Contradictions Inherent in the Management of Natural and Industrial Disasters

Professor Sándor KerekesDepartment of Environmental Economics

and Technology

These days people keep wondering whether the world is more dangerous now than it was before.

Do natural disasters really happen more frequently or is it just that the damage they cause that has become greater?

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Source: Munich Re

SUSTAINABLE BUSINESS: RISKS AND OPORTUNITIES

Columns show the numbers of victims in millions, while the dashed line represents the number of reported events.

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lay people experts

league of collegue active club woman voters students members

Nuclear powerMotor vehiclesHandgunsSmokingMotorcyclesAlcoholic beveragesPrivate aviationPolice workPesticidesSurgery (*) rank 1 represents the most risky activity or technology

Slovic (1987)

RISK PERCEPTION VARY AMONG PEOPLE

1 1 7 102 5 3 13 2 1 44 3 4 25 6 2 66 7 5 37 10 9 88 8 6 99 4 10 710 9 8 5

the number of known / reported catastrophes is relatively high, but that does not necessarily mean there has been an actual increase in frequency.

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Aznalcollar () Failure of tailings dam retaining wall, 25 April, 1998

Kolontar () Failure of the ‘red mud’ dam retaining wall, 12. October, 2010.

Floods and their Impacts (total) in European Countries Source: EM-DAT The OFDA/CRED International Disaster Database

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1980-2009 2000-2009Number of floods 239 147Number of countries affected

22 19

Number of people killed 1309 511Number of people affected (millions)

3.0 1.3

Economic losses (billion USD)

92.3 45.0

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Industry vs NGOs

Common goal Market Non market organisationsexclusive inclusive

Industry higher price monopoly Lobbying

NGO-s Better env. quality ------ membership maxim.

Svendsen: Public Choice and Env. Regulation

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politicians and corporate managers are no longer trusted by European citizens – and neither are scientists. One could make the rather cynical argument that the public do not

greatly trust NGOs either, even though they themselves establish them.

It is an apparent sign of mistrust that, besides Hungarian green organizations, two international NGOs – Greenpeace and Robin des Bois from France – also decided to have an on-the-ground presence at the site of the red mud catastrophe.

And while, based on the work of respectable scientists and a number of studies, a significant number of Hungarian institutions concluded that neither drinking water sources, nor the soil was endangered by the spilt material, the two NGOs flooded the media with statements claiming quite the opposite.

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despite the fact that they only sent two experts to the affected area

“Robin des Bois can not really give credence to the statements of those Hungarian professors and scientists who claim that there is no risk of radioactivity, nor of heavy metal migration into the deep soil layers” (page 36). The two experts reported that “The area flooded by the red mud spill in Hungary directly affects the lives of some 8,500 inhabitants. Only to mention a couple of examples: approximately 70 tons of arsenic, 70 t lead, 130 t nickel, 650 t chromium, 700 t vanadium, 1 600 t sulfur and 114 000 tons of aluminum were released into nature. Arsenic, nickel and chromium 6 have carcinogenic effects” (page 3).

And: “On 4 October 2010, at 1:30pm, the western wall of one of a chain of red mud reservoirs operated by Magyar Alumínium ZRt – MAL collapsed, freeing about 600 to 1,000 thousand cubic meters of red mud, a waste product of the bauxite refining process” (page 4).

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HAS: there are no significant amounts of metal contaminants in the red sludge

concentrations of toxic metals do not exceed the standard limits in the soil, but the pH measured from an aqueous extract of the industrial waste is 11.8, which indicates a strong base.

According to the Institute of Materials and Environmental Chemistry of the HAS on October 5th, the red sludge contained cadmium, chrome, mercury, nickel, lead and zinc in concentrations smaller (in some cases considerably smaller) than the values allowed for waste mud.

The arsenic content of the samples taken from the area of Kolontár and analyzed by the Institute of Materials and Environmental Chemistry was also less than the values allowed. The laboratory analysis of the soil samples taken on October 8, 2010 conducted by HAS’

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An international NGO surely wants to do us some good?

It is no wonder that society’s trust has faded, a finding which is worsened further by news broadcasts which reveal serious defects in our institutions: indicating for example that we could not even pinpoint the authorities responsible for licensing or operational supervision…

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Endogen and exogen risks

high

low

low high

B

Firm level

C

strategic

A

supportive

D

turnaround

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Exogen risks

Risk management strategies

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(1) risk avoidance.- ceasing the activity associated with it.

(2) risk reduction (prevention and control).- reducing probabilities and contingent impacts,

(3) risk retention.- bearing risk internally, and(4) risk transfer.- reducing the amount of damage for wich the firm is responsible.Effective risk management could clearly protect and enhane brand name and reputation of firms with customers, regulators, and the public. We schuld clearly distinguish between acceptable risks and non-acceptable risks.

Thank you for your attention!