HI2: A New Measure of Hurricane Impact for Innovation in Enterprise Risk Management

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The objective of this research is to create a Hurricane Impact Index (HI2) serving as basis and catalyst for innovation in enterprise risk management. As a result of global climate change and rapid growth in coastal regions, businesses and communities are facing unprecedented challenges in preparing for and recovering from natural disasters. Traditional methods, processes, and techniques in risk management used for mitigating severity and/or frequency of adverse situations at individual enterprises have proven ineffective in catastrophic events like hurricanes whose impacts are experienced on a much larger scale and in manners that are often nonlinear. The proposed Hurricane Impact Index is a paradigm shift aimed at continuously measuring realized effect on business operations and economic performance through observation of physical and economic conditions and advanced modeling of system interdependencies. It would fundamentally transform the way hurricane risk is characterized, managed, and mitigated with the aim to fill a critical knowledge gap in quantifying and modeling hurricane-induced damages. The framework of this research can be readily extended to other natural hazards such as earthquake and flooding. Specific aims to be pursued include: 1) Comprehensive and continual assessment of physical damages to built environment; and 2) Development and validation of the Hurricane Impact Index. The success of this work will represent an important step towards our long term goal of establishing alternative mechanisms of risk transfer and risk hedging that are more efficient, transparent, and market-driven.The creation of Hurricane Impact Index will give rise to more powerful and cost-effective financial instruments complementing existing weather-based derivatives and insurance policies. It can play a crucial role in not only stimulating innovations in risk management but also supporting decision making and policymaking on community sustainability and resiliency. Integrated in the project is a plan for broad dissemination of findings through workshops and technology transfer and commercialization in addition to standard academic outlets. The project will support doctoral students in wind science and engineering with sustained effort for recruiting students from underrepresented groups. These activities collectively will provide valuable training opportunities for graduate and undergraduate students, nurture the next generation of experts in multidisciplinary disaster-focused research, and contribute to the knowledgebase of hazard mitigation.