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Lessons to be Learned from the Texas Freeze

April 15, 2021
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Enterprise risk management consultant Carol Williams uses the winter freeze disaster in Texas to present a strategy for dealing with management's objections to costly upgrade recommendations. Her article can be found at htpps://www.erminsightsbycarol.com/management-ignores-recommendations/.

While the cold wave last February was unprecedented, Texas winters can be harsh. There had been  winter storms in 1989 and 2003, and following a 2011 ice storm resulting in blackouts the Electric Reliability Council of Texas (ERCOT), utilities and the Texas legislature were advised by industry experts to winterize power operating equipment and infrastructure,  and invest in reserve generating capacity. The recommendations were rejected due to cost.

As Santayana said, those who do not remember the past are condemned to repeat it. To put it another way, what you don't pay for now you may have to pay for later. The results of the 2021 ice storm include:

  • 40% of Texas' generating capacity was offline at the crisis peak.
  • Oil and gas production decreased by 20%.
  • An estimated $18 billion insured loss, larger than Hurricane Harvey.
  • At least 80 deaths as of early March.

To counter management arguments that risk recommendations and controls are too costly, Williams suggest three options:

  1. Do things incrementally at low cost, in order of priority.
  2. Spread out or shift cost outlay.
  3. Improve internal response management to make risk treatment a higher priority.    

It should not take a state-wide disaster for organizations to consider whether they should upgrade their preparations. If cost is an issue, incremental steps are better  than hoping nothing will happen