Pandemic, Flood Zones, Cyberattacks: Three Not-to-Miss Risks

Risk Management Solutions views avian flu pandemic, flooding and massive cyberattacks as three biggest risks facing the US

Risk Management Solutions, founded at Stanford University, does complex economic risk modeling for the insurance industry. We spoke with Chief Research Officer Robert Muir-Wood about what he views as the biggest risks facing the United States. Here's what he had to say.

1. A flu pandemic

"We haven't considered as much as we might have the degree of economic and social disruption that an event like an influenza pandemic would cause. It's hard to find an equivalent except a little bit in how people respond to terrorism: You have a fear of something, and you want to take action as a result of that fear. With influenza, that fear is probably any gathering of people. Eventually, I would imagine that most people will refuse to go to work or send their kids to school, and they'll refuse to take air flights. The people who work in supermarkets, will they turn up? Will the people who operate Internet systems turn up? I don't know.

"If your perspective is corporate security or network security, the questions are: Who is part of your critical workforce, and what can you do to ensure that they keep turning up to work? The plan should work on the premise that some outbreak has started and rational people are going to think, I do not want to go where other people are unless I'm protected or inoculated in some way."

2. New flood zones

"Another big risk is that we are in a phase of high activity and high severity of hurricanes. In sections of the Mississippi coast, buildings were effectively destroyed farther inland than the 500-year flood plain. The problem is, all the assumptions about flood zones are based on how likely hurricanes are and how intense they are. That may all need to be reevaluated.

"There's a big argument going on about the climate change dimensions of this, but you don't need to believe in climate change to recognize that there are more hurricanes and more intense hurricanes occurring at present. Hurricanes have changed their activity in the past. There was a high cycle in the 1950s, and a very low period in the '60s and '70s and '80s, and then the activity has switched on again since 1995. Maps of the coastal flood zones were based on the frequency of hurricanes in a period of low hurricane activity, and these flood zones will now need to be redefined and buildings rezoned.

"If I was based along the coast and just outside the defined flood zone, I'd be concerned that I might be rezoned or that a storm might hit before the rezoning happened. A corporation may well need to be ahead of the government's thinking on this."

3. A massive cyberattack

"The third big risk would be some kind of cyberattack.

This could be something that brings the network down. It could also be a virus or worm that corrupts data very slowly so that you don't notice it; by the time banks realize the corruption is going on, they have no record that's uncorrupted. The fact that we have a Microsoft monoculture makes us particularly susceptible. If you just have the one species of tree, you could have a disease that wipes out the whole lot. We effectively have something like a monoculture in the systems area.

"The people who have the best understanding of this risk are the people who have the best understanding of how you bring down systems. You almost need a devious imagination."

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Copyright © 2006 IDG Communications, Inc.

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