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Understanding Risk, Post-Katrina

FEMA's disastrous handling of Hurricane Katrina's aftermath was all the more galling because the scenario was long foreseen. So what catastrophe should DHS plan for next? We pick apart the risk equation.

"If we handled low probability and high consequence well, nobody would buy a lottery ticket," says John R. Harrald, director of the Institute for Crisis, Disaster and Risk Management at The George Washington University.

Risk perception experts call this the availability bias. "Psychologically, if something hasn't happened, we focus on the low probability and say we aren't going to worry about it," Harrald says. "Once it has happened, we focus on the consequence. We plan for things we can either remember or imagine." For instance, when Harrald asks people in Maryland who live east of the Chesapeake Bay whether their house is in danger of flooding, the answer is often: "'It didn't flood in [Hurricane] Isabel.' That's their mark. It's a very natural reaction," he says.

This is why the National Oceanic & Atmospheric Administration (NOAA) says the United States has a "hurricane problem"—not because it gets hit by hurricanes, but because 80 percent to 90 percent of Americans who live in hurricane-prone areas have never experienced the core of a severe hurricane. "Many of these people have been through weaker storms," according to NOAA.gov. "The result is a false impression of a hurricane's damage potential. This often leads to complacency and delayed actions, which could result in the loss of many lives."

This availability bias is also why the country spent the past four years focusing on scenarios involving terrorism, after the so-called failure of imagination that preceded 9/11. What have politicians and citizens done for the past four years if not imagine terrorism?

And it's why many observers are now questioning whether the country should have spent that time planning not for terrorism but instead for other potential catastrophes. Like a deadly pandemic. Or major earthquake. Or hurricanes.

"One of the key dangers is that people are always focusing on the last catastrophe," says Robert Muir-Wood, the London-based chief research officer for Risk Management Solutions, which does economic risk modeling for the insurance industry. "It's a big challenge to keep everything in perspective and not be biased by what has last happened."

A true risk-based approach means that, when all else is equal, one must override the availability bias and focus on the most likely future scenarios. Unfortunately, figuring out the probability of any given scenario raises its own set of complexities.

Probability: Why it works better for natural disasters than for terrorism

The probability component of risk is simply how likely it is that a scenario will come to pass. From this standpoint, Hurricane Katrina wasn't just predictable; it was almost inevitable. The Gulf of Mexico has been producing hurricanes since long before New Orleans was settled, and it was only a matter of time before a Category 4 storm hit the city. (Indeed, it's only a matter of time before a Category 5 storm hits the city directly; Katrina was downgraded shortly before landfall.)