What Sandy can teach us about risk management

If you live in the United States, and especially on the East Coast, you are all well aware of what is being called Frankenstorm – aka Hurricane Sandy. Which is expected to make land fall sometime Monday. The storm has already left a wake of fatalities and destruction, and for that it is already a tragic reminder of Mother Nature’s power. Now that it is taking aim at the East Coast of the United States, including cities such as New York, Washington DC, Philadelphia and other large eastern seaboard metropolises the risk of catastrophic damages has elevated.

 

Not sure I will be taking off anytime soon

 

Of course I am always looking for lesson we can take, what can we learn from events such as this. One lesson for me is the poor response by certain businesses to what is a clear demand signal and should be part of any risk management strategy. We have been warned about the potential for this storm for at least 5 days. Yet in some areas the response has been woefully inadequate. One area in particular – air travel. Okay I realize this is annoying me personally as I was suppose to go to San Francisco for a series of meetings. I am hoping that by some miracle I get on a flight Tuesday now…but most likely I will have to cram a week’s worth of meetings into a half day Wednesday and an all day marathon Thursday (As my colleague Chris Smith says “not third world problems” I realize). However what I am realizing and having a bit of a difficult time dealing with is the lack of preparedness on the part of the airlines. USAir in particular since that is who I was flying.

I realize that canceling an entire day of flights out of their hubs, especially Philadelphia, might be taxing on their systems. Yet, once again, this is something they should have planned for a week ago. The signal, similar to a demand signal, has been clear as day since meteorologist started waxing about the coming of Frankenstorm. The path was always projected to do some level of damage to the East Coast. Any airline and transportation hub, one would think, would have some contingency plans for such an event. Yes I realize that USAir was sending out messages that one could rebook without paying the change fees…but I only found this out via Twitter. Hmmm, maybe an email or a call would have been appropriate as well. Now today, they started cancelling flights, but I feel they started doing so late in the game. By this time their phone systems have been overwhelmed. Yet when I call, instead of telling me to hold it just tells me that “our systems are overwhelmed so call back later.” Uh okay. Why not do this, when you know you are going to have a major event, bring in more resources to handle your calls. Better yet, have an automated system that tells you – if you want to wait on hold for 3 hours, please do so, otherwise call back. Finally, how about this. Allow folks to rebook via your web site. I realize that this might add some complexity with regards to those online and on a phone call to rebook, but I am sure there is a way of handling this. Run some model that tells you how many seats to allocate for online rebooking and how many via phone. Or better yet…shape the demand. Push online rebookings to certain flights and do the same with those calling in.

I am sure the airlines have run some risk assessments for these exact scenarios…or have they?

They could learn something from this. Most would be thrilled by getting a signal 5 days in advanced, give them time to get things in order. But once again the airlines failed to deliver. I mean if I can go to Costco today and still be able to purchase plenty of bottled water and batteries then they knew how to prepare for this storm…granted the selection of sliced bread was slightly meager.

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