Bollard warns about NZ's risk management
New Zealand needs to improve its disaster planning and risk management, says Reserve Bank governor Alan Bollard.
Focussing on the Canterbury earthquakes, Dr Bollard told an academic audience in Wellington this morning that New Zealand’s approach to disaster planning needs to pay closer heed to the country’s unique vulnerabilities.
“We must also be conscious of New Zealand’s characteristics as a nation. In contrast to many other developed economies, we are geographically and economically isolated. If we face large challenges, we may do so with little external financial support.”
The speech was primarily focused on the lessons from Christchurch for Wellington in planning for a major earthquake.
However Dr Bollard’s comments have wider implications, not only for planning for further major seismic events but for other disasters.
“We have learned that an event like a major earthquake has many unpredictabilities and uncertainties about it, elements that are incident and location-specific, with characteristics that unfold in different ways,” he said.
“And these make it difficult to plan crisis responses in detail. We have learned the same thing about financial crisis, as in the semi-ironic title of the classic Reinhart & Rogoff book on international economic crises entitled ‘This Time Is Different’. This means institutions need to focus on general preparedness, competency, leadership, delegation powers and resilience, rather than on detailed plans for specific situations which may not repeat themselves.”
The initial economic and reputational “hit” from a disaster such as a major earthquake can be considerable, he said.
Immediate global transition of images from cell phones and the like, posted on the internet and also broadcast on international television networks, had a dramatic impact, with the New Zealand dollar and stock prices tumbling for a short time.
“At the Reserve Bank, we spent time explaining the event to overseas financial institutions and that limited excessive financial market reactions.
“A bad Wellington earthquake with an epicentre in the nation’s capital, could engender a more extreme financial market reaction, and it would be the Reserve Bank’s role to intervene to ensure an orderly foreign exchange market if that proved necessary.
“If the country’s political leadership and key administrative infrastructure were caught up in an earthquake, this could drive a bigger financial reaction, and make government policy responses much harder.”