Resilience Calculator enables businesses to “bounce back” in the face of disaster
CIRI researchers Adam Rose and Noah Dormady are developing a tool - the Business Resilience Calculator (BRC) - to measure and assess the resilience of a business in the face of a disruption, such as a natural disaster, infrastructure collapse, or terrorist attack. The BRC will allow businesses to precisely measure their resilience by assessing the potential economic impact of damage to critical infrastructure.
Rose, a University of Southern California professor of economics and disaster expert, and Dormady, an Ohio State University professor of public policy, have created the underlying algorithms for the calculator. CIRI will work with the research team to develop the software and deploy it for commercial use.
“Resilience is a process,” Rose said.“ A business must build up its resilience capacity before a disaster.”
When there are disruptions, businesses can incur two types of loss: property damage (i.e., destruction of assets) and business interruption. During a business interruption, a business’s ability to produce goods and services is reduced, starting when the disaster strikes and continuing until the company has fully recovered. It is typically measured in terms of lost revenue and employment.
The calculator will identify and measure the cost-effectiveness of 11 resilience tactics that businesses may use to promote continuity by limiting potential business interruptions. For example, one such tactic, termed “resource isolation,” involves modifying business operations to run without a critical input that’s normally used – such as operating a business without water in the aftermath of SuperStorm Sandy.
The tool will help companies make informed business decisions as they plan for how to keep running through a recovery process. The BRC software will allow managers to plug in the parameters of their business and study what other businesses similar to theirs have done in response to disasters - how much they spent on each tactic, and what they avoided in subsequent losses. The cloud-based decision-support software system will offer a user-friendly inventory and self-assessment process whereby a business owner can establish a robust resilience plan by consulting with best practices, ultimately producing a resilience roadmap for the future.
For this project, Rose and Dormady gathered extensive empirical data on how businesses have “bounced back” from natural disasters, framed in terms of the resilience tactics. Their team conducted two large-area surveys in the states of Texas and New York to assess the impacts of Hurricane Harvey and SuperStorm Sandy. A novel contribution of the surveys included measurement of avoided losses, meaning losses that businesses avoided by pursuing sets of actions that reflected different resilience tactics. As hypothesized, the more a company spent on resilience tactics, the higher the avoided losses. Rose and Dormady were able to use the collected data to assess the cost-effectiveness of each of the 11 tactics.
In addition to natural disasters, Rose has also researched the resilience of businesses impacted by the 9/11 World Trade Center terrorist attacks and by cyberattacks, such as those experienced by the Detroit automobile industry. Dormady is a CREATE Fellow at DHS’s Center for Risk and the Economic Analysis of Terrorism Events (CREATE) at USC, where Rose is also a faculty affiliate. Their research on economic resilience was recently published in the Handbook on Resilience of Socio-Technical Systems (Edward Elgar, 2018) and in the International Journal of Production Economics (Elsevier, 2019).