Making It Through The Storm

GOLDMAN SACHS’S latest shrewd investment was in sandbags and back-up electricity generators. As Hurricane Sandy approached New York, the bags were stacked around its headquarters. It was one of the few offices in downtown Manhattan to remain dry and well-illuminated as “Frankenstorm” battered the city.

Each new disaster tends to surprise firms that thought they had good plans in place. Hospitals in New York that had moved their back-up generators above ground nonetheless lost power during Sandy because they had failed to put fuel and pumps where floods could not reach. Running disaster-readiness drills regularly, it turns out, is a common-sense idea practised all too rarely.

“Firms are increasingly reliant on networks, but often fail to understand the risks that networks bring,” says Don Tapscott, a management guru. Global supply chains, just-in-time and shifting to the “cloud” tend to bind once unrelated activities ever closer together, making them more prone to failing at the same time. The current fad for moving data to the “cloud” may appear to reduce risk because there is so much spare capacity in the web. Yet some firms offering cloud services have more concentrated operations than others.

Read the full article in The Economist.