About Jared Wade

Jared Wade is a freelance writer and former editor of the Risk Management Monitor and senior editor of Risk Management magazine. You can find more of his writing at JaredWade.com.

Global Earthquake Activity “Within the Normal Range”

This morning, many Americas awoke to the tragic news that an magnitude 6.9 (or 7.1, according state-run China Earthquake Networks Administration) earthquake had struck the western Chinese province of Qinghai. The initial reported death toll made it seem as though the population had perhaps dodged a bullet, but there have now been close to 500 casualties identified, with another 10,000 injured. And if we use history as a guide, these numbers may very well increase as well. Heart-breaking.

Still, when you consider that the 2008 Sichaun quake struck along the same Longmenshan fault system in a more populous region and killed some 90,000 people, things could have been worse. And in a year where another powerful, seismic event shakes the globe seemingly every week, that is at least one thing to be thankful for as the region tries to launch successful rescue and recovery efforts.

But has the earth really been producing more major quakes? It sure seems like it, and Newsweek gives a rundown of the recent evidence:

Yesterday, a 6.9-magnitude quake struck Qinghai, China, resulting in an estimated 400 dead and 10,000 injured. One week before that, a 7.7 tremor hit Northern Sumatra, Indonesia. Two days before that, a 7.2 shook Baja, Mexico. At the end of February, Chile shuddered under an 8.8 earthquake, little over a month after a 7.0 crumbled Haiti and killed nearly 230,000. With such a list, 2010 appears to be the year of the apocalypse or, at the very least, unnaturally active for these natural disasters.

But it is not.

According to the United States Geological Survey, seismic activity in 2010 has been well “within the normal range.”

Scientists say 2010 is not showing signs of unusually high earthquake activity. Since 1900, an average of 16 magnitude 7 or greater earthquakes — the size that seismologists define as major — have occurred worldwide each year. Some years have had as few as 6, as in 1986 and 1989, while 1943 had 32, with considerable variability from year to year.

With six major earthquakes striking in the first four months of this year, 2010 is well within the normal range. Furthermore, from April 15, 2009, to April 14, 2010, there have been 18 major earthquakes, a number also well within the expected variation.

“While the number of earthquakes is within the normal range, this does not diminish the fact that there has been extreme devastation and loss of life in heavily populated areas,” said USGS Associate Coordinator for Earthquake Hazards Dr. Michael Blanpied.

The last line is the key.

There aren’t more earthquakes. There are more people.

And that is why the need for better preparedness, building codes and emergency response is greater than ever. The worst-case events of the recent past may not actually be worse than the true true worst-case disasters we will see in the future. (For reference, here are the 11 deadliest earthquakes in history.) With the global population projected to reach nine billion by mid-century, there will be way more people who are — quite literally — atop shaky ground.

We have seen a similar phenomenon both in the United States and globally in terms of hurricane/windstorm risk. Whether or not hurricanes are actually increasing is debatable (and not something I want to get into here), but what is undisputed is that more people today live near the coast than ever before. Internal migrations and population booms in recent decades have left more people directly in the path of the storm.

And now, we are seeing how the same thing can — and will continue to — tragically play out near fault lines.

UPDATE: Here’s a feature we ran way back in 2005 (pre-Katrina even) detailing the increasing danger disasters pose to coastal communities. Obviously, the stats are a little dated, but the general trend has not changed.

[All this recent storm] activity underscores just how precarious it is to live and work on the world’s coasts. Despite this, the United Nations has estimated that 37% of the world’s population lives within 100 kilometers (about 62 miles) of the coast. In theUnited States, coastal areas make up one-fifth of the landmass but are home to more than half of the population. And according to a paper by Charles Colgan, chief economist of the National Ocean Economics Project and professor of public policy and management at the University of Southern Maine, 75% of the U.S. domestic economy came from coastal areas in 2000. With these numbers steadily increasing, it is vitally important to understand the natural catastrophe risks related to coastal development, especially in light of what was a particularly active year for such events.

Our other editor Morgan O’Rourke wrote the piece and breaks down both tsunami risk and the memorable 2004 hurricane season if you want to read more on the topic.

UPDATE II: EQECAT, a leading catastrophe risk modeling company, released an update on the Qinghai quake, announcing that — as expected — the insured losses will be “minimal.”

Approximately 16,000 people were exposed to strong ground shaking, and hundreds of deaths have been reported, primarily due to the particular earthquake-vulnerability of the of the conventional mud-brick construction.  Though this earthquake has caused immense consequences to the people affected, its significance among the insurance community will be minimal.  The Yushu prefecture in which the earthquake was centered contributes a fraction of a percent to China’s GDP, with primary industries of herding and farming, as well as limited tourism related to Buddhist monasteries throughout the region.

Seismic activity in the Tibetan plateau is related to extrusion within the Eurasian plate resulting from convergence of the Indian plate along the Himalayan front.  Extrusion-related earthquakes with moderate to large magnitudes, of which the magnitude 7.9 2008 Wenchuan earthquake was one example, are known to occur throughout central China from the Himalaya northward.

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Turning Whistleblowers into Millionaires

The U.S. Foreign Corrupt Practices Act is not new. Founded in 1977, the act’s main mission has always been to curtail improper accounting practices by companies operating internationally and prevent bribes. Thus, the “corrupt” aspect. In many parts of the world, there is a thin line between a “gift” and a “bribe,” and this regulation is designed to better demarcate that line and ensure that those businesses that overstep it have to pay a penalty for doing so. (Here’s a more detailed explanation if you’re into reading legalese.)

Only in recent years, however, has the act started to gain any real teeth.

Dow Jones reports on the expansion of the FCPA of late.

There have been a rising number of FCPA enforcement actions in recent years…with 34 prosecutions netting $435.3 million in penalties in 2009, according to the Department of Justice. In 2008, Justice said 17 prosecutions netted $497.6 million in penalties.

Because of this ramped up enforcement, companies should be sure to revisit compliance efforts. In fact, we ran a piece by Jonathan Marks of Crowe Horwath on that very topic last November, offering 10 tips on how to make sure your foreign operations are on the up-and-up. (“Global Presents”/global presence … Get it? We’re very clever … We know.)

Thus, the real news now is not more fines — it is the coming overhaul of the incentives that will be awarded whistleblowers going forward. The Senate and House bills for financial regulation differ on the matter somewhat, but both will create what is being termed a “bounty program,” in which the person who reports the FCPA violation would receive a percentage of whatever the related fine ends up being.

The final percentage will obviously hinge on what is actually written into legislation, but regardless, it has the potential to turn a whistleblower into a millionaire overnight.

Among key language differences between the bills, the House version, which passed in December, has no set minimum percentage of the collected funds in a case for the SEC to pay to a whistleblower. The SEC has greater discretion in determining the bounty than it does under the Senate’s version, which has a 10% minimum. Both have a 30% maximum payout.

Theoretically, a whistleblower could come into a huge windfall based on this formula. Consider the case of Siemens AG, which paid $800 million in fines to the SEC and the DOJ in 2008 after pleading guilty to violating the FCPA. Had those penalties been the result of information obtained by a whistleblower, the person could have received a $240 million payout, or a minimum bounty of $80 million based on the Senate language.

$80 million for tipping off the G-men about a foreign infraction? That’s a lot of coin. Certainly enough to motivate employees, you would think.

Mike Koehler, an assistant professor of business law at Butler University in Indiana, who is an expert on FCPA-related issues and blogs under the name FCPAProfessor, sees such sums being an effective incentive.

“Any time you incentivize rank-and-file workers with a lot of money, rational actors are going to respond. You’re going to see an increase in enforcement activity regardless of whether the action violates the law,” Koehler said.

I know I’ll be on the look-out

whistleblower

The future whistleblowers of America?

The 9 Hallmarks of Successful ERM

As anyone who has ever tried knows, implementing an ERM program is easier said than done. And getting one to yield any quantifiable results is even tougher.

It is not surprising, then, that more than a third of risk professionals recently surveyed by Aon categorized their ERM programs as “initial/lacking and basic.” For those folks, however, Aon has some advice.

Here are the nine hallmarks of any successful ERM program.

  1. Board-level commitment to ERM as a critical framework for successful decision making and driving value
  2. Dedicated risk executive in a senior-level position, driving and facilitating the ERM process
  3. ERM culture that encourages full engagement and accountability at all levels of the organization
  4. Engagement of stakeholders in risk management strategy development and policy setting
  5. Transparency of risk communication
  6. Integration of financial and operational risk information into decision making
  7. Use of sophisticated quantification methods to understand risk and demonstrate added value through risk management
  8. Identification of new and emerging risks using internal data as well as information from external providers
  9. A move from focusing on risk avoidance and mitigation to leveraging risk and risk management options that extract value

How does your program stack up?

Five Tips for Preventing Workplace Injuries

Jeffrey Quinn of New Jersey Today wrote a piece the other day featuring five tips for preventing workplace injuries. Four of them focus on driving, weather, protective gear and worksite tidiness, and Quinn’s advice in those areas is great — and quick to read.

But the one major takeaway here is this:

Report Dangers – Reporting unsafe situations is one way you can improve the safety of your worksite.  For example, if you come across a chemical spill and cannot identify the substance, do not touch or move it. Barricade the area and report the spill. Your worksite should have a spill response plan that includes emergency phone numbers, evacuation procedures, containment instructions and proper cleanup processes.

Additionally, keep all working and walking surfaces free of spills and debris.

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Spilled coffee in a stairwell or an electrical cord stretched across a walkway can lead to slips, trips and falls. Be proactive and report the danger. Watch where you are walking and exercise care given the conditions.

These days, apathy seemingly reigns supreme. In this economy, people are over-worked, under-resourced and, often, over-educated for their jobs with no short-term hope of career advancement. So they are loathe to go the extra mile to do things that help the common good as long as it doesn’t negatively affect them.

And this goes down to the level of someone seeing a spilled coffee, stepping over it and then simply continuing on with their day. It would be very easy for the worker to tell someone.

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But often they don’t. It wasn’t an issue for them and it’s not their job to mop the floor, so the guy just shakes his head, bemoans the person who has failed to clean it up and goes back to his desk.

Here’s the part in the post where you could use some advice on how to help overcome that apathy.

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Unfortunately, I have no idea.

Let us know how you do it.