Chapter 5 : Earthquake risk reduction and small business

ABSTRACT

This chapter represents our current understanding of earthquake risk reduction and small business, with special reference on the Eastern and Central United States, where there is the potential for infrequent strong and potentially damaging earthquakes. It is based on a literature review and ongoing research. Three topics are emphasized (1) alternative approaches to earthquake risk reduction, (2) insurance as a loss reduction measure, and (3) unanswered questions requiring further research. Our research is oriented toward developing practical policy advice for businesses and for local, State, and national governments. It is multidisciplinary, embracing finance, decision theory, risk assessment, systems design, and systems management. A typology is developed for basic small business hazard mitigation goals. Financial models are developed so that the aggregate consequences of earthquakes on small businesses can be assessed, with and without benefit of earthquake insurance. Examining the financial consequences of potential earthquakes will enable us to derive conclusions pertaining to improvements in public policies for small business risk reduction. The characteristics affecting the vulnerability small business to earthquakes are identified and examined on the basis of hypotheses about organizational, financial, and market effects. Research on these hypothesized relationships is expected to result in cost-effective loss reduction measures for small business that are not dependent on structural mitigation measures or insurance.(AU)