Earthquakes and Risk Management in China

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Earthquakes and Risk Management in

China
a
David L. Olson & Desheng Dash Wu
b c
Department of Management , University of Nebraska , Lincoln, NE,

USA
b
Reykjavik University , Reykjavk, Iceland
RiskLab , University of Toronto , Toronto, ON, Canada

Published online: 07 Jun 2010.
To cite this article: David L. Olson & Desheng Dash Wu (2010) Earthquakes and Risk Management
in China, Human and Ecological Risk Assessment: An International Journal, 16:3, 478-493, DOI:
10.1080/10807031003779898
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Human and Ecological Risk Assessment, 16: 478493, 2010

Copyright C Taylor & Francis Group, LLC
ISSN: 1080-7039 print / 1549-7860 online
DOI: 10.1080/10807031003779898
Earthquakes and Risk Management in China

David L. Olson1 and Desheng Dash Wu2
Department of Management, University of Nebraska, Lincoln, NE, USA;
2
Reykjavik University, Reykjavk, Iceland and RiskLab, University of Toronto,
Toronto, ON, Canada
Downloaded by [INASP - Pakistan (PERI)] at 00:58 22 August 2015
ABSTRACT
Natural hazards such as floods, tsunamis, wildfire res, droughts, landslides,
volcanic eruptions, windstorms, and earthquakes exist everywhere in the world.
Earthquakes can pose the greatest threat to human lives, property, and economic
development in our society. We review tools that have been developed to assist
the earthquake risk management process. We also propose two mechanisms for
earthquake risk management: one to possibly better predict earthquake damage
magnitude (prediction markets), the other to prepare response team performance
(recognition primed decision-making). In conjunction with broader use of information system technology, it may be possible to improve preparedness and response.
Key Words:
risk management, earthquake, Sichuan earthquake.
INTRODUCTION
The magnitude of the 2008 Sichuan earthquake and its ensuing disaster bring
home the power of nature, and the challenge all humankind faces in preparing
for and mitigating such events. There are all kinds of disasters that threaten us,
some natural (floods, hurricanes, tsunamis in addition to earthquakes); others are
artifacts of human inability to appropriately manage its affairs (war, terrorism).
China is of course not alone in facing the risks of earthquakes. Australia recorded
insured losses of more than $1 billion at Newcastle in 1989. For a detailed list
of large earthquakes all over the world, see http://en.wikipedia.org/wiki/List of
earthquakes. A list of major earthquakes in China is provided in Table 1.
Earthquakes can be seen to have long been a feature of life in China. Similar tables
could be developed for many other locations in the world. Clearly earthquakes have
taken many lives in China over the centuries, and are a fact of life, just as they
are in California. That earthquakes can involve massive loss of life (see the 1556
earthquake on the list) is demonstrated in Table 1. They also have had significant
political impact (e.g., the Managua Nicaragua earthquake in 1972 has been credited
Address correspondence to Desheng Dash Wu, Reykjavik University, Kringlunni 1, IS-103
Reykjavk, Iceland and RiskLab, University of Toronto, 1 Spadina Crescent, Toronto, ON,
Canada M5S 3G3. E-mail: DWu@Rotman.Utoronto.Ca; dash@ru.is
478
Table 1.
Significant Chinese earthquakes.
Time
Place
Deaths
Intensity
Comments
1036
1057
27 Sep 1290
23 Jan 1556
Shanxi
Chihli (Hopeh)
Chihli (Hopeh)
Shaanxi
23,000
25,000
100,000
830,000
?
?
6.7
8
13 Jul 1605
Qiongshan
Hainan
Around 23,000 were killed

25,000 were killed
More than 100,000 were killed
More than 830,000 were killed.
Damage extended far; included
ground fissures, uplift, subsidence,
sandblows, liquefaction, and
landslides
More than 97 states and counties in
other provinces suffered great losses;
Aftershocks happened every 3 or 5
days, and such situation lasted for
more than 5 years
about 100,000 die
Felt in 17 provinces; 4 cities destroyed;
10 more towns damaged
Gulang vanished; poisonous material
produced
Many aftershocks for half a year
3000
7.5
30 Nov 1731 Beijing

16 Dec 1920 Ningxia-Gansu
100,000
240,000
?
8.6
22 May 1927 Gulang Gansu
40,000
7.9
25 Dec 1932 Changma

Gansu
1976
Tangshan
70,000
7.6
242,000
7.8
2 Jun 2007
Yunnan
12 May 2008 Sichuan

Province
2
87,000+
6.2
8.0
164,000 injured, more than 410,000

localities suffer cave breakdowns,
landslide and mud-rock flows with
an annual death toll of nearly 1000;
2.62 million square kilometers of
land desertified; 2460 square
kilometers of land becomes sand
annually and more than 1.8 million
square kilometers of land lost due to
water erosion
More than 200 more injured, damage
to houses and roads, communication
Felt in Beijing and Shanghai; more
than 26,000 aftershocks, billions in
damage; lots of quake lakes; direct
economic loss 845.1 billion RMB
with leading to the Sandinista revolution because of inadequate governmental relief

response).
Earthquakes strike all around the world. In August 2007 Peru was struck by a
7.9 magnitude earthquake that shook the cities of Ica, Pisco, and Chinca, resulting
in 500 deaths and destruction of houses, churches, transportation, and utilities
(Shexnayder 2007). In May 1970, more than 50,000 died in Peru from another 7.9
magnitude earthquake. Earthquakes in Japan threaten a widespread nuclear energy
system. An earthquake in 2007 caused a fire at the Kashiwazaki-Kariwa Nuclear Power
Plant, leading to leaking of radioactive water into the ocean. As nuclear energy
Hum. Ecol. Risk Assess. Vol. 16, No. 3, 2010
479
D. L. Olson and D. Dash Wu
becomes more attractive, environmental groups are concerned about earthquake

risk in other areas of Asia, to include Indonesia, Vietnam, and Thailand (Grinberg
2007).
When facing earthquakes, technology development measures often prove ineffective and may themselves turn to a source of added vulnerability. For example, the
infrastructure where we live and work can cause more deaths and injuries when they
fail. In the Sichuan earthquake, 6,898 school buildings were destroyed when the design standards were exceeded, causing a huge number of student deaths. Similarly,
it is true that original plans from policy-makers can take little effect to reduce the
vulnerability resulting from earthquakes. The earthquake victims may actually suffer
from post-earthquake social and economic disruption. To effectively deal with the
earthquake disaster and reduce its severity, a systematic risk management approach
is necessary in order to consider disaster control through the whole disaster cycle.
This consideration involves the economic, political, and social sources of victimization and losses and the extent to which social inequality and coordination existence
in the social network. In the Sichuan earthquake, poverty was a greater cause of
the serious damage or Chinese living in the earthquake zone. Most buildings that
collapsed were old and poorly made (China Daily 2008). Symptoms such as a sudden
loss of confidence and feelings of depersonalization could last from 2 to 10 years,
or for a lifetime, after an event such as the Sichuan earthquake.
This article analyzes various earthquake risk management tools and proposes our
risk management approaches, to deal with post-construction issues in the Sichuan
earthquake in China.
STATUS
The chief of the Office of Applied Economics of the U.S. National Institute
of Standards and Technology has proposed a three-step protocol to prepare for
natural disasters in the context of building construction (Marshall et al. 2004).
The first step is to assess risk. Tools available to evaluate risk include standards
and software products. The second step is to identify alternative risk mitigation
strategies, to include engineering alternatives, management practices, and financial
mechanisms. The third step is to evaluate lifecycle economic effectives of alternatives.
Some organizations provide standards and software to aid in this third step.
In Europe, risk from natural disaster-triggered events is referred to as Natech
(Cruz et al. 2006). One of the most recent earthquakes of significance was in Turkey
in August 1999 at Kocaeli. This earthquake released more than 20 hazardous material events, and caused the collapse of a concrete stack at an oil refinery, triggering
multiple fires that burned for 4 days, leading to evacuation of thousands. Sampling
identified more than 100 industrial facilities that handled hazardous chemicals.
The European Community is acting through regulations aimed at prevention and
limiting consequences. Industrial facilities that store, use, or handle dangerous substances are required to have major-accident prevention policies, with emergency
plans for dealing with accidental chemical release. Facilities must carry out a hazard
assessment, to include a process safety analysis, and evaluate mitigation measures
including protection of human health and the environment.
480
In Bulgaria, specific measures include building codes requiring earthquake resistant design. Bulgarian hazardous material measures include a hazard assessment, to
include scenarios of domino effects and impacts on communities. In France, natural
disaster risk prevention includes hazard identification, risk assessment, monitoring
and warning programs, prevention and mitigation policies, and regulations establishing zoning, disaster preparedness, and emergency response. Germany has an
integrated system of prevention and warning systems. Each disaster triggers evaluation that is used to update regulations. Emergency response plans are required with
hazard risk maps published.
In Italy, the Department of Civil Protection held a nationwide study to evaluate
civil protection plans. Scenarios of direct and indirect effects on human health, the
food chain, and pollution are used for planning. Portugal deals with earthquake
risk under their Regulation for Security for Structures. An in-depth study to assess
seismic vulnerability was conducted in 1997, leading to an emergency contingency
plan. Portugal developed a geographic information system (GIS)based simulator of
seismic scenarios with information on geophysical, geological, housing, structural,
and population data by region. Sweden applies an all-hazards approach to risk
management and emergency response. Municipalities are required to identify local
risks and generate preventive measures and emergency response plans. National
agencies provide supervision, tools, guidance, and support.
In the United States, emergency management has a long and complex history,
directed by various governmental agencies, to include the Federal Emergency Management Agency. Federal, state, and municipality governments all have regulations
and building codes. Comerio (2004) reviews policy incentives designed to steer
builders to construct more disaster-resistant structures. Some policies are aimed
at reducing risk through growth restrictions or land-use regulations. Other policies promote safe development through mitigation of event consequences through
preparedness information, building codes, and insurance.
The State of California has a heavy history of earthquake experience. The 1994
Northridge earthquake resulted in more than $12 billion in insured losses, severely
damaging the insurance industry. Part of the California approach to dealing with
earthquakes includes legal requirements for insurers to sell residential earthquake
coverage, enacted in 1988 (Maroney et al. 2005). Special insurance pools were
created to assure that coverage was provided while enabling insurers to survive.
Australia also experiences some earthquake activity, averaging losses of $Australian 144 million per year (Blong 2004). In December 1989, Newcastle was hit by a
5.6 magnitude earthquake leading to damage to more than 63,000 household insurance claims. Australia has done significant work in assessing the risk to residential
buildings since that time. This may lead to the avoidance of some future damage
through better building codes and land-use planning.
China suffers from seven major types of natural disasters: meteorological, oceanic,
flood, earthquake, geological, agricultural, and forestry disasters. Chinese natural disasters are characterized with variety, high frequency, great severity, and
widespread distribution. China has established a systematic natural disaster prevention system, to include monitoring, prediction, prevention, resistance, and relief. Natural disaster reduction and control is one of the primary tasks in science
and technology development from the Chinese governments point of view. Data
481
accumulation of various natural disasters has lasted for more than 2000 years in
China. These data are collected through more than 100,000 monitoring stations
over different natural disaster sites in China, where a nation-wide monitoring and
prediction system can be found in each site.
The earthquake monitoring and prediction network consists of about 1000 seismographic stations and earthquake precursory observatories. Many advanced technologies are employed. These include radar transmission networks for precursory
data acquisition, mobile shortwave satellite communication systems, immediate response systems to great earthquake, mobile digital micro-seismic and strong ground
motion networks, and regional telemetric seismic networks. All were helpful in improving observation accuracy, fastening information transmission and increasing
immediate response to Sichuan earthquake.
While earthquakes have struck worldwide throughout recorded human history,
professional emergency managers argue that the level of preparedness is often
inadequate (Wade 2008).
CHINESE RESPONSE
The International Federation of Red Cross and Red Crescent Societies (IRCRCS
2008) has provided a 3-month consolidated report as of August 22, 2008, outlining
challenges and progress in response to the Sichuan earthquake. By August 12,
the Sichuan provincial government was credited by placing all displaced people
in transitional housing. The magnitude of the disaster was demonstrated in the
massive scope, with 4.5 million people losing homes. Of these, 978,000 were in
urban households, who were placed in transitional housing, with 3400 resettlement
areas being built. In rural areas, 3.5 million received government subsidies to rebuild
their own housing. Of these, 20,000 permanent homes had been completed by the
time of the report, with another 175,000 homes under construction. Objectives and
progress by relief category for the Chinese Red Cross and Red Crescent Societies
are given in Table 2.
RISK MANAGEMENT PROCESS

There are many published frameworks for risk management, which is a growing
industry worldwide. Intel Corporation published their risk management process, to
include elements of identification, control, transfer, and mitigation (Namyst 2007).
Intels philosophy is to categorize risks in order to predict the magnitude of risk
involved, engineer measures to control each risk through avoidance or mitigation,
transfer risk through insurance if appropriate, and mitigate through a claims management process to minimize cost/impact.
Identification
Potential losses are quantified for every significant source of risk. Humans tend
to identify risks based on their experience, but we all know that catastrophes from
482
483
Rural livelihood
Water and
sanitation
Health
Shelter
03 months: ensure up to 100,000 families

receive food, water, sanitation
112 months: ensure up to 100,000 families
receive food enabling move to transitional
shelter
03 months: ensure 100,000 families receive
shelter
112 months: provide technical support for
1000 health centers, 1500 schools
336 months: provide earthquake-resistant
houses for 2000 rural families
03 months: Deploy medical, first aid,
psychological support teams
112 months: Provide technical assistance and
training to health clinics
336 months: technical assistance and
training for preparedness and service
03 months: provide drinking water,
sanitation, hygiene promotion
112 months: provide technical assistance and
training for emergency response units
336 months: provide technical assistance and
training for emergencies, with facilities
03 months: provide technical advice and
training for livelihood substitution; cash and
voucher transfer
112 months: provide livelihoods to 2000
families
Objectives
Detailed assessment of rural

livelihoods
Pilot projects
Grants and materials to 2000 families
and host communities
Provided technical advice and

monitoring
Provided technical advice and
training in emergency health care,
psychological first aid,
psychological assessment
On-the-job training and technical
support
Transportation
Water and sanitation units set up
Water purification tablet distribution
Base camp and satellite stations
set up
Deployment of Deyang base camp
Pilot projects
Rural area site selection
Shelter kit materials to 2000 families
Activities
Red Cross and Red Crescent Society objectives and progress (IRCRCS 2008).
Food and
basic items
Category
Table 2.
Distributed water purification

tablets
Deployed two M15 water and
sanitation units
Deployed one mass sanitation
unit
Awaiting area stabilization
Rapid deployment of eight

health professional teams on
two-week rotations by the end
of May
150,000 tents
>120,000 quilts
250,000 clothing items
1.7 million mosquito nets
6480 tons of food
53 planes chartered to deliver
tents
102,210 international tents
received through end of July
Progress
new sources are always possible, so risk identification is often a matter of imagination. The type of risk also matters. For Intel, this is in terms of financial severity.
For governments, cost can be a factor, but a more important element is probably
loss of life. Risk identification with respect to earthquakes includes the prediction
elements discussed earlier of timing, magnitude, and location. Loss modeling tools
can include risk maps and analyses of risk impact and likelihood. Intel uses a detailed quantification study for specific hypothetical events and their consequences.
It begins with review of loss histories, usually external to Intel in order to obtain
adequate statistics. Analyses include mitigation options, with the aim of quantifying
and measuring specific losses from a perilous event to more rationally establish a
relative level of risk.
Establish Acceptable Level of Loss
An acceptable level of loss needs to be established. These levels of acceptability
determine which types of mitigation investments are needed for specific risks. This
can vary by stakeholder. Establishing such levels of loss is done by every government,
almost always with some dispute from various stakeholders.
Risk Control
Once risks are identified and acceptable levels of loss established, control measures can be generated to mitigate loss exposure. In terms of earthquake risk, risk
control usually manifests itself in the form of building codes to reduce the likelihood
of collapse. Risk control also includes the establishment of emergency management
agencies to react to earthquakes in terms of rapid delivery of rescue teams, delivery of emergency food and water, and deployment of construction equipment to
alleviate damage caused by earthquakes. In the Sichuan earthquake case, this last
element was demonstrated by work applied to alleviate many dangerous water pools
created by earthquake rubble forming dams to major bodies of water.
Risk Transfer
Private companies have the option of transferring risk to third parties via insurance or other financial tools such as catastrophe bonds (Greenwald 2008). Earthquake insurance is offered, but as with any insurance, the level of coverage appropriate for a given company varies widely depending on attitudes toward risk (Goda
and Hong 2008). The cost of insurance often serves as a guide for private firms
to take mitigation actions as alternatives to insurance. Governments do not have
the insurance option, but must react physically to deal with risks. A great deal of
research has shown how the losses are transferred from the victims to insurance
companies, the government and international aid givers in developed economies,
covering around 50% of the direct losses.
EARTHQUAKE RISK MANAGEMENT TOOLS

There are some tools that have been developed to assist the earthquake risk
management process. As we have stated, insurance is a tool that private firms and
484
individuals can utilize to protect themselves. A number of ideas have been developed to better provide insurance coverage of disasters, to include insurance pools
(Schwarze and Wagner 2004) as well as decentralized models applying conditional
value-at-risk (CVaR) (Mulvey and Erkan 2006). A national insurance system has been
suggested where disaster insurance be mandatory for households and businesses in
high-risk areas and urban center. However, this raises the issue of how low-income
persons will cover the costs of buying necessary insurance. Wenchuan, the earthquake center, is a non-economically developed area and the insurance penetration
rate is very lower. As a result, these tools are not appropriate for basic entities such
as governments. Moreover, the distribution of earthquake loss coverage is uneven
among insurance claims, public compensation, and voluntary aid. In some countries, insurance plays the major role while in others public assistance and voluntary
aid takes effect. Public assistance and voluntary aid are of extreme importance in
the Sichuan earthquake, where buying insurance is almost impossible for the poor.
There are, however, alternative tools that can help. One is to better predict.
Organizations such as Risk Management Solutions, Inc. offer products and services
for natural hazard risk in portions of the United States and Canada (Windeler 2006).
Information technology provides a very useful tool for earthquake risk management in the form of GIS. In the planning phase, databases can be populated with
information that can include land use models integrating earth science and socioeconomic information by locality (Bernknopf and Rabinovici 2006). Wood and Good
(2004) reported on experience with a GIS to assess the vulnerability of an Oregon
port to earthquake and tsunami risk. The GIS enabled focusing on vulnerability
issues, aiding decision-makers to set priorities for response in light of available resources. The forecasting and monitoring system developed by the Chinese Academy
of Sciences has played a major role in the disposal process of quake lakes. It has also
been reported that aviation remote sensing and broadband communications are the
most import technologies that were widely employed in the Sichuan earthquake.
Information technology has been developing at a very rapid pace, creating a
dynamic of its own. Many technical systems have been designed to gather, process, distribute, and analyze information in emergencies. These systems include
communications and data. Tools to aid emergency planners communicate include
telephones, whiteboards, and the Internet. Tools to aid in dealing with data include
database systems (for efficient data organization, storage, and retrieval), data mining tools (to explore large databases), models to deal with specific problems, and
combination of these resources into decision-support systems to assist humans in
reaching decisions quickly or expert systems to make decisions rapidly based on
human expertise.
Database Systems
A starting point to disaster recovery is collection of relevant data. Disaster information management systems (DIMS) have been developed to store such data (Ryoo
and Choi 2006). A minimum set of requirements for a DIMS are:
1. The ability to recognize and handle different disaster data sources, to include
geographical information, registry information, and aid information.
485
2. The ability to handle disparate disaster data formats. Data can be obtained from
diverse data sources to include e-mails, documents, pictures, movies, and audio
files.
Some data can be gathered prior to disaster. Geographical data includes information
on population, infrastructure, and natural ecosystems. Hazard information is data
on the disaster event itself, to include location, severity, and probabilities. Locators
are needed to track the current location of victims. Registries are needed to identify
victim families, those requiring medical attention, and critical contact information
concerning human resources for dealing with various aspects of a disaster. Data can
come in many formats. More advanced data types include 3-D and virtual reality
content. Standardization reduces the difficulties of sharing information.
To prevent accidental or intentional loss of data, and to ensure efficient retrieval
and distribution, a centralized data repository (such as a data warehouse) is desirable at a secure location. This will enable more efficient querying of data and
thus expedite subsequent analysis. Security calls for a back-up site at a different
physical location. Data at both the primary and back-up sites should be periodically monitored for accuracy and operational readiness. Some of the data stored
in these systems may be sensitive, to include critical national infrastructure content
concerning transportation, power, and communication networks, as well as military
facilities. Individual information can also be sensitive, such as personal identification data that might lead to compromise by identity thieves (social security numbers,
etc.), or sensitive medical information on individuals. Access management and encryption systems exist to safeguard such data, but these systems need to be properly
implemented.
Some geographical data needs to be constantly updated for location. Critical
assets may be moving quite often in a disaster situation. Part of the dynamic of life
is the constant development of new technologies.
Emergency Management Support Systems
A number of software products have been marketed to support emergency management. These are often various forms of a decision-support system. The U.S.
Department of Homeland Security developed a National Incident Management
System. A similar system used in Europe is the Global Emergency Management
Information Network Initiative (Thompson et al. 2006). While many systems are
available, there are many challenges due to unreliable inputs at one end of the
spectrum, and overwhelmingly massive data content at the other extreme.
Decision-support systems (DSS) have consisted of access to tailored data and
customized models with real-time access for decision-makers. With time, as computer
technology has advanced and as the Internet has become more available, there is
a great deal of change in what can be accomplished. Database systems have seen
tremendous advances since the original concept of DSS. Now weather data from
satellites can be stored in data warehouses, as can masses of point-of-sale scanned
information for retail organizations and output from enterprise information systems
for internal operations. Many kinds of analytic models can be applied, ranging
from spreadsheet models through simulations and optimization models. DSSs can
486
be very useful in support of emergency management. They can take the form of
customized systems accessing specified data from internal and external sources as
well as a variety of models suitable for specific applications needed in emergency
management situations. The focus is on supporting humans making decisions. If
problems can be so structured that computers can operate on their own, decisionsupport systems evolve into expert systems. Expert systems can and have also been
used to support emergency management.
Systems in place for emergency management include the U.S. National Disaster
Medical System (NDMS), providing virtual centers designed as a focal point for
information processing, response planning, and inter-agency coordination. Systems
have been developed for forecasting earthquake impact (Aleskerov et al. 2005). This
demonstrates the need for DSS support not only during emergencies, but also in
the planning stage.
Information technology can be of best use in gathering and organizing data. But
systems also need to be easy to use during crises. The tradeoff is that the more
comprehensive the data that are contained, the more difficult they are to use.
Systems supporting earthquake response need to address the following:
Damage assessment of structures after earthquakes,

Lessons of post-earthquake recovery,
Rehabilitation and reconstruction,
Public policy,
Land use options, and
Urban planning and design
Preparedness for Earthquake Response

The classical rational decision-making model does not work well in emergency
situations. That model expects decision-makers to balance multiple criteria over
all available alternates, assumed to be known with perfect knowledge. That model
is suspect at best in normal operating conditions, but is totally unattainable in
emergency contexts where developments are by definition unexpected, with no
time available for data collection and consideration of tradeoffs.
A method that can aid emergency preparedness is the use of prediction markets
to forecast based on the knowledge of a large number of individuals, none of whom
know everything about the topic at issue, but who in aggregate contribute a broad
perspective of information. Prediction markets have been found to be quite accurate
in predicting things like election results, or demand for products, and have been
proposed as ways to predict the magnitude of natural disaster damage (Sunstein
2006).
The recognition-primed decision model (RPDM) (Klein 1993) is based on preplanned training. The framework consists of the following steps:
1. Development of contingent response plans of action,
2. Training response personnel to react to expected critical situations, and
3. Prepositioning resources (equipment, food, medical supplies, transportation for
key response personnel and decision-makers)
487
This approach is especially useful for emergency response teams, such as fire fighters
or toxic clean-up operations. In essence, it can be viewed as pre-programming
professionals to automatically act when faced with typical emergency situations, so
that time is not wasted on deliberative thought. This is good, in that time is not
wasted, which can be critical in environments such as heart surgery. There are
decisions where deliberation should be applied, but not emergencies.
Coping with Earthquakes

We can prepare to better cope with earthquakes. There are two basic activities that
can be accomplished. We can predict their occurrence, although this is admittedly
one of the more difficult tasks in the field of prediction. We can also plan for what
to do when they occur (Sawada 2007). These two activities will be our focus. We will
also look at some tools that have been developed to aid in this planning process.
Scientists from a number of disciplines have been involved in trying to better
predict earthquakes, in terms of timing, magnitude, and location. Animals have
been observed to behave strangely when earthquake activity begins. There also
are theories that seismic activity might vaporize water, leading to unusual cloud
patterns, or even rainbow effects. Statistical study of earthquakes falls into the area
of extreme value distributions. Fortunately, earthquakes tend to be rare events for
specific areas. The Wenchuan earthquake took place at 14:28:04 on May 12, 2008.
Soon after that, aftershocks continued. The distribution of Sichuan earthquakes
aftershocks is shown in Figure 1. This indicates that earthquake historical data are
far from evenly distributed over the time horizon. Traditional statistical analysis is
thus complicated because it is difficult to obtain meaningful statistics over such long
periods. Distributions such as Pareto or Gumbel (extreme value distribution) have
been found to fit earthquake data in some cases, allowing more accurate prediction
(Bogen and Jones 2006). The bunching effect of earthquake events may motivate the
employment of statistical tools from financial risk management such as backtesting
with bunching. But earthquake prediction continues to be very difficult to predict,
in all three terms of timing, magnitude, and location.
Earthquake response refers to actions taken to immediately save victim lives and
reduce possible damage and disruption in a very short period of time. Possible
Figure 1.
488
Distribution of Sichuan earthquake aftershocks.

measures consist of threat detection, warning message dissemination, threatened

population evacuation, trapped victim search and rescue, medical care, and food
and shelter provision. When an earthquake strikes, RPDM can be a good alternative
tool to respond to earthquakes.
Finally, post-earthquake recovery consists of a continuum of actions taken to
repair, rebuild, and reconstruct properties and various social economic systems.
Because post-earthquake recovery is under way in the Sichuan Province of China,
we address details of this issue in the next section.
RISK MANAGEMENT IN POST-EARTHQUAKE CONSTRUCTION

China has been proactive in developing effective responses to natural disasters
(Disaster Reduction Report of the PRC 2008). This begins with a classification of
the types of natural disasters that China faces, as given in Table 3.
China has one of the worst impacts of natural disaster loss in the world, with
more than 200 million people affected annually (several thousand killed; 3 million
needing resettlement, 3 million houses destroyed). Losses from natural disasters
have increased with time. Typical catastrophic disasters include annual Yangtze,
Songhau, and Neng River floods, an earthquake in Lijiang, Yunan in 1996, severe
drought in North China from 1999 to 2001, and Huai River flooding in 2003.
Chinese Disaster Reduction
In 1989, the Chinese government created the National Commission for the International Decade on Natural Disaster Reduction, comprising 30 ministries and
departments. This agency coordinates disaster activities under the direction of the
State Council, which is responsible for promulgating principles, policies and plans,
coordination of disaster activities, guiding local government efforts, and promoting
international cooperation. China enacted a series of more than 30 laws and regulations to include the Law on Earthquake Prevention and Disaster Reduction. The
national disaster reduction plan emphasized prevention as a priority. From this plan
have come the following outcomes:
Table 3.
Natural disaster types in China.
Environment
Disasters
Atmospheric and
aquatic
Flood, drought, typhoon, tsunami,

wind, snow, ice
Geological and
seismic
Earthquake, cave-ins, landslides,

desertification
Biological
Pests, rodents
Fire
Forests, grasslands
Rates
7 typhoons per year
5 million hectares per year
disastrous flooding
More than 300,000 lives since 1949
More than 10 million houses
destroyed
More than 1400 pests
50 million tons of grain
Average 16,000 forest fires/year
489
1. Major objectives were to implement key disaster reduction projects, applying

disaster-reduction technology and enhancing public awareness and knowledge.
A comprehensive mechanism was to be created to alleviate disaster impacts on
economic and social development and to reduce economic losses and human
casualties. Large-scale projects have been implemented in flood-afflicted river
areas, as well as in drought and pest-stricken farmland.
2. A disaster monitoring and warning system has been implemented, with 251
ground meteorological stations, 124 high-altitude monitors, and more than 80
weather radars. An earthquake monitoring network was established that networks
48 stations with 1000 mobile observatories. A hydrometric network and a forest
fire-fighting and pest prevention forecasting network were put in place.
3. The National Disaster Reduction Center was founded in April 2002, to share
disaster information and to link technical services.
4. Small satellite constellations for environmental and disaster monitoring were
approved in 2003. Satellites were planned for launching in 2006.
5. A national emergency-response plan system has been created.
6. A material reserve system of disaster relief was improved.
7. Public awareness of disaster reduction has been raised.
Post-earthquake construction and recovery calls for systematic planning and design. Five hurdles were experienced during the post-earthquake construction and
recovery in Sichuan. These hurdles are as follows.
Economic aspects: There was market confusion after the earthquake, and the
cost of resuming production were high. There were also issues with property rights.
Challenges were met with respect to business and industrial sector recovery.
Social aspects: After the earthquakes, there was a need for a number of services,
to include psychological reconstruction, temporary shelters during the transition
phase victims, childcare, housing for those disabled and living alone, reuniting
families, renewal of communities, and management of special geographical and
ethnic cultural needs.
Natural impacts: The ecological environment was damaged, leading to the need
to rebuild sites, restore the ecological environment, and preserve ruins.
Administrative issues: The earthquakes disrupted existing administrative divisions. A large number of government officials were precluded from normal function,
and many grassroots administrative bodies no longer existed.
Policies and laws: The disaster led to questions with respect to how to adjust
policies involving financial, fiscal, taxation, land, and industrial sector management.
In the process of rebuilding, immigration policy became an issue, and disaster relief
laws urgently needed to be enacted.
The preceding problems are related to a great deal of economic, social, political, legal, cultural, natural environment factors. Solving such problems requires
approaches that integrate systematic planning and design.
Post-earthquake recovery is not only a physical outcome but also a social process that involves systematic decision-making that leads to restoration and reconstruction. This process emphasizes the harmony of various social-economic systems.
It views the recovery process as probabilistic and recursive and needs systematic
thinking under risk and uncertainty. In the recovery process of Sichuan Province,
490
the emphasis is sustainable development based on people-oriented rule, to create

value-added, resource-saving, and environment-friendly social units by coordinating
urban and rural development, regional development, economic and social development, harmonious development of man and nature, and promote the social life,
regional economic, administrative, ecological environment, and the legal system
within quake areas.
Enterprise risk management can be used to guide the post-earthquake construction and recovery process. The concept of enterprise risk management (ERM)
was developed in the mid-1990s in industry, with a managerial focus. There are
more than 80 risk management frameworks reported worldwide, to include that of
the Committee of Sponsoring Organizations of the Treadway Commission (COSO
2004). ERM is a systematic, integrated approach to managing all risks facing an
organization (Dickinson 2001). It focuses on board supervision, aiming to identify,
evaluate, and manage all major corporate risks in an integrated framework (Gates
and Nanes 2006).
Contingency management has been widely systematized in the military, although
individual leaders have practiced various forms for millennia. Systematic organizational planning recently has been observed to include scenario analysis, giving
executives a means of understanding what might go wrong, giving them some opportunity to prepare reaction plans. A complicating factor is that organization leadership is rarely a unified whole, but rather consists of a variety of stakeholders with
potentially differing objectives.
Disasters are abrupt and calamitous events causing great damage, loss of lives,
and destruction. Emergency management is accomplished in every country to some
degree. Disasters occur throughout the world, in every form of natural, anthropogenic, and combination of disaster. Disasters by definition are unexpected, and
tax the ability of governments and other agencies to cope. A number of intelligence
cycles have been promulgated, but all are based on the idea of:
1.
2.
3.
4.
Identification of what is not known,

Collectiongathering information related to what is not known,
Productionanswering management questions, and
Disseminationgetting the answers to the right people.
CONCLUSIONS
Emergencies of two types can arise. One is repetitivehurricanes have hammered
the Gulf Coast of the United States throughout history, and will continue to do so
(just as tornadoes will hit the Midwest and typhoons the Pacific). The other basic
type of emergencies are surprises. These can be natural (the explosion of Krakatoa)
or anthropogenic. We cannot hope to anticipate, nor will we find it economic to
massively prepare for every surprise. We do not think that a good asteroid-collisionprevention system would be a wise investment of our national resources. On the
other hand, there is growing support for an effective global warming prevention
system.
491
Repetitive emergencies are an example of riskwe have data to estimate probabilities. The second type is an example of uncertaintywe cannot accurately estimate
probabilities for the most part. (People do provide estimates of the probability of
asteroid collision, but the odds are so small that they dont register in our minds.
Global warming probabilities are near certainty, but the probability of a compensating cooling event in the near future evades calculation.)
Earthquakes are unfortunately repetitive. A great deal of experience and data
can be gathered for those events. Our weather forecasting systems have done a very
good job of providing warning systems for actual events over the short term of hours
and days. However, humans will still be caught off-guard.
Emergency management is thus a no-win game. However, someone has to do it.
They need to do the best they can in preplanning:
1. Gathering and organizing data likely to be pertinent,
2. Developing action plans that can be implemented at the national, regional, and
local level,
3. Organizing people into teams to respond nationally, regionally, and locally,
trained to identify events, and to respond with all needed systems (rescue, medical, food, transportation, control, etc.).
Two mechanisms were proposed, one to possibly better predict earthquake damage
magnitude (prediction markets), the other to prepare response team performance
(recognition primed decision-making). In conjunction with broader use of information system technology, it may be possible to improve preparedness and response.
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