early warning systems as well as
providing of shelters, evacuation plans and training of staff. The crucial
point and the most difficult one is the appropriate assessment of risks. If
the risk is not correctly assessed, the government will underestimate or
overestimate the benefits from the prevention measures and the level of
preparedness will not be adequate for the incident.
If the government underestimates the risk, not enough measures
are undertaken to protect the people and the environment. Fig. 7
shows a downwards shift of the marginal benefit curve which results
in a lower level of preparedness. If the government overestimates the
risk, the benefits related to a certain disaster increase, and so the
marginal benefit curve shifts upwards (see Fig. 8).
The first case is the most probable one. The tsunami disaster in 2004
that had an enormous impact and harmed people and infrastructure in a
tremendous way is an example of an underestimation of the risk and a
weak level of preparedness. Another example is the accident of
Chernobyl in 1986 that led to an important radioactive contamination
in the Ukraine and Byelorussia with consequences for Eastern and
Western Europe. In the last case, the risk was underestimated twice:
firstly the graphite moderated power plant itself had a construction risk
which was not correctly assessed. Secondly, the team responsible for the
plant management underestimated the risk related to an experiment
they had to carry out and which finally led to the most harmful radiation
contamination ever in civil history (Dörner, 2001).
Usually the authorities responsible for disaster response do the risk
analyses (Greiving et al., 2006). This process is a very demanding task
which can have far reaching consequences for a region. Therefore the
leading function is normally not in private hands but with the central
or federal government (Jenkins, 2006). Risk analysis is frequently
correlated with many uncertainties since the status of research varies
depending on the type of event and the probability estimated. For
example, during the last decade, the assessment of B-terror risk has
changed in the western countries; in particular the probability is
estimated to be much higher since September 11, 2001.
4.2.3. Prevention measures and risk allocation
The basic question is whether individuals or the public hand should
be responsible for disaster prevention (Adam, 2006). If, for example, the
collective or the public sector bears the entire risk in a region, the private
sector intends to neglect the individual risks because of false incentives.
This was the case in the last decades in many European countries when
more and more houses were built in areas where earlier no one would
have built due to safety reasons. If the allocation of risks is asymmetric–
the public sector adopts all the risks while the private sector ignores
them–the possible damages from an incident can be much higher than
in case of a well balanced allocation of risks between the public and
private sector (Pollner, 2001). The marginal benefit curve shifts
downwards because of the negligence of the individual risk and the
underestimation of benefits from the individual prevention measures
(see Fig. 7). The result shows a weaker level of preparedness.
The business economics literature only casually looks at how to set
incentives to guarantee an efficient allocation of the risks between the
public and the private sector (Hofman and Brunkoff, 2006). This issue
may be an interesting topic for further research.
4.2.4. Prevention measures and organization
Taking prevention measures into account, organization of the
emergency is one of the first questions to consider. Should the central
Fig. 7. Equilibrium change of prevention measures under risk underestimation and
asymmetrical risk allocation. Fig. 8. Equilibrium change of prevention measures under risk overestimation.
Fig. 6. Equilibrium of marginal costs and marginal benefit curve.
341A. Schenker-Wicki et al. / Journal of Business Research 63 (2010) 337–346
state take all the responsibilities and the power, or should the central
state delegate responsibility and competences to regional or local
authorities? Decentralization seems to lead to higher benefits than
centralization, which can also be explained by the rational choice
approach. A decentralized organization leads to higher benefits due to
the fact that this entity is capable to react much faster than a clumsy
central organization. More people and more land can be safe-guarded
and a short response time reduces the losses. In that case the harm to
the population and the environment will be less important and the
benefits will increase. Thus, the marginal benefit curve shifts upwards
(see Fig. 8) and allows a greater benefit for the same level of
preparedness. At the same time the total cost will be lower due to the
fast reaction which shifts the marginal cost curve downwards as well.
Fig. 9 shows that both effects lead to a higher state of preparedness
and finally to a more favorable equilibrium than in the initial situation.
The same effect is observable with respect to hierarchical and flat
organizations. The more hierarchical levels needing consideration in
an emergency case, the slower the response will be. In this case
hierarchy has the same effects as centralization whereas flatness can
be put on a level with decentralization.
5. From economics to management
5.1. Framework
Disaster management has to do with classical management processes
such as strategy, leadership, and logistics (Dimitruk, 2005;
Johnson, 2007). These areas are core subjects in business economics.
Based on Grün (2005) the study here includes a modified version of his
framework showing the relationships among the different elements
characteristic for disaster management. The framework helps to get a
deeper understanding and a better insight into disaster management.
As Fig. 10 shows, three elements are important. These elements
include the event, its specific impact on people, and the environment
and the disaster management itself under which prevention and
response are subsumed. The event relates directly to the impact
whereas impact and disaster management are connected by a feedback
loop. The more important an impact is, the more activities are
necessary to mitigate the losses; and vice versa, the more activities are
prepared or carried out, the lower the losses will be. System theory
calls this a balanced causal-loop diagram. The disaster management
itself is classifiable in two parts: prevention and the intervention part.
Under prevention this article subsumes risk analysis, preparedness as
well as monitoring and early warning. Under intervention are
subsumed rescue, humanitarian and financial aid as well as
reconstruction and reflexion. Both prevention and intervention are
substitutes: the more prevention the less intervention is necessary.
5.2. Disaster preparedness/prevention
Reducing potential damage in case of the entry of an event is the
goal of disaster prevention. Thus, the desire for more or less security is
subjective due to the fact that risks are differently perceived. As a
result, the perception of a certain risk has a significant influence on the
responses and willingness to undertake prevention. Risk perception
itself depends on several factors such as the possibility of personal
control, trust into the government capabilities to react in an
appropriate way and the habituation to the source of the risk. (Pfeil,
2000).
To obtain a better overview, a risk matrix is useful for classifying
different events with respect to the probability of occurrence and
vulnerability of a certain collective (see Fig.11). The risk matrix shows,
that for highly risky events appropriate resources to implement
prevention measures should be made available immediately.
The correct and systematic analysis of risks and its perception is a
task, which should include natural sciences and engineering as well as
psychology and political science. While natural sciences and engineering
usually determine the objective risks with respect to
mathematical and statistical data series, psychology and political
science are responsible to evaluate the human aspect of risks; this
means the perception of the risk.
In addition to risk analysis, early monitoring and warning systems
exist, which both play an important role in minimizing losses. The
implementation of such systems represents a classic investment
problem: early warning systems typically cost a lot of money since a
comprehensive monitoring system is very demanding. However, a
good early warning system with alert capabilities can greatly reduce
Fig. 9. Equilibrium change of prevention measures for decentralized organisation and a
fast response.
Fig. 10. Modified reference framework for the analysis of disaster management (based on Grün, 2005, p.648).
342 A. Schenker-Wicki et al. / Journal of Business Research 63 (2010) 337–346
losses in the case of earthquakes, tsunamis, and tornados, for instance.
In spite of modern satellite and radar systems (Voigt et al., 2007), one
of the largest difficulties in monitoring is the correct anticipation of a
critical development with respect to time (Coates, 2006). Many crises
and the ensuing disasters show creeping progressions which are
barely perceptible by humans (Alexander, 2004). Reserved or even
nonexistent reactions are the consequence. Since the correct anticipation
of a systematical dysfunction is very difficult, research–
including economic research–is a big challenge. For example, identify
possible turning points or thresholds to successfully stabilize a system
using the method of reconstructive logic. In that case, starting from
the possible impact of a disaster and then going back to the event is
the approach to define these thresholds. The discussion of such
values–in this context, remember the discussion of radiation protection
after Chernobyl in 1986–is a delicate procedure. In 1986 a great
debate took place with respect to radiation dose–the damage to the
human body–and based on that on the maximum activities of nuclides
tolerated in vegetables, milk and meat. The crux of the matter is that
always a defined remaining risk must be accepted for any given
disaster otherwise preparedness costs would be immense. The
publication of such values and the estimation of remaining risks are
very difficult, since the risk aversion with respect to collective
(involuntary) risks is much higher compared to that of individual
(voluntary) risks. “The public is willing to accept voluntary risks
roughly 1000 times greater than involuntary risks” (Porter et al.,
1991).
5.3. Response
The disaster response comprises four phases: alert, rescue, and
recovery, reconstruction and victim relief. This includes all services
and assistance starting from self-protection and rescue measures
during the disaster and until the reconstruction on site after the
disaster (Plate et al., 2001). The decisive element in disaster response
is the cooperation and correct action of those involved, such as the
various organizations and government authorities, the disaster relief
agencies (Fcc Plans Public Safety, 2006) and the volunteers. The better
the disaster preparedness, the smaller the efforts needed to cope with
a disaster (Begley, 2005).
5.3.1. Recovery and rescue
Disaster response, like prevention, takes place at various levels.
Governmental and service organizations are active in international
disaster response and have, in part, their own trained professional
personnel as well as relief equipment and funding available for these
purposes (Godschalk et al., 2003). International support for rescue
and assistance are especially important for developing countries
affected due to the fact that natural disasters can set them significantly
back because of their weak economic development (Dams, 2001).
During and immediately after a disaster, victims must first rely on
their own resources for protecting their property, which requires the
accession to appropriate knowledge and necessary information
(Prizzia, 2005). Prevention measures and informational campaigns
can assure that the population knows the meaning of a siren, the
proper responses or the whereabouts of possible shelters. At the same
time, the information communicated during or immediately after a
disaster is essential. The media, among others, carry an important
responsibility since they can transmit warnings, information and
behavior, and can advise the involved population (Peters and Reiff,
2000).
Emergency organizations become active in a second step and begin
with the necessary recovery and rescue. For excavations, evacuations
and emergency help, they need the proper equipment and appropriate
communication possibilities. Crises managers or operational
commands are responsible for providing clearly structured leadership
and the smooth coordination and cooperation of all involved
organizations and institutions (Bittger, 1996). The extreme situation
is not only a psychological exceptional situation for the victims who
have to endure the helplessness, damage and loss, but also an
enormous burden for the responsible people in the emergency
organizations and the rescuers (Ungerer, 1997).
Humanitarian and financial aid, the material and financial support
and the psychological assistance for the victims, also belong to the
disaster response phase (Flores, 2006). In some cases victims need
medical care and they as well as the aid workers need the supply of
food, water and shelters. Humanitarian aid starts with bottom level,
one-on-one activities such as, for example, neighborly assistance or
help from family members or friends. The higher the level of aid, the
more complex the structures needed for communication, logistics and
mission organization (Dombrowsky, 2001).
5.3.2. Reconstruction
The longest and most capital-intensive phase in the disaster
response process is reconstruction. Depending on the extent and type
of catastrophe, the regions affected, and the reactions from outside,
reconstruction takes place very slowly (Kutz, 2007). The pace depends
particularly on the level of insurance payment, government aid,
international empathy, and money donations.
At all levels of disaster management, experiences need processing,
documentation, and examination to achieve effective preparation for
future events and/or to respond more efficiently. Awareness of danger
rapidly decreases after a disaster and gives way to a subjective (false)
feeling of security (Habersack et al., 2004). Initiating a sustainable
learning process could avoid this development.
5.3.3. Victim relief
The potential damage claim is an important question after a
disaster event. Laying blame is barely feasible for natural disasters. No
one can fundamentally be responsible for the consequences of pure
natural causes (Kerschner, 2004). Monetary payments to compensate
loss and damages are derivable from insurance contracts; every
country does not offer protection for natural disasters; such claims
become exorbitant for certain risks (Geipel, 1992). Based on this fact,
the government and the willingness of others to offer compensation
payments play an important role (Walker, 2006).
5.3.4. Management issues regarding the response to a disaster
Management from the beginning (emergency management) till
the end (rescue and recovery) is a very important topic with respect to
Fig. 11. Risk matrix (Adam, 2006, p. 96).
343A. Schenker-Wicki et al. / Journal of Business Research 63 (2010) 337–346
successful disaster coping. Whereas many principles from classic
organization theory are available for managing businesses (from
functional ones to institutional economics), no generally accepted
management concepts exist in the area of disaster management. The
particular challenge of a good emergency and rescue organization is to
cope with human mistakes and external pressure. Flexibility and
innovative strength are in demand (Webb and Chevreau, 2006). In the
same way as jazz improvisation, organizations could train and learn
innovation or improvisation (Mendonza and Fiedrich, 2006; Mendonza
and Wallace, 2007). However, such buffer-prone and, in a
certain sense also stress-resistant, organizational forms still need
definition for different kinds of events: Whether hierarchical
organizations–with how many levels–flat ones or networks (Denning
and Hayes-Roth, 2006), whether as a project organization or based on
a permanent and professional staff, each type of event and management
is to be considered separately because of the absence of
evidence-based research (Choi and Brower, 2006). The reason is that
institutional frameworks and cultural influences are linked to each
other, and in some cases cultural influences can override institutional
framework conditions (Ahrens and Rudolph, 2006). For instance, to
establish a disaster management in a bottom-up model in Japan is
practically impossible even though in European countries a bottomup
model is one of the most potentially successful ones. The reason for
this is that the Japanese and Europeans have completely different
understandings of authority and correspondingly deal with authority
figures in a very different way. While Europeans are used to handling
decision-making under their own supervision, the Japanese have
much more difficulty, particularly when supervision is not available
and decision makers are not directly accessible.
Logistic processes are also subsumed under disaster response and
management (Perry, 2007). However, a disaster management does
not mean an orderly process which is successfully carried out via the
well known supply chain management models but rather with goods
delivered in an unspecified quality and quantity at any time (Altay and
Green, 2006); figure donation money which is not assignable to any
direct donation purpose or voluntary helpers who do not know the
organizational units and begin with autonomous, bottom-up organization
work. An example is the police commander in charge of fighting
a fire on a freight train carrying petrol at a train station in a small town
in Switzerland who had to integrate 1000 volunteers into an orderly
leadership and logistic process. A further example is the problem of
donation money collected by the non-profit organizations etc., which
gains an increasing importance in a world of growing globalization,
especially through the worldwide media reporting. Since donations
are a scarce resource, carefulness during dealing is important, which
particularly refers to the need of the establishment of an efficient
project management without any detour. Mega-events such as the
tsunami in Southeast Asia mobilized over 20% more donors. As a
consequence other works threaten to end up in the back of people's
memories (GFS, 2005). These examples show some issues of the
actual core business of disaster management and represent a rich pool
of opportunities for business economic research.
6. Perspectives
Unfortunately, the topic of disaster management could increase
regarding the importance of social and environmental dimensions
over the next years. For this reason, business economists are wise to
look into urgent research questions in this interdisciplinary area. This
includes topics such as risk assessment, risk allocation and principal
organization from an economic point of view as well as problemoriented
prevention and relief strategies or business continuity
planning from a management point of view, respectively. So, business
continuity planning has to do with juxtaposing a regular and an
extraordinary situation in the same company and smooth planning
(Gibb and Buchanan, 2006). This is already a topic in many countries,
for example in connection with the feared Avian Flu pandemic
(Zsidisin et al., 2005) this issue impinges on private and public
operations (Stackhouse, 2007). For example, banks and insurance
companies already prepare for a possible epidemic just as hospitals
and communities do.
Another topic which consistently reappears in disaster management
is the decision-making process. Decisions made under stress and
fear provoke a loss of control and give rise to mistakes. They demand
appropriate routines and organizational forms to improve their
quality (Schenker-Wicki, 1990). The same is also true for getting
Fig. 12. Standardized concept for evaluating the response fitness for disasters (Adam, 2006, p. 131).
344 A. Schenker-Wicki et al. / Journal of Business Research 63 (2010) 337–346
along with the volunteer army which is usually immediately available
in a disaster. Interactions between institutions (Gopalakrishnan and
Okada, 2007) and with the media, that is information for and
communication with the population, are also decisive for responding
to a disaster. Credibility, based on objectivity, fairness and consistency
of the information is the basis for good communication with the
victims and those potentially in danger (Renn and Kastenholz, 1997).
Public institutions–especially emergency organizations on different
levels–can influence the communication process by building up
credibility and reducing uncertainty. Since the transnational dimension
of crises and disasters will increase, there must be a synchronization
of communication at the domestic and international levels and
cultural differences and sensitivities have to be considered.
Monitoring of efficiency, effectiveness and appropriateness in
disaster response is a worthwhile research topic. Accountability has an
increasingly important role in the course of monitoring the scarce
public finances in various countries (Depoorter, 2006). Besides the
argument of assuring that the financial resources are efficiently
allocated, the need for accountability in terms of whether the desired
goals and results are actually achieved in disaster management is
highlighted by the enormous damages and suffering caused by
disasters. Adam (2006) develops a standardized grid for analyzing
resources, processes and results in view of their efficiency, effectiveness
and appropriateness using the disaster management of the
community authorities for flooding in Austria as an example. She
determined the fitness of individual communities regarding their
mastering of flooding (see Fig. 12) and developed a series of
indicators, which are suited for evaluating non-monetary based facts
with respect to the different phases of disaster management. Using
the parameter value of each indicator, problem areas are shown. This
control concept is a practical instrument, which shows a comprehensive
picture of the fitness of the community with respect to flood
disaster management. At the same time it is possible to apply this
instrument with little additional effort to other disaster types or in
other institutional frameworks.
Under the assumption that the existing trend continues, see Figs. 1
and 2, more hazards with losses over US$ 100 billion will occur in the
future. Apart from natural hazards caused by the climate change — an
increasing risk emerges from armed hostilities induced by ethnical
conflicts, and scarce resources (water, oil), which produce poor living
conditions and huge migrations streams. These as well as the
accumulation of wealth, the growth of the cities and the settlement
in areas where earlier no house was built due to safety reasons are
increasing the vulnerability of modern societies. Hence, a need and a
major importance of the topic disaster management exist regarding
both scientific as well as political debates (Henstra and McBean,
2005).
With respect to the increasing political and social relevance of
disaster management, economics and especially business administration
should show a great interest to develop models on how to cope
successfully with a disaster. Even though the number of articles on the
topic has considerably increased in the last years, most of the studies
are designed as single cases and are not synthesized. Kapucu et al.
(2007) describe the lessons learned from disasters in the past and
show the tasks of the national emergency organizations. Sometimes
computer models and decision support systems are presented (Levy
et al., 2005) by dealing with one or different phases of disaster
management such as risk analysis, monitoring, prevention, rescue and
reconstruction (Beckmann and Simpson, 2006). In most cases they are
designed for one or two phases, and very rarely they support the four
phases. This is especially true for natural hazards such as hurricanes
(Caruson and MacManus, 2006; Chua, 2007; Chua et al., 2007; Gerber,
2007; Weeks, 2007), tsunamis (Scanlon et al., 2007; Tolentino, 2007)
global warming (Anderson, 2003), pandemic flu (Fraser et al., 2004;
Achampong, 2007), earthquakes (Jason et al., 2003) and volcanism
(Wadge, 2003). Thus, while lots of single studies are available, the
missing synthesis within a normative framework, inhibits evidence
based management and benchmarking. The necessary data are often
unavailable and most of the cases are handled with respect to
plausibility and intuition. Each event seems idiosyncratic and the
tendency to repeat inefficient patterns by governmental bodies is high
(Lalonde, 2007). However, to ease the impact of a disaster and reduce
the suffering of the affected population, efficient and effective disaster
management is a necessary condition which takes institutional and
cultural parameters into account (Schenker-Wicki, 1990). To make
these management systems more efficient and effective, business
economics could contribute substantially.
References
Achampong F. Preparing for the pandemic flu from a risk management perspective.
CPCU J 2007;60(1):1–8.
Adam, V. Hochwasser-Katastrophenmanagement, Wirkungsprüfung der Hochwasservorsorge
und -bewältigung österreichischer Gemeinden. Dissertation. Deutscher
Universitätsverlag, Wiesbaden; 2006.
Ahrens J, Rudolph P. The importance of governance in risk reduction and disaster
management. J Conting Crisis Manag 2006;14:207–20.
Alexander D. Cognitive mapping as an emergency management training exercise. J
Conting Crisis Manag 2004;12(4):150–9.
Altay N, Green W. Or/Ms research in disaster operations management. Eur J Oper Res
2006;175(1):475–93.
Anderson D. Global warming/climate change: implications for the risk management
and insurance industry. CPCU J 2003;56(1):1.
Beckmann H, Simpson D. Risk assessment and GIS in natural hazards: issues in the
application of HAZUS. Int J Risk Assess Manag 2006;6(4/5/6):408–22.
Begley S. Man-made mistakes increase devastation of natural disasters. Wall St J East Ed
2005;246(45):B1.
Bittger J. Großunfälle und Katastrophen: Einsatztaktik und -organisation. Stuttgart:
New York; 1996.
Caruson K, MacManus S. Funding homeland security and hurricane preparedness:
Florida's local governments face formidable fiscal pressures. Munic Finance J
2006;27(2):75–93.
Choi S, Brower R. When practice matters more than government plans: a network analysis
of local emergency management. Adm Soc 2006;37(6):651–78.
Chua A. A tale of two hurricanes: comparing Katrina and Rita through a knowledge
management perspective. J Am Soc Inf Sci Technol 2007;58(10):1518–28.
Chua A, Kaynak S, Foo S. An analysis of the delayed response to Hurricane Katrina
through the lens of knowledge management. J Am Soc Inf Sci Technol 2007;58
(3):391–403.
Claessens D. Katastrophen und Anastrophen. In: Dombrowsky W, Pasero U, editors.
Wissenschaft, Literatur, Katastrophe: Festschrift zum sechzigsten Geburtstag von
Clausen L. Opladen; 2005.
Clausen L, Dombrowsky W. Zur Akzeptanz staatlicher Informationspolitik bei
technischen Grossunfällen und Katastrophen. Bonn; 1990.
Coates J. Anticipating disaster, or putting the fear of God into top management. Res
Technol Manag 2006;49(1):6–8.
Cruz A, Steinberg L, Arellano A. Emerging issues for Natech disaster risk management in
Europe. J Risk Res 2006;9(5):483–501.
Dams T. Die entwicklungspolitische Dimension der Katastrophenvorbeugung. In: Plate
E, Merz B, editors. Naturkatastrophen — Ursachen, Auswirkungen, Folgen. Stuttgart;
2001.
Denning P, Hayes-Roth R. Decision making in very large networks. Commun ACM
2006;49(11):19–23.
Depoorter B. Horizontal political externalities: the supply and demand of disaster
management. Duke Law J 2006;26:101.
Dimitruk P. Three keys to supply chain management in times of disaster. Healthc Purch
News 2005;29(12):64–5.
Dombrowsky W. Is a disaster what we call a disaster. In: Quarantelli E, editor. What is a
disaster? Perspectives on the question. London; 1998.
Dombrowsky W. Die globale Dimension von Katastrophen. In: Plate E, Merz B, editors.
Naturkatastrophen — Ursachen, Auswirkungen, Folgen. Stuttgart; 2001.
Dörner D. Die Logik des Misslingens. Reinbeck bei Hamburg; 2001.
Fcc Plans Public Safety. Security bureau. Fire Chief 2006;50(4):12.
Flores R. Financial management in support of natural disasters. Armed Forces Comptrol
2006;51(2):26–9.
Flynn D. The impact of disasters on small business disaster planning: a case study.
Disasters 2007;31(4):508–15.
Fraser C, Riley S, Anderson R, Ferguson N, May R. Factors that make an infectious disease
outbreak controllable. Proc Natl Acad Sci U S A 2004;101(16):6146–51.
Frey B. Dealing with terrorism: stick or carrot? Cheltenham. UK and Nothhampton.
Mass: Edward Elgar Publishing Ltd.; 2004.
Geipel R. Naturrisiken: Katastrophenbewältigung im sozialen Umfeld. Darmstadt; 1992.
Gerber B. Disaster management in the United States: examining key political and policy
challenges. Policy Stud J 2007;35(2):227–38.
GFS Gesellschaft für praktische Sozialforschung. Spendenmonitor. Bern; 2005.
Gibb F, Buchanan S. A framework for business continuity management. Int J Inf Manag
2006;26(2):128–41.
345A. Schenker-Wicki et al. / Journal of Business Research 63 (2010) 337–346
Godschalk D, Brody S, Burby R. Public participation in natural hazard mitigation policy
formation: challenges for comprehensive planning. J Environ Plan Manag 2003;46
(5):733–54.
Gopalakrishnan C, Okada N. Designing new institutions for implementing integrated
disaster risk management: key elements and future directions. Disasters 2007;31
(4):353–72.
Greiving S, Fleischhauer M, Wanczura S. Management of natural hazards in Europe: the
role of spatial planning in selected EU member states. J Environ Plan Manag
2006;49(5):739–57.
Grün O. In: Oesterle M, Wolf J, editors. Elemente des Katastrophenmanagements.
Wiesbaden: Internationalisierung und Institution; 2005.
Habersack H, Bürgel J, Petraschek A. Analyse der Hochwasserereignisse vom August
2002 — Flood Risk Synthesebericht, BMfLFUW, 2004. Wien.
Hanisch R. Katastrophen und ihre Opfer. In: Hanisch R, Mossmann P, editors.
Katastrophen und ihre Bewältigung in den Ländern des Südens. Hamburg; 1996.
Henstra D, McBean G. Canadian disaster management policy: moving toward a
paradigm shift? Can Public Policy / Analyse de Politiques 2005;31(3):303.
Hofman, D., Brunkoff, P. Insuring public finances against natural disasters — a survey of
options and recent initiatives. IMF working paper 2006; No. 06/199.
Jason S, Pulinets S, da Silva Curiel A, Liddle D. Earthquake science research with a
microsatellite. Philos Trans: Math, Phys Eng Sci 2003;361(1802):169–73.
Jenkins, W. Jr. Federal emergency management agency: factors for future success and
issues to consider for organizational placement: Gao-06-746t. GAO Reports; 2006.
Johnson C. Strategic planning for post-disaster temporary housing. Disasters 2007;31
(4):435–58.
Kapucu N, Garayev V, Arslan T. Examination of Turkish disaster management system. PA
Times 2007;30(3):6.
Kerschner F. Zivilrechtliche Haftungsfragen bei Hochwasser. In RFG 2004; 6.
Kreps G. Sociological inquiry and disaster research. Ann Rev Sociology 1984;10:309–30.
Kutz G. Hurricanes Katrina and Rita disaster relief: prevention is the key to minimizing
fraud, waste, and abuse in recovery efforts: Gao-07-418t. GAO Reports; 2007.
Lalonde C. The potential contribution of the field of organizational development to crisis
management. J Conting Crisis Manag 2007;15(2):95-104.
Levy J, Gopalakrishnan C, Lin Z. Advances in decision support systems for flood disaster
management: challenges and opportunities. Int J Water Resour Dev 2005;21
(4):593–612.
Maier R. Natural disasters create pollution hazards. Natl Underwrit/Property Casualty
Risk Benefits Manag 2006;110(28):16–7.
Mayer V. Operatives Krisenmanagement — Grundlagen, Methoden und Werkzeuge des
ganzheitlichen Risk Management. Wiesbaden; 2003.
Mendonza D, Fiedrich F. Training for improvisation in emergency management:
opportunities and limits for information technology. Int J Emerg Manag 2006;3
(4):7.
Mendonza D, Wallace A. A cognitive model of improvisation in emergency management.
IEEE Trans Syst Man Cybern: Part A 2007;37(4).
MunichRe, M. Topics Geo — Jahresrückblick Naturkatastrophen 2005. See http://www.
munichre.com vom 11.12.2007. München; 2006a.
MunichRe. Topics Geo — Naturkatastrophen 2006, Analysen, Bewertungen, Positionen.
München; 2006b.
Müller U, Zimmermann W, Neuenschwander P, Tobler A, Wyss S, Alder R. Katastrophen
als Herausforderung für Verwaltung und Politik. Kontinuitäten und Diskontinuitäten.
Zürich; 1997.
Perry M. Natural disaster management planning: a study of logistics managers
responding to the tsunami. Int J Phys Distrib Logist Manag 2007;37(5):409–33.
Peters H, Reiff S. Naturkatastrophen und die Medien: Herausforderungen an die
öffentliche Risiko- und Krisenkommunikation. Bonn; 2000.
Pfeil J. Maßnahmen des Katastrophenschutzes und Reaktionen der Bürger in
Hochwassergebieten am Beispiel von Bonn und Köln. Bonn; 2000.
Plate E, Merz B, Eikenberg Ch. Naturkatastrophen — Herausforderung an Wissenschaft
und Gesellschaft. In: Plate E, Merz B, editors. Naturkatastrophen — Ursachen,
Auswirkungen, Folgen. Stuttgart; 2001.
Pointner J. Im Schattenreich der Gefahren — Wie Naturgewalten und Zivilisationskatastrophen
uns zunehmend bedrohen. Wien; 1995.
Pollner, J. Catastrophe risk management: using alternative risk financing and insurance
pooling mechanisms. World Bank policy research working paper 2001; No. 2560.
Porter A, Roper A, Mason T, Rossini F, Banks J. Forecasting and management of
technology; 1991. New York.
Prizzia R. Agency coordination and the role of the media in disaster management in
Hawaii. Int J Emerg Manag 2005;2(4):292–305.
Quarantelli E. Disaster studies: an analysis of the social historical factors affecting the
development of research in the area. Int J Mass Emerg Disasters 1987;5:85-310.
Renn O, Kastenholz H. Die Glaubwürdigkeit von Experten und Institutionen bei einer
Notfallsituation. In: Baggenstos M, Bayer A, editors. Information von Behörden,
Medien und Bevölkerung im Ereignisfall. Köln: Fachverband für Strahlenschutz;
1997.
Rudolf F. From the notion of crisis to the notion of risk in French sociology. Some
remarks on the study of disasters. Hist Soc Res 2007;32(3):115–30.
Saynisch M. Krisenmanagement — Chancennutzung oder Risikoabsicherung. In: Gareis R,
editor. Erfolgsfaktor Krise: Konstruktionen, Methoden, Fallstudien zum Krisenmanagement.
Wien; 1994.
Scanlon J, Mcmahon T, Van Haastert C. Handling mass death by integrating the
management of disasters and pandemics: lessons from the Indian Ocean Tsunami,
the Spanish Flu and other incidents. J Conting Crisis Manag 2007;15:80–94.
Schenker-Wicki A. The conceptual definition of a crisis management decision support
system CMDSS for evaluating acceptable countermeasures to reduce ingestion dose
after an accidental release of radioactivity. Fribourg Switzerland: University Press;
1990.
Stackhouse A. Disaster management: private lessons for the public sector. Supply Chain
Manag Rev 2007;11(1):50–7.
SwissRe. Vorläufige sigma-Katatstrophenbilanz 2005: Zahlreiche Opfer, rekordhohe
versicherte Schäden von 80 Mrd. US$. Zürich; 2005.
Tierney K. From the margins to the mainstream? disaster research at the crossroads.
Ann Rev Sociology 2007;33:503–25.
Tolentino Jr A. The challenges of tsunami disaster response planning and management.
Int Rev Environ Strateg 2007;7(1):147–54.
Ungerer D. Stress und Führungsverhalten im Einsatz. In: Mitschke Th, editor. Handbuch
für technische Einsatzleitungen. Stuttgart; 1997.
Van Aalst M. The impacts of climate change on the risk of natural disasters. Disasters
2006;30(1):5-18.
Voigt St, Kemper Th, Riedlinger T, Kiefi R, Scholte K, Mehi H. Satellite image analysis for
disaster and crisis-management support. IEEE Trans Geosci Remote Sens 2007;45
(6):1520–8.
Voss H, Hidajat R. Vulnerabilität als Komponente zur Bewertung des Naturrisikos. In:
Tetzlaff G, Trautmann T, Radtke K, editors. Extreme Naturereignisse — Folgen,
Vorsorge, Werkzeuge (Zweites Forum Katastrophenvorsorge). Bonn; 2002.
Wadge G. A strategy for the observation of volcanism on Earth from space. Philos Trans:
Math, Phys Eng Sci 2003;361(1802):145–56.
Walker, D. Federal Emergency Management Agency: challenges for the National Flood
Insurance Program: Gao-06-335t. GAO Reports; 2006.
Webb G, Chevreau FR. Planning to improvise: the importance of creativity and flexibility
in crisis response. Int J Emerg Manag 2006;3(1):8.
Weeks E. Lessons from Katrina: response recovery and the public health infrastructure. J
Health Care Law 2007;10.
Zsidisin G, Melnyk S, Ragatz G. An institutional theory perspective of business continuity
planning for purchasing and supply management. Int J Prod Res 2005;43
(16):3401–20.
346 A. Schenker-Wicki et al. / Journal of Business Research 63 (2010) 337–346