Thursday, March 17, 2011

Coping with Crippling Calamities: Management to Mitigate Misery

The massive earthquake and ferocious tsunami that struck the Sendai and other northeastern regions of Japan on March 11, 2011 have once again demonstrated how fragile human life and property would be when faced with the fury of nature. Japan’s famed building designs that withstand earthquakes, the country’s perpetual preparedness for natural calamities and the society’s incomparable discipline and fortitude have served to buffer the fatalities and losses; but unfortunately only to an extent. The loss of thousands of lives and billions of dollars in this human tragedy would take years to cope with. The Japanese government and the society have risen to the challenges of rescue, relief and reconstruction while several other governments and nations are chipping in with their support in kind and services.

The severity and consequences of such natural calamities, which are indeed unpredictable, strongly suggest that proactive management to avoid and mitigate misery needs to be high on agenda of all leaders whether in government or enterprise. This may require caution and conservatism alongside aspiration and risk-taking as the mainstay of management of nations. This blog post presents some thoughts on this, with focus on Japan but with relevance to India in the context of a larger Indo-Japanese approach to reconstruction.

Planning with pessimism

Ironically, most human civilizations and settlements had grown in regions prone to natural calamities, be they seismic zones, volcanoes, islands, sea shores, river banks, freezing terrains, desert tracks or mountain ranges. Some civilizations and settlements even got wiped out in natural adversities in the past, and some were rebuilt at huge cost. Similarly, several industrial units, whether chemical and fertilizer plants or thermal and nuclear complexes, are set up near oceans. As the recent earthquake and tsunami that struck Japan and their adverse impact on the Fukushima nuclear power complex as an aftermath demonstrated, civilization can be endangered by natural disasters even in this era of technology. Planning for protection of civilizations has to be undertaken in a scenario of pessimism, rather than in a scenario of complacence. Pessimistic planning is an essential insurance for human safety.

In today’s world, leaders are expected to be optimistic rather than pessimistic. Realistic leaders, let alone cautious leaders, seem to have little place in the contemporary annals of competitive governance and business. The adage of planning for the best and preparing for the worst is only partially followed now, with the second half of the exhortation completely ignored. Calamities such as these are a grim reminder that preparing for dangers, imminent or distant, is what wise governments and societies should aim at. Similarly, industrial managements need to ensure eternal vigilance in respect of all their units which are located near fault lines and ocean waves irrespective of the past and present tranquility. Any expenditure on preemptive vigilance which probably would cost a few millions of dollars annually would be worth the billions of dollars that would be lost in one go when calamity strikes the unplanned and unwary.

Fallible infallibility

Advanced nations such as Japan, Germany, United States and Korea, to name a few, have a culture of systemic placation of technology. Japan, in particular, has not only a flair for high technology but also an uncanny ability to obtain outstanding results even from dated technologies by appropriate upgrades, retrofits and management. However, as the Fukushima nuclear threat shows there are limits to stretch technology while assuring the needed safety. It also raises a question if the systemic approach considered infallible in a national culture context would indeed be so in respect of individual systems, particularly when old generations of technology are deployed. Even Germany has reportedly seven aged nuclear reactors which the government has shut down in the wake of the Japanese calamity. It would appear that planning for failures as well as enhancements must be a routine part of periodic technology and safety audits that all installations and systems must undergo.

One way of systemizing this could be to classify technologies in terms of key technology drivers or generations. The telecommunications field has done a good job categorizing transmission technologies from 1G to 4G, with clear distinctions in performance indicators. However, clarity in terms of relative safety or the desirability of newer generation taking over completely are not very evident in discourses; nor is there clarity in terms of definition of different generations of cellular phones and their relative radiation safety. There appear to be at least ten types of nuclear power reactors, in terms of technology, but the relative safety is not well debated. In fact, papers by the World Nuclear Association discuss safety more in terms of aging and terrorism rather than earthquakes and tsunamis. Clearly, there is a need to define and deploy technology in terms of both performance and safety, with systemic robustness that ensures performance stability and safety.

Seismic tsunami engineering

Traditionally civil engineering focused on normal construction of buildings and infrastructure with studies of earthquake-proof engineering remaining a specialty. The only country where civil and architectural engineering as well as the building codes specify earthquake resistant engineering is Japan. The benefits of such approach are evident in the way the buildings could withstand the high magnitude earthquakes and the unending series of post-quake tremors. A review of engineering curriculum (at least in India) suggests that engineering for high stress and vulnerability prevention is not a mainstream topic. It is important to revisit civil engineering and architectural curriculum to incorporate engineering for earthquakes and tsunamis as a mainstream subject at the graduate level itself. Subjects of structural dynamics should incorporate special design simulation to take care of multiple seismic zones.

Going by the experiences of 2004 and 2011, new disciplines of seismic tsunami engineering would also need to be evolved to cater to constructions within say 100 to 200 kilo meters of all coastlines. The forces that are unleashed in earthquakes, tsunamis and the seismic tsunami combination are different. Structural designs of buildings may need to be reinforced by potential embankments to cater to multiple forces. To start with, such courses may be developed in institutions which have specializations in multiple engineering disciplines including civil engineering, architecture, ocean engineering, nuclear engineering, thermo and hydro power engineering and materials engineering to ensure appropriate hybridization of the new construction and materials engineering domains.

Nuclear Security

Seismic tsunami brought into force the risks of nuclear power complexes. By their very nature, nuclear plants require enormous amounts of fresh water and/or sea water which make their location on the sea coasts rather inescapable, adding to the risk profile. Despite the robust construction mechanisms and rapid shutdown mechanisms that exist it appears that the nuclear complexes are vulnerable to earthquakes and tsunamis. This is more so in respect of plants of older designs, whose lives are extended from time to time, albeit with appropriate reviews. The use of nuclear energy would only increase in future. The number of countries producing nuclear energy is likely to move up from the current count of 30 to 50 in the years to come. The number of nuclear reactors would more than double from the current 443 to 955. India and China which have only around 2 percent of energy coming from nuclear power are likely to lead this nuclear power wave and need to be especially cognizant of the risks.

There is a need for national government and national atomic agencies to undertake immediate and comprehensive review of all the safety aspects of nuclear reactors, current and planned. The review should cover the technology deployed, radioactive materials used and generated, shutdown mechanisms, emergency power mechanisms, cooing water systems, location hazards (seismic and tsunami) proximity of civilian population, rigor of repairs, maintenance, vulnerability to water shortages and heat waves (in land-locked location), emergency response and rescue systems, radiation monitoring system, radiation treatment system and so on. As almost all nations have nuclear safety boards or atomic energy commissions with overarching powers, consistent and diligent use of their powers to audit technologies and management of nuclear power plants on an ongoing basis should be mandatory.

Safety Stock

Over the years, supply chain management has come a long way from the classic economic order quantity (EOQ) paradigm which stipulated a batch ordering and stocking system which balanced demand generation and product consumption with lead time to replenish and safety stock. Lean concepts, that originated in Japan and embraced with enthusiasm by the West all but eliminated the concept of safety stock with just-in-time ordering and replenishment concepts. Time and again, natural disasters, even on a much smaller scale such as routine floods and droughts, have brought out the benefits of safety stock to meet the emergency needs. Today, the starkly empty shelves in the retail and wholesale chains of Japan illustrate the vulnerability of the population in crises to profit-driven squeezing of supply chains. While the supply chains could be ramped up in time, the damage done due to the lack of essential goods in the critical days following the crisis can never be made up.

Rather than relentlessly pursue lean supply chain concepts, it probably would be wise to emphasize the need to ensure safety stock of all goods vital for human life in emergencies such as food items, pharmaceuticals, medical devices, clothing, personal items, automobiles, generators, rescue equipment, oil and gas and such other items. Countries such as India which have public distribution systems should have prescribed norms for emergency stores. Private sector corporations dealing in the above items must be willing to relook at the concepts of treating safety stock as a wasteful concept, and instead view safety stock as a potential means to smoothen out volatility in the best of the times and as an essential need to mitigate misery in the worst of times. Supply chain planning can in fact be more optimal with safety stock planning.

Rescue forces

Natural disasters point out the need for a group of trained experts and personnel who can carry out rescue operations in times of crises with surety, speed and empathy. Traditionally, governments have relied on the armed forces to carry out such tasks. While armed forces bring to the action scene unique capabilities of operating in all-terrain conditions and are backed by the infrastructure of air, land and sea forces, many times natural disasters bring out challenges of understanding local conditions and engaging with local provincial governments and their agencies. This task can be undertaken effectively if each province has self-help forces which are specially trained in understanding and coping with natural disasters.

The mandate for rescue forces could be to actively collaborate with provincial governments in all medium / high risk zones and undertake personal risk-mitigation audits as well as conduct safety audits. Rescue forces of each nation should link up with the forces of other nations not only to reach out in events of national emergencies like the one currently faced in Japan but also to learn from various events of this nature to strengthen the infrastructure against national disasters and reinforce the capabilities of the SHDs to respond better. Nations should earmark separate budgets for development and maintenance of rescue forces and provide them with high technology communication equipment and protective gear that can help them operate in all kinds of environmental challenges and disasters.

Market financing

It is distressing that when natural disasters strike investors in stocks and commodities speculate based on perceived impact on their investments. Rather than support market stability, investors of countries affected tend to dump stocks in panic reaction while investors in other countries tend to speculate favorably or unfavorably based on perceived impact, positive or negative. For example, post the seismic tsunami, Tokyo Stock Exchange lost thirteen percent, or USD 278 billion, in a matter of few days on perceptions of damage to the economy while a few other stock exchanges including the Indian ones gained on perceptions of softer oil prices and enhanced export opportunities with Japan. While the capitalistic market behavior and perfect market economics cannot be controlled there is no reason why the investors who are prepared to lose or invest in billions in such speculative trade transactions in the wake of crises should not be made to contribute to mitigations of misery on ground.

One way would be to impose a securities transaction tax of 0.1 percent on all transactions that take place on the bourses on a perpetual basis, and an additional special securities transaction of 0.1 percent on all transactions that take place on the bourses for a period of 3 months after any such disaster or calamity. The proceeds of such transaction tax should be credited to specially established infrastructure fund which will help in the rescue, relief and rebuilding efforts. As the investments out of this fund will be for rebuilding of infrastructure and economy, the taxes will eventually be growth triggering. The investors should not grudge such taxation economically, and should in any case be welcoming it from a humanitarian point of view.

Incredible society

Whatever be the technological, economical and infrastructural measures to combat natural disasters, it is the attitude and fortitude of the society that would be the determinant of how well a nation can cope with such disasters. Japan stands out as a role model in this aspect. It is amazing how the entire nation has calmly and methodically responded to the disaster and the emergency pressures. Attention has been on a unified national response than on individual groups indulging in critiques of the rights and wrongs. Even in the face of shortages people have been disciplined and patient. From the very composed manner in which the citizens have responded to the very courteous manner in which the rescuers and rescued have interacted one can see the society’s strong roots of self-support and mutual empathy. Despite the successive governments of Japan being in the dock for infighting and poor performance, the Japanese society’s basic strengths have endured to govern itself in an outstanding manner in the face of calamity. Japan has proved itself to be an incredible society that can meet even the most challenging disasters as effectively as is humanly possible.

Aspiring nations such as India must take Japan as a role model and attempt to build incredible societies that have both wits and guts to progress on one hand and responsibility and resilience to overcome setbacks on the other. Contrary to popular perceptions, the young in Japan are neither apathetic nor lacking in engagement. The disasters in Japan have tended to bring in a surge of volunteerism from the young. The aged are not giving up either. Apart from maintaining a healthy lifestyle that is enabling a graceful aging of the population, more of the aged themselves are working longer much beyond the traditional retirement age. The greatest cause for optimism for any nation should lie in the reservoir of social capital that generates productive wealth and growth in good times and in difficult times, as is the case with Japan. These social values would need to be inculcated from the childhood. India has a rich legacy of great religious and social values which admirably support such initiatives. These teachings which are lost in the speed and materialism of the modern living need to be restored as guiding social principles.

Seismic security for Japan, with India

The measures of reconstruction which Japan would surely undertake with perfection would restore the ravaged economy of the northeastern Japan, and of the nation in the overall. The costs of reconstruction could be as high as USD 200 billion. Investments and reconstruction do not by themselves mitigate any of the risks associated with Japan sitting on a seismic zone, perpetually prone to earthquakes and tsunamis as well as volcano eruptions. Japan needs a more permanent solution, and the history of Japan’s globalization could offer one. In its first wave of globalization covering the 1970s and 1980s, Japan became a major exporting country, exporting products made in Japan. In the second wave of globalization covering the 1990s and 2000s, Japan globalized its production substantially, with several thousands of overseas ventures contributing to over 50 percent of Japan’s gross output. Time is now compelling for Japan to look at a third wave of globalization whereby Japan would create several Little Japans in seismically and economically stable countries which have large surplus land mass, and are also hungry for growth. India comes up as an excellent choice in that respect.

India and Japan have signed a free trade agreement (FTA) in February 2011 providing enhanced trade and investment access. Rather than be concerned that the current crisis would delay the fruits of the FTA, India should propose to Japan a path-breaking strategy by which Japan could move at least 50 percent of production of all of its agricultural and industrial needs to India. To provide needed infrastructure and incentives, India should offer land banks to establish Special Japan Agricultural, Industrial, Residential and Economic Zones so that the Japanese could transfer or establish additional facilities in the manner they desire. Creation of Little Japans with interconnectivity amongst themselves in India with appropriate rail and road network, and connectivity with key industrial centers of Japan by sea and air would help catalyze such investments. Apart from reducing seismic risk to Japan, this strategy would provide a government supported low cost, high quality supply base for Japan, and access to technology and market for India.

From seismic and tsunami insecurity to regional and global security

Japan is a great nation which has the best of technological competencies, people skills and societal values. It has endured its geographical disadvantages and nature’s adversities by steeling itself as an infrastructural and social marvel. As the last Friday’s seismic tsunami has shown the nature has its gentleness and a fury of its own. Recognizing this, Japan, and other nations positioned in medium/high risk zones must readdress their national management approaches. The thoughts in this blog post, written with a heavy heart in the background of the grievous loss to life and property suffered by Japan, hopefully point a way forward for national and global security.

Posted by Dr CB Rao on March 18, 2011

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