Lecture 15 - Chemco and Insurance

Lecture 15 - Chemco and Insurance - Crisis Management...

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Crisis Management Company actions in the aftermath of a large, catastrophic event are often characterized as “crisis” management Crisis management is a special case of risk management From a risk or crisis management perspective, what can we learn from Chemco’s experiences after Bhopal?
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Agenda Assemble groups of 3 to 4 students (your choice) Discuss the questions posed, and write up your answers (in class) 30 minutes Class discussion Follow-up lecture
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Questions Psychologists have identified a number of risk perception biases and decision-making heuristics that people tend to exhibit when dealing with low-probability high-consequence events. Is Chemco’s focus on the worst-case scenario evidence of these kinds of “non-rational” responses by Chemco management?
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Questions Chemco’s management exhibited a vigorous risk management reaction to Bhopal, reviewing and changing risk management policies as a result. We have learned that a firm should balance the costs of risk management with the expected costs of (direct and indirect) losses plus costs of uncertainty. Did the Bhopal accident change the costs of direct losses, indirect losses or costs of uncertainty sufficiently for Chemco to warrant the increase in risk management costs?
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Questions Comment on Chemco’s reactions in terms
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Lecture 15 - Chemco and Insurance - Crisis Management...

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