Chertoff: Guard the henhouse

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in Leaders & Managers,Management Training

The 9/11 terrorist attacks, the devastation of Hurricane Katrina and the current fiscal crisis all were predicted years ahead and could have been prevented, says Michael Chertoff, Secretary of the U.S. Department of Homeland Security.

“We have an inefficient system for managing risk,” Chertoff told students at the Wharton business school this  past fall. “Dealing with something afterward is not risk management. It is suffering the consequences.”

Chertoff described a recurring pattern. Those entrusted with our security make mistakes, learn lessons and forget them. As the tragedy fades from memory, people start thinking they’re spending too much time and money protecting against something that might never happen, so they stop paying attention. Then disaster strikes.

To control risk, Chertoff says:

Remember that you’re in it for the long haul.
Building safeguards probably will not yield short-term payoffs.

Look at the big picture. A crisis produces more than internal costs. Leaders need to take responsibility for external and cascading costs as well. For example, to help with power recovery after hurricanes, Chertoff encouraged (and Florida later required) gas companies to install emergency generators.

Earn trust. “Transparency is the greatest gift to commerce,” Chertoff said. Yet just in the past year, tainted food and toys came from China, 40 million credit card numbers were stolen and reckless financial dealings robbed Americans of billions from their retirement funds. The resulting mistrust spurs extreme reactions.

Even though you can’t eradicate risk, Chertoff advises vigilance, spinning a variation on an old saying: Shame on fate for the first disaster, shame on us for the second one.

— Adapted from “Secretary Chertoff discusses failures in risk management,” Katherine Foo, Wharton Journal.

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