Magazine article Risk Management

Earthquake! A Global Strategy for Earthquake Risk

Magazine article Risk Management

Earthquake! A Global Strategy for Earthquake Risk

Article excerpt

In the global economy, the phrase "it's an ever shrinking world" means that more business is being conducted across national boundaries. It also means that the business risk related to earthquakes is becoming less concentrated in California. As researchers learn more about the slow but consistent movement of the earth's crystal plates, it is becoming clear that the shifting that causes earthquakes is more common than scientists have previously believed.

Unfortunately, except for locations with historically high levels of seismic activity, the factors that dictate the location of business operations rarely address the potential earthquake hazard. It is important, therefore, for risk managers to help their organizations develop an effective approach to managing earthquake risk on a worldwide basis. Such a strategy must include identifying hazardous locations; comparing earthquake hazards to economic considerations-, quantifying property damage and business interruption exposures-, and implementing the most effective combination of loss control, risk financing and recovery planning.

Finding Hot Spots

Earthquake risk isn't "present" or "not present"; it exists to some degree everywhere on the earth's surface. The most conservative approach to the problem says that faults are everywhere, and risk managers must always calculate the probability of shaking and the required level of safety. (This is the approach adopted by the nuclear energy industry. However, the practical reality is that the areas of the world subject to greater earthquake risk are well known, and this knowledge can provide a reasonable level of guidance. Maps published by the United States Geological Survey identify the global "hot spots" of historical shaking, and a wealth of seismic risk information can be obtained via the Internet.

The most active areas, include most of California, the Pacific Northwest and coastal British Columbia; Taiwan, Japan, Indonesia and the Philippines; Mexico and the western coastal regions of South America; and southern and southeastern Europe. Other historically active earthquake regions, such as the vicinity of the New Madrid fault zone, which poses a major threat to the St. Louis, Missouri, and Memphis, Tennessee, metropolitan regions, should also rank among those areas worthy of concern.

Defining the Hazard

Once it is determined that a site is a potential hot spot for earthquake activity, it is important for the level of risk to be calculated so the appropriate risk management alternatives can be evaluated. The most effective way to quantify this exposure is to conduct a site hazard analysis, which can be performed by many earthquake and geological engineering firms. This type of analysis involves identifying the faults or other sources of seismic activity that can affect a site.

The most common level of risk is an earthquake event with a return period (an estimate of the length of time during which one major earthquake should be expected to occur) of about 475 years. This level of earthquake risk is used by building codes throughout the United States as a basis for establishing the minimum safety requirements for most structures. The nuclear energy industry uses events in the 2,000-to-10,000-year return period range, i.e., events with a much lower likelihood of occurrence" as a basis for"safety design.

A site hazard analysis din take many forms, depending on how the results are intended to be used. Common considerations in site hazard analyses include the expected peak ground acceleration in terms of a percentage of gravity (designated as a "g" level), and the intensity of shaking, which is often measured on a 12-point Roman numeral scale known as Modified Mercalli Intensity (MMI). The MMI, which follows established guidelines to estimate the severity of earthquake damage, is more subjective than the Richter scale, which measures the energy released during an earthquake. …

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