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Learning from Poland'sTragedy: Travel Concentration Risk and the Teachable Moment

By Marissa Fenech

Poland’s shocking loss of life, leadership, and intellectual capital in a single catastrophic event is an astounding blow to the country and the world. The airplane crash on 10 April 2010 over Smolensk, Russia, in poor weather killed 96 people, 88 of whom were part of the Polish state delegation including President Lech Kaczyinski; the Army, Navy, and Air Force chiefs of staff; the head of the National Security Office; the central bank governor; as well as lawmakers, aides, and the head of Poland’s Olympic Committee, Piotr Nurowski.

Poland as a country will survive this leadership crisis, its democratic processes intact and its markets stable. However, this event has implications for the private sector and risk professionals in particular. Although a national government has been impacted rather than a private sector entity, those in the security and risk industry would do well to ask themselves: "If a similar event happened to my firm, would we survive?"
 
As risk professionals know all too well, tragedies – realized risk – must be teachable moments, be they the sudden crash of an airplane carrying senior leaders or a siege-style terrorist attack against luxury hotels. With no warning, an event listed deep in the index of crisis management plans and dismissed as “low-probability, high-impact” becomes certain and devastating.
 
While it is too soon to question the decisions of those who placed such a convergence of brain trust and experience on a single airplane, it can be noted that the twin issues of concentrating staff for travel purposes along with crisis management planning for the loss of executive life or a significant loss of staff from travel accidents are often overlooked in the contingency generating process, given the relative safety of air travel and the need for staff to travel from Shanghai to Lisbon or New York to Lima as quickly and conveniently as possible. However, if eight executives of a firm’s ten-person management board were on a flight that crashed, would that firm survive the inevitable loss of confidence that would necessarily follow? At what price?
 
Regardless of the next tier of talent and their readiness to assume senior positions, such an event would speak volumes to shareholders about a firm’s ability to plan for succession, guard those crucial to the vitality of the company, and ensure continuity in the face of realized risk. It is also not only an issue for senior management. In today’s economy, where many firms are chasing smaller profits, what would happen to your firm’s ability to compete if the majority of your sales team, en route to a convention in Bangkok, suffered a similar accident? This is a teachable moment for management and staff about the need to mitigate travel concentration risk and ensure that large groups of staff or board members travel separately so if tragedy strikes, the firm is not decapitated.
 
Travel concentration risk, or managing the risk of staff traveling together in significant numbers on a single mode of transportation, is one of the most difficult risks to mitigate for a number of reasons. First, the relative safety and convenience of air travel makes the small possibility of accidents fairly easy to dismiss. Two, the globalization of business travel means that staff may need to be in places where there is one flight in or out per day, if not fewer. Although markets are opening up for a number of industries across Africa, Central Asia, and parts of the Middle East, airlines have been slow to meet growing demand. Three, management rightly sees time with colleagues in the air, on a coach, or in a car as time to strategize for the next client meeting or catch up with staff. Finally, staggering staff travel to avoid travel concentration risk can mean additional hotel rooms, connecting flights, and more opportunities for delays or longer drives—all of which cost time and money. In the face of these considerations, the current practice is to have 30 staff members board a single inexpensive, direct flight from London to St. Petersburg, while risk professionals try not to think of the implications.
 

Comments

A Swift And Crushing Blow

Having that many "high level players" taken out by one incident could and should have been avoided. There certainly is a teaching moment here. 1. - Build the infrastructure of your company in such a way that members at all levels are fully capable and ready to fill the gap above them. (should one arise)  2. - Avoid having to do this on a mass scale at all costs. Companies these days don't even keep all of their data in one singular location without some form of disaster recovery software that could be implemented. Why should human capital be any different. That plane should have never had that many government officials on it in the first place. If a company were to make traveling like this a regular practice, and news of this were to happen to get out . . .investors would be pulling out faster than you could say "Bankruptcy!" Simply put, it's neither fiscally nor strategically responsible for the company. It may be a little more expensive in the short term, but companies need to consider making high level executives travel separately. If the company is large enough to be doing a ton of overseas business/travelling, I would think that they should be able to afford the added cost. It should also be noted that with technology progressing like it is, many of the overseas meetings can be done via video conference. While this is not always the best option, it sure beats the cost of having all of your executives(and in turn your investors) taken out in one fell swoop.

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