Smart In­vest­ments Can Stem Losses

Ev­ery $1 in­vested in pre­ven­tion can save $5 in fu­ture losses

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There was once a golf course in La­ji­tas, Texas along the Rio Grande where play­ers could hit a lit­tle half wedge shot over the 90 or so yards of wa­ter onto a green that was across the bor­der in Mex­ico. It was the only place in the world where you could hit your tee shot in one country and have it land on the green in an­other.

In 2008, Trop­i­cal Storm Low­ell be­gan dump­ing rain near La­ji­tas. The Rio Grande pushed over its banks, and quickly be­came a quar­ter-mile wide rush of wa­ter. The golf course was sub­merged for more than a month, and ir­repara­bly dam­aged.

Flood pre­pared­ness: An in­vest­ment that makes sense

The dis­ap­pear­ance of a golf course un­der wa­ter cer­tainly wasn’t the most se­ri­ous reper­cus­sion of that 2008 event or any other ma­jor flood. How­ever, that flood did have a sig­nif­i­cant eco­nomic im­pact, and it’s rel­e­vant to some cur­rent work be­ing un­der­taken to re­duce the like­li­hood of flood­ing around the world.

Flood pre­pared­ness is among the most im­por­tant as­pects of proac­tive global risk man­age­ment. From 1995 to 2015, floods caused $662 bil­lion in eco­nomic dam­age, ac­cord­ing to the UN Of­fice for Dis­as­ter Risk Re­duc­tion. In the U.S., floods are the most fre­quently oc­cur­ring nat­u­ral dis­as­ter. How­ever, a mul­ti­year aca­demic co­op­er­a­tion by the Z Zurich Foun­da­tion, the In­ter­na­tional In­sti­tute for Ap­plied Sys­tems Anal­y­sis and the Whar­ton School showed that over the most re­cent two decades, nearly 87 per­cent of flood re­lief funds are spent on emer­gency re­sponse, re­con­struc­tion and re­ha­bil­i­ta­tion, and only 13 per­cent are spent on re­duc­ing and man­ag­ing flood-re­lated risks.

“A bet­ter bal­ance in spend­ing can help re­duce the im­pacts of se­vere storms,” says Mike Fo­ley, CEO, Zurich North Amer­ica Com­mer­cial. “Re­search shows that ev­ery $1 spent on dis­as­ter pre­pared­ness saves $5 in fu­ture losses. That’s im­por­tant, be­cause while floods are nat­u­ral oc­cur­rences, they af­fect more peo­ple glob­ally than any other nat­u­ral haz­ard. It’s es­ti­mated that floods cost com­mu­ni­ties more than $250 mil­lion ev­ery year and cause some of the world’s largest so­cial and hu­man­i­tar­ian losses each year.”

Ap­ply­ing lessons learned

Data can play a key role in in­creas­ing re­silience and im­prov­ing the qual­ity of flood pre­pared­ness. “Not only can more and bet­ter data pro­vide a base­line to mea­sure progress, it can also help ev­ery­one to un­der­stand what works in prac­tice and how well it works,” says Fo­ley. “Com­mu­ni­ties can learn from each other and tai­lor their ac­tions to their own con­text. Do­ing this in a trans­par­ent way can en­cour­age pub­lic di­a­logue and fos­ter in­no­va­tive so­lu­tions backed by em­pir­i­cal ev­i­dence.”

Col­lab­o­ra­tive ef­forts and trans­par­ent ben­e­fits to com­mu­ni­ties are gain­ing trac­tion, in­clud­ing in New Or­leans, which is home not only to the PGA Tour’s Zurich Clas­sic of New Or­leans, but also to on­go­ing ef­forts to help the com­mu­nity build re­silience to flood­ing. This can be seen up close at the City Park Golf Cour­ses in the Bayou District, part of one of Amer­ica’s largest ur­ban parks. The ren­o­va­tion of the golf cour­ses has in­cluded the in­stal­la­tion of a game-chang­ing flood man­age­ment sys­tem that is pro­tect­ing homes, busi­nesses and the liveli­hoods of res­i­dents in the com­mu­nity. Zurich do­nated $1 mil­lion to help in the con­struc­tion of a new hy­draulic weir, which can be visu­al­ized as a very large con­crete bath­tub. Three times larger than its pre­de­ces­sor, the weir fea­tures a 10-foot-wide hy­draulic gate. Be­fore a ma­jor rain­storm, the gate will be low­ered to drain the ad­ja­cent City Park la­goons, in­creas­ing the storm wa­ter ca­pac­ity by the equiv­a­lent of 400 foot­ball fields of wa­ter mea­sur­ing one foot in depth, and help­ing to pre­vent wide­spread flood­ing dur­ing heavy rains.

“That’s a good ex­am­ple of risk mit­i­ga­tion wor­thy of in­vest­ment,” says Fo­ley. “Ev­ery­one in the com­mu­nity will ben­e­fit in mul­ti­ple ways.”

“It’s es­ti­mated that floods cost com­mu­ni­ties more than $250 mil­lion ev­ery year and cause some of the world’s largest so­cial and hu­man­i­tar­ian losses each year.”

Thirty years ago, on April 26, 1986, Re­ac­tor No. 4 at the Ch­er­nobyl Nu­clear Power Plant mal­func­tioned and ex­ploded dur­ing a rou­tine test. The blast threw ra­dioac­tive smoke, dust, and de­bris into the at­mos­phere, where it trav­eled as far as Nor­way. It was the world’s largest nu­clear ac­ci­dent, re­leas­ing 10 times more ra­di­a­tion than the cat­a­strophic melt­down of re­ac­tors in Fukushima pre­fec­ture, Ja­pan, in the wake of an earth­quake and tsunami in 2011. The $ 15 bil­lion ini­tial cleanup— in­clud­ing the hur­ried con­struc­tion of an im­mense con­crete sar­coph­a­gus to en­tomb the ra­dioac­tive re­mains—helped desta­bi­lize the al­ready wob­bly Soviet Union, which broke into 15 coun­tries in 1991. The site is now ad­min­is­tered by Ukraine, which faces a com­plex chal­lenge: It must man­age an engi­neer­ing mar­vel that’s been de­signed to con­tain Ch­er­nobyl’s poi­sonous re­mains and deal with the painful eco­nomic af­ter­math, all while ne­go­ti­at­ing with in­ter­na­tional cred­i­tors to keep the na­tional econ­omy from col­laps­ing.

The sar­coph­a­gus, which is braced against dam­aged sec­tions of the re­ac­tor build­ing, wasn’t ex­pected to last more than 20 to 30 years. To pro­vide a cen­tury more of pro­tec­tion, Ukraine, with the as­sis­tance of the Euro­pean Union, has since 2012 been con­struct­ing the New Safe Con­fine­ment. The 850-foot-wide steel shield weighs more than 30,000 tons and, at 360 feet tall, could ac­com­mo­date the Statue of Lib­erty, pedestal to torch. In Novem­ber the NSC, which looks like a gi­ant air­craft hangar, is ex­pected to glide on Te­flon and stain­less steel skids about 1,000 feet long over the top of the en­tombed re­ac­tor. (There’s still too much ra­di­a­tion em­a­nat­ing from unit 4 for con­struc­tion to be done di­rectly over it.) A mem­brane, made from the same ma­te­rial used to keep sea­wa­ter out when a sub­ma­rine launches a bal­lis­tic mis­sile, will then be at­tached be­tween the sar­coph­a­gus and the shield to trap ra­dioac­tive dust and de­bris.

“We have engi­neer­ing spe­cial­ists, con­crete, elec­tri­cal, ven­ti­la­tion, heavylift­ing, ra­dio­pro­tec­tion spe­cial­ists, trans­la­tors, and lo­gis­ti­cians,” says Ni­co­las Caille, the project di­rec­tor for No­varka, which de­signed and built the NSC. “We have peo­ple from all over work­ing here. The world has fi­nanced this project.” It’s also been some­thing of a jobs pro­gram for Ukraine. About 6,000 peo­ple are em­ployed in the zone. They get into their work clothes in chang­ing rooms, and each one car­ries an es­sen­tial piece of gear: a ra­di­a­tion meter. Work­ers stay at their jobs not by the hour but by how much ra­di­a­tion they’ve taken. Ra­di­a­tion varies around the site; higher dose rates closer to the sar­coph­a­gus re­quire spe­cial suits. But a typ­i­cal dose is about 0.006 mil­lisiev­erts per day. The high­est dose any­one got on the site in 2015 was 13 msv. Nu­clear work­ers in the U.S. have a limit of 50 msv of ra­di­a­tion per year, the equiv­a­lent of 1,000 X-rays.

Al­most all the work­ers live in the town of Slavu­tych, pop­u­la­tion 25,000, which the Sovi­ets built in 1986 to house peo­ple who were ei­ther work­ing at the nu­clear power plant or dis­placed by the ra­dioac­tive fall­out. It was also home to the thou­sands of “liq­uida­tors,” who made up the cleanup crews. Un­told num­bers of them died from ex­po­sure, but they pre­vented the con­tam­i­na­tion from get­ting even worse.

Those hero­ics are now deep in the past. Winded from the long climb up the NSC’S scaf­fold­ing, one worker, who asked not to be named be­cause he wasn’t autho­rized to speak to the press, puffs on a cig­a­rette and says, “To be hon­est, I’m not proud of my job. It’s not like in Soviet times, when we were told we

The New Safe Con­fine­ment rises above the de­sert­ede­hent,nime­tremain­sunt vendis­quid­ofch­er­nobylque volupta ecesto tes et of­fi­cat of­fi­ciant.

were do­ing every­thing for the pride of the father­land. I’m just do­ing this to put food on the ta­ble for my fam­ily.” He pulls down about $235 a month—6,000 hryv­nias, the lo­cal cur­rency—about $60 more than the av­er­age in­come in Ukraine. The com­ple­tion of the arch doesn’t grat­ify him or many of the town’s other res­i­dents. It fills them with fore­bod­ing. “The arch is the city,” says Anas­ta­sia Ro­ma­nenko, 16, hang­ing out at the lo­cal amuse­ment park. “When the arch is fin­ished, the city is fin­ished.”

Once the NSC is done, most of the res­i­dents of Slavu­tych will have to find other work. That won’t be easy. Un­em­ploy­ment in Ukraine is now well above 10 per­cent; the econ­omy shrank by al­most 10 per­cent in 2015, par­tially as a re­sult of the sep­a­ratist con­flict backed by Rus­sia in the in­dus­trial cities of the east. Although in­fla­tion has eased, in March it still stood at more than 20 per­cent. The country wouldn’t have been able to af­ford the arch at all with­out for­eign as­sis­tance. Over the years, Ukraine has re­ceived more than $370 mil­lion from the U. S. alone to care for Ch­er­nobyl.

Enor­mous amounts of money have been poured into the engi­neer­ing of the NSC. A cus­tom jack­ing process was cre­ated to lift the thou­sands of feet of gi­ant steel tub­ing, im­ported from Italy, that forms the build­ing’s struc­ture. The tubes are at­tached with some 600,000 spe­cial­ized bolts, each cost­ing about €15 ($17). “It’s the Rolls-royce of bolts,” says Caille. The struc­ture’s been de­signed to with­stand fire, the freez­ing tem­per­a­tures of Ukraine’s win­ter, and a Level 3 tor­nado. Two gi­ant cranes made in Min­nesota, each with the di­men­sions of a Boe­ing 737, are sus­pended in­side the NSC. Con­trolled re­motely from a nearby ra­di­a­tion­proof bunker, they’ll carry a plat­form fit­ted with a ma­nip­u­la­tor arm, a core drill, a con­crete crusher, and a 10-ton vac­uum cleaner that will re­move ra­dioac­tive de­bris. The au­toma­tion will cut down on the need to ex­pose hu­mans to the dan­ger­ous lev­els of ra­di­a­tion. But it will also re­duce the jobs in Slavu­tych.

Ukraine will be fi­nan­cially re­spon­si­ble for op­er­at­ing the re­mote-con­trolled cranes and treat­ing the rem­nants of the power sta­tion, which is nec­es­sary to elim­i­nate all risk of ra­dioac­tive con­tam­i­na­tion at the site. The other Ch­er­nobyl re­ac­tors have been de­com­mis­sioned but not dis­man­tled. So far, there’s been lit­tle dis­cus­sion of how that will be done. In De­cem­ber, Pres­i­dent Petro Poroshenko honored the mem­ory of those killed in the days af­ter the nu­clear dis­as­ter and in­di­cated that this year’s com­mem­o­ra­tions would fo­cus on the heroic work of the liq­uida­tors. But while the govern­ment has ac­knowl­edged the need to in­vest re­sources into the area of the catas­tro­phe, it hasn’t put for­ward any plans.

Kiev has been deal­ing with other prob­lems. It’s been em­broiled in po­lit­i­cal in­fight­ing for months. The im­passe was bro­ken only on April 14 with the nam­ing of Volodymyr Hro­is­man as prime min­is­ter. His first task is to un­lock the third dis­burse­ment of a $17.5 bil­lion bailout from the In­ter­na­tional Mon­e­tary Fund. It’s been held up since Oc­to­ber be­cause of the po­lit­i­cal wran­gling. Hro­is­man must con­tinue with an­ti­cor­rup­tion re­form to get the money. That would then open the way for more than $4 bil­lion in bi­lat­eral aid from the U.S. and the EU, among other al­lies. The govern­ment also needs to stave off re­ces­sion and more fully im­ple­ment ac­cords with the pro-rus­sian rebels that have slowed, but not com­pletely halted, fight­ing in the east.

De­spite its cru­cial role in con­tain­ing Ch­er­nobyl for the past 30 years, Slavu­tych is too small a cog right now to catch the em­bat­tled govern­ment’s eye. Dmitry Kor­chak of the Re­gional De­vel­op­ment Agency, which the town has charged with plan­ning for its fu­ture, be­lieves Slavu­tych can be saved. He thinks with all the soon-to-be­unem­ployed en­gi­neers, physi­cists, bi­ol­o­gists, and re­search sci­en­tists around, the govern­ment should build a univer­sity and turn Slavu­tych into a tech and re­search and de­vel­op­ment hub. Early in April, Kor­chak tried to or­ga­nize a meet­ing to be­gin rais­ing sup­port and aware­ness for his re­brand­ing cam­paign and his or­ga­ni­za­tion’s plans for the town. About 50 peo­ple said they’d come. But the day of the meet­ing was the first day of warm spring weather. “Ev­ery­one went into the for­est to grill ke­babs and drink beer,” he says. Only 12 peo­ple showed up. Six of those were or­ga­niz­ers. <BW>

pro­posed, among other things, bol­ster­ing the in­de­pen­dence of the cen­tral bank, re­duc­ing the state’s role in the oil sec­tor, and loos­en­ing var­i­ous man­dates that strait­jacket the na­tional bud­get.

Also im­por­tant to a jaded elec­torate will be to ex­pand an­ti­cor­rup­tion laws—many of them en­acted un­der Rouss­eff. Last month the pub­lic prose­cu­tor’s of­fice (which has led the Petro­bras in­ves­ti­ga­tion) said it had gath­ered 2 mil­lion sig­na­tures on a pe­ti­tion ask­ing Congress to con­sider 10 new laws that would help it bring cor­rupt of­fi­cials to jus­tice.

Ideally, all or most of this should get done by the end of sum­mer. Mu­nic­i­pal elec­tions sched­uled for Oc­to­ber will re­vive the po­lit­i­cal par­ties’ an­i­mal spir­its, re­duc­ing the prospects for co­op­er­a­tion. If a Pres­i­dent Te­mer wants to get on the right side of his­tory, he’ll need to move quickly.

To read Noah Smith on fi­nance’s dom­i­na­tion of the econ­omy and Justin Fox on why hous­ing is so ex­pen­sive, go to

Bloombergview.com

Flood pre­pared­ness is among the most im­por­tant as­pects of proac­tive global risk man­age­ment.

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