Emp.Defense.Council.Li.2011.10.27

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The EMP Defense Council(sm) based in San Diego, California, believes that the best way to prepare for Electro-Magnetic Pulse (EMP) events, whether solar or nuclear, is by encouraging major corporations to see EMP as a profitable business opportunity -- NOT an expense item. Markets-based & standards-based approaches combined with the profit motive and self-interest will guarantee that more timely steps will be taken to prepare America for EMP.

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Emp.Defense.Council.Li.2011.10.27

  1. 1. Corporate Preparedness & Co-opting Electro-Magnetic Pulse (EMP) events during the active Solar Cycle “Plateau” of 2011-2017 – Turning the threat of solar Coronal Mass Ejections (CMEs) – or ANY “Black Swan” events -- into Business Opportunities David A. Palella, Founder EMP Defense Council (sm) "Markets-based Strategies to Co-opt EMP” San Diego, California cell: 619-787-5767 email: [email_address] http://EMP411.blogspot.com Entire contents Copyright Sept 2010 & August 2011 by David A. Palella. All rights reserved.
  2. 2. <ul><li>Entire contents Copyright Sept 2010 </li></ul><ul><li>& August 2011 by David A. Palella. </li></ul><ul><li>All rights reserved. </li></ul>
  3. 3. The EMP Defense Council (sm) logo explained -->> EMP leads to infinite electrons (e - ) which = infinite voltage spikes which = fried electronics <ul><li>. </li></ul>
  4. 4. Exx-Definitions – “EMP” not to be confused with… <ul><li>(1) EMI -- Electro-Magnetic Interference -- You take out your cell phone at the airport and make a call and the old man sitting next to you has a heart attack and dies. His family sues you saying your cell phone interfered with his pacemaker, killing him. This is EMI. </li></ul><ul><li>(2) EMF -- Electro-Magnetic Fields – You’re sitting on your front porch minding your own business when your yakker neighbor stops by to say Harry’s son down the street got brain cancer, probably from those damn high-voltage power lines cutting through your neighborhood ½ mile away. He says Harry should sue the utility company for $ 10 million. This is EMF. </li></ul><ul><li>(3) EMP -- Electro-Magnetic Pulse or Geomagnetic Storm – Al Qaida steals a high-altitude weather balloon from a U.S. government weather-monitoring station, and attaches a nuclear weapon provided by North Korea. They float it up 100 kilometers (as usual) near the rural Pennsylvania weather station they stole it from and detonate it, creating an EMP that destroys alll electronics and the electrical grid within a 250-mile radius of the epicenter. Or, alternatively, a major sunspot unleashes a coronal mass ejection (with or without an accompanying solar flare), which causes a geomagnetic storm on earth with similar results to Al Qaida’s efforts, but much wider spread. This is EMP. </li></ul>
  5. 5. Executive Summary (#1) <ul><li>A regional or national Electro-Magnetic Pulse (EMP) event caused by either a solar Coronal Mass Ejection (CME) or a high-altitude nuclear blast has a high probability of occurring within the next 5-10 years. </li></ul><ul><li>Nuclear EMP events can extend over a radius of 1,000 miles and will severely damage or impair most of the conveniences of modern life including the electrical grid, electronic medical devices, computer systems, modern cars, consumer electronics, natural gas & oil pipeline-control systems, and satellites (e.g., GPS & weather satellites). </li></ul><ul><li>Solar EMP events could affect an entire hemisphere of Earth, both polar areas, or the entire planet </li></ul><ul><li>Planes in the air (all late-model fly-by-wire commercial airliners), nuclear power plant control systems, acute-care / intensive-care medical equipment, elevators and building heating & cooling systems could cease functioning immediately , leading to 100s of thousands of deaths in a few minutes or hours. </li></ul><ul><li>Reference: </li></ul><ul><li>The EMP Defense Council(C) Announces the Electro-Magnetic Pulse (EMP) Priority Hardening List Ranked by Industry Vulnerability, and Proposes a Markets-Based Approach to Addressing Solar or Nuclear EMP Events </li></ul><ul><li>17 January 2011 </li></ul><ul><li>http://www2.marketwire.com/mw/release_html_b1?release_id=708639 </li></ul>
  6. 6. Executive Summary (#2) <ul><li>Back-up generators and emergency response equipment, even those turned off or not in operation at the time of an EMP event would also be severely damaged. </li></ul><ul><li>Little is being done by governments, companies, schools and the non-profit sector to prepare for EMP. Preparations by the U.S. military only protect military assets. Not you nor your company. </li></ul><ul><li>The U.S. Government will not lead on this issue in any timely manner – Leadership in America is the responsibility, burden & privilege of American corporations </li></ul><ul><li>The EMP Defense Council (sm) will act as a catalyst to mobilize companies, trade associations, standards-setting groups, engineering schools, and (lastly) laggard governments to prepare the U.S. for EMP. </li></ul><ul><li>Markets- and standards-based approaches will be favored over legalistic or regulatory approaches </li></ul><ul><li>Most importantly, for many companies, the threat of EMP events can be monetized as a business opportunity synergistic with their current core competencies and product & service offerings </li></ul><ul><li>In sum, EMP events should just become “business as usual” for America Inc. </li></ul>
  7. 7. Why Should Your Company Prepare for EMP Events ? (#1) <ul><li>As general awareness of EMP increases, eventually laws and regulations will require companies to prepare for EMP – e.g. Sarbanes-Oxley/SEC and AICPA SAS 94 financial data integrity & auditing requirements </li></ul><ul><li>Likewise, insurance carriers are beginning to change policy language to exclude coverage of all EMP events – or to cover it for an extra premium </li></ul><ul><li>For many companies, however, preparing for EMP is also a business opportunity to provide, for example, hardened or long shelf-life versions of their own products & services to first-responders, emergency services organizations, the U.S. military, and private security companies </li></ul><ul><li>If done in the design phase, experts estimate that EMP hardening adds only 3-5 % to the manufacturing cost of a product </li></ul>
  8. 8. Why Should Your Company Prepare for EMP Events ? (#2) <ul><li>Over the next few years, standards-setting organizations such as IEEE, ANSI (the American National Standards Institute), NIST (the National Institute of Standards & Technology), UL (Underwriter’s Laboratory), CPSC (the Consumer Product Safety Commission), ISO (the International Standards Organization), and others will establish both voluntary and mandatory standards for EMP resistance in products – this will level the playing field and place the same design/cost “burden” on imported products as well, just as standards for qualification for the “CE” mark in the European Union do, or just as U.S. Federal flammability standards do for any children’s clothing or bedding imported into the U.S. </li></ul><ul><li>The corporate EMP preparedness field will follow a maturation cycle similar to that experienced by the cyber security field over the past 10 years – or even faster </li></ul>
  9. 9. Why Should Your Company Prepare for EMP Events ? (#3) <ul><li>Because many of the exact same preparations are also needed for: </li></ul><ul><li>-- major earthquakes </li></ul><ul><li>-- flu pandemics / epidemics or quarantines </li></ul><ul><li>-- hurricanes </li></ul><ul><li>-- dirty nuclear or radiological bombs </li></ul><ul><li>-- nuclear reactor melt-downs / leaks </li></ul><ul><li>-- large-scale cyber / viral attacks on internet and/or power-grid </li></ul><ul><li> management / control centers (e.g., the Stuxnet virus); and </li></ul><ul><li>-- other national emergencies or negative “Black Swan” events (and, yes, black swan events can be positive ) </li></ul>
  10. 10. “… [ negative ] Black Swan events are Not Rare…” <ul><li>&quot;Plumeri urges buyers to prepare for riskier world” - September 2011 </li></ul><ul><li>&quot;Joe Plumeri, Chairman & CEO of Willis, told delegates at the DVS symposium last week in Munich that climate change is the number one risk faced by business today, closely followed by terrorism and pandemics.” ... </li></ul><ul><li>“ The last few years have shown that black swans are not rare,” said Mr Plumeri. </li></ul><ul><li>“ We [the risk transfer industry] need to be more creative and more in line with what industry needs from us against a backdrop of what the world has become,” he added. “We need to stay focused and current and understand that the world is different.” </li></ul><ul><li>&quot;Because the risk landscape has changed the traditional approach to risk management, whereby risk is simply transferred via an insurance transaction, is no longer valid, the American said. “The new way to look at the world is via an enterprise risk management approach -- a holistic view of a company’s risk ,” he said. There is no going back, he continued.” </li></ul><ul><li>Source: &quot;Commercial Risk Europe - European Insurance & Risk Management News&quot;, 06-08 Sept 2011 </li></ul><ul><li>From a speech at the DVS Symposium, Munich, Germany. DVS = Deutscher Versicherungs-Schutzverband (DVS) </li></ul>
  11. 11. America has a long history of preparing for HILP events – Both major & minor ! <ul><li>HILP = High Impact, Low Probability events such as: </li></ul><ul><li>-- Earthquake building codes, even though major quakes occur only once every 50 – 100 years </li></ul><ul><li>-- Codes requiring grounding of buildings & airplanes from lightning strikes – a one in a million risk </li></ul><ul><li>-- Flammability standards for upholstery, bedding, children’s clothing (textiles) – which, of course, even imports must conform to </li></ul><ul><li>-- Consumer Product Safety Commission (CPSC) standards for off-road vehicles (4x4s) and even table-saws ! – yes, true. </li></ul><ul><li>-- Add your own favorites here: _____________ </li></ul><ul><li>Clearly & eventually EMP / CME events will join this list. </li></ul>
  12. 12. Key Deliverables of the EMP Defense Council (sm) <ul><li>New Product Innovation or Product Line-Extension Strategies to Monetize EMP events or the Possibility of EMP events </li></ul><ul><li>Marketing, Advertising & Positioning Strategies for the same </li></ul><ul><li>Economic Impact Studies to Quantify EMP Damages </li></ul><ul><li>Human Factors Design & Organizational Design for EMP Preparedness and Corporate Robustness / Resiliency </li></ul><ul><li>Supply-chain Hardening Strategies & Tactics </li></ul><ul><li>EMP-Awareness Training Programs for All Employees, especially Top Management </li></ul><ul><li>Rapid Connections & Introductions to EMP-savvy partners in the areas of Insurance, EMP Mitigation/Hardening, Utilities/Power-Generation Planning, Telecommunications and Product Design, among others </li></ul><ul><li>Plus many other check-list items needed to prepare for EMP and/or other negative “black swan” events </li></ul>
  13. 13. How often do major solar EMP events occur? <ul><li>Here is a 145-year chronological listing of major solar or geomagnetic storms on earth going back to 1859: </li></ul><ul><li>http://www.solarstorms.org/SRefStorms.html </li></ul><ul><li>Some of the major storms listed are (to highlight a few – all of which would cause major catastrophic damage in today’s “electronified” world): </li></ul><ul><ul><li>1859 Carrington Event – the Mother of all Geomagnetic Storms </li></ul></ul><ul><ul><li>1921 New York Railroad Storm </li></ul></ul><ul><ul><li>1940 Easter Sunday Storm </li></ul></ul><ul><ul><li>1989 Quebec Blackout Storm – U.S.$ 2 billion in immediate damages from only a 9-hour blackout. </li></ul></ul><ul><ul><li> Other downstream damages and costs probably doubled this estimate. </li></ul></ul><ul><ul><li>2003 Halloween Storm s (19 October – 07 November) – 2 & ½ weeks of CMEs occurring 2-3 years after the solar maximum, causing about U.S.$ 1 billion in identifiable damages including loss of a U.S.$ 450 million satellite (Midori-2) and a 1-hour black-out in Sweden </li></ul></ul><ul><li>And just browsing randomly through this 15-20-page listing, you will find many other storms described that would cause U.S.$ 10 - 25 billion of damage today to electrical & electronic systems and equipment, not including business-interruption damages </li></ul><ul><li>In short, major geomagnetic storms on the caliber of a major hurricane ($10-20 billion in damages) probably occur every 35 - 45 years. </li></ul><ul><li>These are not 100- or 150-year events. </li></ul>
  14. 14. “ Great Southwestern Black-out” – 08-09 Sept 2011 <ul><li>Increasingly Complex Systems + Chaos Theory = more Black Swan events every year – meaning the rate of negative Black Swan events is increasing </li></ul><ul><li>Seven million customers in the Southwest U.S. & Mexico affected by one small mistake by a lineman in Yuma, Arizona – power outage lasted from 7 – 24+ hours </li></ul><ul><li>“ Effects of power outage linger; Sewage spills, economic losses result from blackout” </li></ul><ul><li>09 Sept 2011 – San Diego Union-Tribune </li></ul><ul><li>http://www.signonsandiego.com/news/2011/sep/09/effect-of-power-outage-linger/ </li></ul><ul><li>“ The blackout prompted some businesses to close early Thursday and economists said it will likely cost the greater San Diego region more than $100 million in economic losses , mainly in lost productivity. But the 12-hour event might also provide a mini-boost to the local economy as people spend to replenish supplies such as batteries and flashlights. ” </li></ul>
  15. 15. “ How loooong can you expect the power to be out if these events happen…? <ul><li>Random, typical black-outs such as the Great Southwestern Blackout: a few minutes to hours </li></ul><ul><li>Dirty nuclear or radiological bombs or other local or regional terrorist acts: a few minutes to hours to days </li></ul><ul><li>Hurricanes: a few hours to a few days </li></ul><ul><li>Major earthquakes: a few days to a week or more </li></ul><ul><li>Nuclear reactor melt-downs / leaks – caused by earthquake, tsunami, operator error, terrorism: a few days or weeks or more, as seen in Japan in 2011 (Fukushima reactors) </li></ul><ul><li>Pandemics / epidemics or quarantines: with little or no staff to run the grid, black-outs could last from days to weeks </li></ul><ul><li>Major ice storms: days or several weeks, as occur in Western New York </li></ul><ul><li>Cyber / viral attacks on internet and/or power-grid management / control centers (e.g., the Stuxnet virus): days or weeks or months </li></ul><ul><li>EMP events: weeks or months or up to 9 years </li></ul><ul><li>Multiply US$ 100 million for a 1 day black-out X months or years </li></ul>
  16. 16. <ul><li>Accounting Aspects of EMP </li></ul><ul><li>Entire contents Copyright Sept 2010 & August 2011 by David A. Palella. All rights reserved. </li></ul>
  17. 17. Sarbanes-Oxley & AICPA SAS 94 (#1) <ul><li>Sarbanes-Oxley (administered by the SEC) and the American Institute of CPAs’ (AICPA) SAS 94 (Statement on Auditing Standards 94) require publicly-traded companies to certify the integrity, reproducibility and robustness of their financial processes and the resulting data </li></ul><ul><li>However, with the possible exception of U.S.-based banks, these processes are not rigorously audited nor tested annually under the extreme conditions that would prevail during an EMP event – such as the electrical grid and back-up generators being non-functional for weeks or months – meaning most or all internal control and retrospective auditing processes would fail </li></ul><ul><li>Thus, we believe that favorable going-concern letters issued by auditors, are flawed in this regard and should be qualified until a publicly-traded company writes a detailed and quickly implementable Disaster & Business Recovery Plan that takes into account High Impact “Low” Probability (HILP) events such as EMP, hurricanes, earthquakes, pandemics, terrorist acts, cyber threats, and other unfavorable black-swan events, both natural and manmade </li></ul>
  18. 18. Sarbanes-Oxley & AICPA SAS 94 (#2) <ul><li>These Plans (and actual preparations) should establish and test financial processes, and prove that a company’s data can be reproduced accurately, even if the company’s computer systems & data centers were without power for days or weeks, and even if the company’s operations on 2 or more continents were equally affected </li></ul><ul><li>The EMP Defense Council(sm) will work with the AICPA (the American Institute of CPAs), FASB (the Financial Accounting Standards Board) and the SEC (Securities & Exchange Commission) to change auditing practices so that these Plans & Preparations are more rigorously audited and actually tested annually for implementability (as they are now for U.S. banks) </li></ul><ul><li>All companies based in the U.S. should likewise ensure that their major business partners such as suppliers, distributors, utility companies and financial intermediaries also have credible and quickly implementable Disaster & Business Recovery Plans in place. Now they do not </li></ul><ul><li>In short, unless your supply chain is “EMP certified”, your own business is at risk… </li></ul>
  19. 19. <ul><li> Insurance Aspects of EMP </li></ul><ul><li>Entire contents Copyright Sept 2010 & August 2011 by David A. Palella. All rights reserved. </li></ul>
  20. 20. Insurance & Liability Issues (#1) <ul><li>Business Property Policies are usually moot on the subject of solar-generated EMPs, implying that solar EMP losses may be covered – but probably only after an expensive legal battle with the carrier arguing over the breadth of the definitions of your “Computer & Media” or “Equipment Breakdown” endorsements and/or the restrictions of “Nuclear”, “War”, or other standard exclusions and sub-limits </li></ul><ul><li>Per a SwissRe report, in the case of solar EMP events that can be forecasted 6 – 24+ hours in advance, it is the duty of the insured to undertake mitigation measures to reduce losses. According to this report, in general, business property insurance policies cover only “sudden & accidental losses”, not those that are predictable. </li></ul><ul><li>The question becomes, then, is your company adequately monitoring space weather 24/7 ? Probably not. And the coverage you think you have in place, probably does not apply if you do not take preemptive mitigation measures against solar CMEs </li></ul><ul><li>Moreover, should a nationwide or hemisphere-wide EMP event occur, losses in the trillions of U.S. dollars will mean total losses will far exceed any recoverable market capacity (liquidity). The entire global insurance industry could lack the liquidity to cover all “insured” companies’ losses in the case of a catastrophic solar event, where potential damages have been estimated by the National Academy of Sciences (NAS) to equal “twenty Katrina’s” = U.S.$ 1.25 – 2.0 TRILLION </li></ul>
  21. 21. Insurance & Liability Issues (#2) <ul><li>Electric power supply – Utility companies currently do not have a good answer for how they will ensure the durability and sustainability of supplied power in a severe EMP event; furthermore, during such an event, connection to a vulnerable grid will probably only increase damages to your “Business Property” – assuming you & your carrier agree on this definition </li></ul><ul><li>Thus, another important question: Does your company have an established, standardized and quickly implementable plan to disconnect your buildings, labs & factories from the grid? Again, assuredly not. </li></ul><ul><li>You should ensure that your Business Property Policy specifically addresses the topic of EMP, both solar and nuclear </li></ul><ul><li>The EMP Defense Council(sm) is collaborating with an industry-leading insurance brokerage and their partner carriers to define insurance products that specifically include EMP coverage </li></ul>
  22. 22. Insurance & Liability Issues (#3) <ul><li>Business Interruption (BI) Insurance – You should insure that your policy covers losses from EMP events that could cause business interruptions or disruptions which may last months or even years. The Business Interruption coverage should extend beyond your 1 st -party layer or risk into contingent layers of your vendors and customers. </li></ul><ul><li>The entity at risk (your company) should verify that the broker/carrier partnership employed is indeed cognizant of the evolving risk of EMP events and capable of sustaining such losses for months or years. </li></ul><ul><li>It is recommended insured entities (your company) buy coverage for at least 12 – 18 months. </li></ul>
  23. 23. Insurance & Liability Issues (#4) <ul><li>Contingent Business Interruption (CBI) coverage should extend a few layers out from your operations because many high-tech, life science and consumer product entities rely heavily on CMOs (contract mfg organizations), CROs (contract research organizations) or major raw material suppliers </li></ul><ul><li>Electric power supply – If you ask directly, your utility company will not have a good answer for how exactly they will ensure the durability and sustainability of your power supply in a severe EMP event </li></ul><ul><li>Diesel-powered back-up generators or solar panels – these too will be damaged by EMP, and if they survive, may be your only power for weeks, months or years (assuming fuel, parts & supplies are available/deliverable). Coverage periods should not be reduced because you believe you are power-independent, because more than likely your key business and supply-chain partners have not prepared properly. So your coverage must be as long as it takes your supply chain to recover </li></ul><ul><li>As before, you should insure that your key business partners are also properly insured against long-term business interruptions from EMP (BI + CBI) </li></ul>
  24. 24. Insurance & Liability Issues (#5) <ul><li>D&O and E&O Insurance – Over time, knowledge in the business community of EMP events will increase to such a level that not preparing for them will constitute professional negligence – just as board members of California companies that ignore the risk of earthquakes are clearly professionally negligent </li></ul><ul><li>Likewise, the production, distribution & sale of critical products that will fail in an EMP event will constitute negligence – e.g., electronic medical devices, thus requiring changes in your Product Liability policies </li></ul><ul><li>Eventually the so-called “business judgment” case law that protects directors & corporate officers from liability will be reversed in the case of solar EMP as it becomes a well-recognized or well-known natural disaster – the same as earthquakes, lightning strikes or hurricanes </li></ul><ul><li>Solar flares and CME’s (coronal mass ejections) are really just sequelae (after effects) of magnetic “sunquakes” – and therefore not much different from terrestrial earthquakes </li></ul><ul><li>These are the arguments or legal theories that the plaintiff’s bar will soon use against deep corporate pockets. Be prepared ! </li></ul>
  25. 25. Insurance & Liability Issues (#6) <ul><li>Soon D&O and E&O policies will specifically exclude coverage for failure to provide or plan for EMP events. Coverage may then become available through endorsement (or “rider”) </li></ul><ul><li>Shareholder lawsuits against company Directors & Officers that failed to prepare the corporation or its products/services to resist EMP may become common </li></ul><ul><li>Companies should prepare and execute an insurance strategy to limit their EMP exposure – and insure that their key business partners have done the same </li></ul><ul><li>Evolution of EMP-related insurance products could mimic the trajectory that cyber insurance products have followed the past 10 years. </li></ul><ul><li>Once a major EMP event takes place, any EMP insurance coverage may become extremely expensive and/or only available through a government exchange – e.g., as with some coverages for EQ (earthquake), Flood, Terrorism, etc. – and thus limited in scope and dependent on the U.S. Government actually being liquid as well after an EMP event </li></ul>
  26. 26. Insurance & Liability Issues (#7) <ul><li>&quot;Risk Management & Space Weather: Are You Ready?” </li></ul><ul><li>Published in: National Underwriter P&C [ Property & Casualty ] </li></ul><ul><li>September 5, 2011 </li></ul><ul><li>By Nicole Homeier, Kyle Beatty, James Martin Griffin </li></ul><ul><li>http://www.propertycasualty360.com/2011/09/01/risk-management-space-weather-are-you-ready?t=public-sector </li></ul><ul><li>&quot;Defining Space Weather” </li></ul><ul><li>Published in: National Underwriter P&C [ Property & Casualty ] </li></ul><ul><li>September 5, 2011 </li></ul><ul><li>“ This means that from now until 2017 or so, we should be on alert for strong solar flares and large coronal-mass ejections. Historically, the strongest storms happen during the decline of the solar cycle, so the period from 2013 through 2017 may pose the largest risk.” </li></ul><ul><li>http://www.propertycasualty360.com/2011/09/01/defining-space-weather?t=public-sector </li></ul>
  27. 27. Insurance & Liability Issues (#8) <ul><li>Here is a rare and concrete example of a major insurance carrier actually addressing the dangers of Geomagnetic Storms: </li></ul><ul><li>&quot;Solar Storms: Protecting Your Operations Against the Sun's 'Dark Side'&quot; </li></ul><ul><li>By: A.V. Riswadkar and Buddy Dobbins - 4/08/2010 </li></ul><ul><li>Zurich Services Corporation , Risk Engineering Dept. </li></ul><ul><li>http://www.zurichna.com/internet/zna/SiteCollectionDocuments/en/media/SolarStorms.pdf </li></ul>
  28. 28. Insurance & Liability Issues (#9) <ul><li>We have interacted with many insurance brokers to try to highlight the near-term threat of EMP, but only Willis has responded proactively and positively </li></ul><ul><li>Many brokers and carriers are grossly uninformed about this “evolving” threat, mildly stated </li></ul><ul><li>If you have concrete questions / concerns about EMP-related insurance of any type, we recommend you contact: </li></ul><ul><li>D. Michael McCarroll </li></ul><ul><li>Client Advocate </li></ul><ul><li>WILLIS GROUP </li></ul><ul><li>Willis Insurance Services of California, Inc. </li></ul><ul><li>La Jolla Calif. </li></ul><ul><li>direct tel: 858 678 2145 </li></ul><ul><li>main tel: 858-678-2000 </li></ul><ul><li>email: [email_address] </li></ul><ul><li>http://www.willis.com </li></ul>
  29. 29. <ul><li> Action Steps to Prepare for EMP </li></ul><ul><li>Entire contents Copyright Sept 2010 & August 2011 by David A. Palella. All rights reserved. </li></ul>
  30. 30. Action Steps Your Company Should Take to Prepare for EMP (Summary) <ul><li>Commission your own independent study of the economic impact of an EMP event on your company in terms of immediate equipment & personnel losses, as well as the long-term cost of Business Interruption. </li></ul><ul><li> Show this study in particular to your utility company and key business partners / suppliers that probably have taken no steps themselves to prepare for EMP </li></ul><ul><li> Ask them to explain in writing how they will be a reliable supplier or business partner to your company for the 12-month period following an EMP event </li></ul><ul><li>Harden certain corporate buildings and structures against EMP </li></ul><ul><li>Clarify language in all your insurance policies to ensure coverage for EMP events, whether solar or nuclear </li></ul><ul><li>Develop an EMP-hardening design or retro-fit strategy for your own company’s products and/or services </li></ul><ul><li>Develop marketing strategies and campaigns to turn EMP awareness and hardening into profitable business opportunities for your company </li></ul><ul><li>Develop EMP-awareness training programs for all employees, from the CEO down to entry-level employees – think sexual harassment training, which is required of every employee, even C-level employees </li></ul>
  31. 31. Economic Impact Studies Quantifying Business-Interruption Losses <ul><li>Commission your own independent study of the economic impact of an EMP event on your company in terms of immediate equipment & personnel losses, as well as the long-term cost of Business Interruption </li></ul><ul><li> Show this study in particular to your utility company and key business partners / suppliers that probably have taken no steps themselves to prepare for EMP </li></ul><ul><li> Ask them to explain in writing how they will be a reliable supplier or business partner to your company for the 12-month period following an EMP event. These letters, documents or emails will later be your “smoking guns” </li></ul><ul><li>More than likely, no one will give you a satisfactory answer regarding the level of their preparedness for EMP. Threaten to change suppliers / partners that refuse to prepare themselves for EMP events (or for earthquakes, hurricanes or pandemics too) </li></ul><ul><li>In the case of utilities in particular (water, electric, industrial gases, etc.), the answers you receive will be especially vague and evasive. Monopolies and oligopolies in particular do not see a need to prepare for HILP (High Impact “Low” Probability) events. Or for what they view as HILP events, which may actually have a very HIGH probability of occurring. In some cases, utilities/public monopolies may even have statutory immunity from liability. So what is your strategy then ? </li></ul><ul><li>The EMP Defense Council(sm) specializes in preparing EMP-related Economic Impact Studies for companies, cities, states and regions </li></ul>
  32. 32. Hardening of Corporate HQs, data centers, vehicle-storage hangars, etc. <ul><li>Hardening of corporate HQs, data centers, aircraft hangars, car garages and inventory warehouses is an inexpensive EMP mitigation measure that most companies have yet to embrace </li></ul><ul><li>If you outsource your data storage to a commercial data center, or entrust your data storage to Google or Yahoo, or to one of the new and trendy mythical “cloud” storage companies, you should verify where your data is physically stored and that the facility is indeed hardened against EMP. Most data centers are not. In case of a hemispheric or global geomagnetic storm, your data should be stored or backed up in at least 3 separate locations worldwide, including one in another hemisphere or one near the equator (where geomagnetic storms are always weaker) </li></ul><ul><li>In the case of solar EMP, you will have from 6 – 24 hours advance warning, at least, of the arrival of the geomagnetic storm. This provides enough time to gather corporate jets, service vehicles, cars and other critical & portable electronic equipment into a hardened hangar or warehouse. </li></ul><ul><li>In the case of an EMP event that disables corporate telecom networks, fiber-optic cable signal boosters/repeaters, cell phones and even old land lines, how will your executive team communicate ? Most likely they will not be able to. What is your fall-back plan then ? </li></ul><ul><li>The EMP Defense Council(sm) has a semi-exclusive business development agreement with the leading EMP hardening and mitigation design-build & verification contractor in the U.S.: </li></ul><ul><li>HARDENED STRUCTURES HARDENED SHELTERS, LLC </li></ul><ul><li>Virginia Beach, VA </li></ul><ul><li>http://www.HardenedStructures.com </li></ul><ul><li>http://www.EmpEngineering.com </li></ul>
  33. 33. Employee Training for Response to EMP events <ul><li>Develop EMP-awareness training programs for all employees, from the CEO down to entry-level employees – think sexual harassment training, which is required of every employee, even C-level employees </li></ul><ul><li>EMP events could occur during working hours or non-working hours. Your corporate response will be different in each case </li></ul><ul><li>An EMP event during working hours that you did not prepare for opens you up to liability from employee class-action lawsuits, union action, and possible disciplinary rulings / fines from OSHA (Occupational Safety & Health Administration) </li></ul><ul><li>If you have remote or semi-remote work sites, many employee cars and mass transit will not function after an EMP event. Do you have a plan to transport these employees back to their homes ? Do you have food and water on-site to support these employees for several days or a few weeks until they can be transported back home or to a central public shelter ? </li></ul><ul><li>For the public-relations value, you should consider having quickly executable plans to convert one or more of your corporate facilities into public shelters in case of an EMP event. The facilities should be well stocked with water, food and basic medicines </li></ul><ul><li>You should share your employee EMP-awareness training materials with the BC/DR (Business Continuity/Disaster Recovery) managers working at your key partner & supplier companies </li></ul><ul><li>If an EMP event occurs during non-working hours, your employees may not report to work for days or weeks. How will your factories and offices function in such a case ? Some employees will die in plane & car crashes, medical emergencies, pipeline explosions, building system malfunctions (trapped in elevators), and in freak accidents caused by 2 nd - and 3 rd -order chaotic effects. How will your company operate without these employees ? </li></ul>
  34. 34. Product Design4EMP & Organizational Design4EMP (#1) <ul><li>Companies should make Design for EMP (Design4EMP) a central tenet of their corporate culture. This means design of both their products/services and their organizational design </li></ul><ul><li>EMP University : The EMP Defense Council(sm) is attempting to develop courses to teach Design4EMP to industrial & product designers, and electrical & mechanical engineers. Eventually we will offer such courses in-house at our client companies and on-line </li></ul><ul><li>If done in the design phase, experts estimate that EMP hardening adds only 3-5 % to the manufacturing cost of a product. Note that “hardening” does not mean “indestructible”; the cost of the latter would be excessive </li></ul><ul><li>National and international standards will eventually force all domestic and foreign suppliers to meet Design4EMP standards, just as they must meet flammability and EMI (Electro-Magnetic Interference ) standards now to sell their products in the U.S. or Europe </li></ul><ul><li>Initial markets or market segments for products Designe d 4EMP include emergency services (fire, police, ambulance), hospitals, the U.S. military, the National Guard, Coast Guard, private security companies / guard services, etc. </li></ul><ul><li>Simple design changes that could impart EMP resistance to products include incorporation of fast-fail inexpensive fuses, automatic disconnection of long conducting wires when a product is not in use, more modular design to facilitate repairs, additional grounding routes/wires, tighter joints/seals/closures on product housings/shells/skins/hulls, fractal antennas (instead of long axial antennas), retro-design features such as more mechanical components that would appeal to baby-boomers, etc. </li></ul>
  35. 35. Product Design4EMP & Organizational Design4EMP (#2) <ul><li>Retro Product Designs that incorporate mechanical (or now plastic “mechanical”) parts and assemblies that recall or mimic designs and color palettes popular in 1950s & 1960s America would be very popular with baby-boom generation customers. </li></ul><ul><li>Today’s increased level of manufacturing expertise and quality control means such mechanical systems would have almost the same reliability and product lifetime as fully electronic products (which will fail during an EMP event). Plus, these mechanical/plastic products would survive EMP events intact, or be much easier to repair afterwards </li></ul><ul><li>Taking into account the statistical risk of EMP events, the Expected Lifetime [ E(life) ] of such retro mechanical products would be about the same as electronic products that will most likely fail catastrophically and not be repairable </li></ul><ul><li>Many consumer products companies could target EMP-conscious consumers simply by altering the packaging of their products to increase the shelf-life (for long-term storage for emergencies) or to provide the consumer with a useful reusable container after the product is consumed </li></ul><ul><li>Certain technologies or systems are by nature EMP resistant or partially resistant including fiber optics, photonic systems, solar wafers (but not other long conductive / electrical parts of a solar panel or system), mechanical and chemical systems, gravity-based systems, “cloud”-based computer systems with redundant data storage, and most batteries </li></ul><ul><li>During normal product re-design or update cycles, such EMP-resistant materials, technologies and systems can be incorporated into next-generation products </li></ul>
  36. 36. Product Design4EMP & Organizational Design4EMP (#3) <ul><li>EMP events will lead to casualties and fatalities, thus “Organizational Design4EMP” means that planning and design for EMP events must become part of the corporate culture, including continuous organizational provisioning in case of EMP such as cross-training of managers; “redundant” lines of reporting (matrix organizations & succession planning); increased corporate-wide documentation of SOPs available in an easily accessible database (in an EMP-hardened facility – of course!) and/or printed on paper; increased emphasis on training mid-level managers and employees to take initiative and be able to function without supervision, often for long periods of time; and training all employees in the basics of performing the job above them should their supervisor no longer report to work </li></ul><ul><li>In sum, multiple organizational strategies are needed and must be practiced daily to enable long-term potentiation of the Corporate Memory -- and in a manner very similar to the highly-networked and redundant plasticity of the human brain – if one part is severely damaged, its function can often be assumed by a completely unrelated part of the brain </li></ul><ul><li>At the most functional and basic level of Organizational Design4EMP, companies should EMP harden various facilities to ensure the survival of key managers & employees and corporate data </li></ul><ul><li>Note that Design4EMP is fairly equivalent to “Design4Earthquake” or “Design4Hurricane” </li></ul><ul><li>Finally, to enhance shareholder & stakeholder value, companies embracing Design4EMP should make regular public announcements detailing their progress in transforming their organizations into long-term survivors of the most serious natural and man-made disasters known to mankind </li></ul>
  37. 37. For Publicly-traded Companies… <ul><li>A nationwide, hemispheric or bi-polar EMP event will probably mean that the exchange that trades your stock will be shut down for days or weeks, or possibly months </li></ul><ul><li>Thus, you should consider keeping a public listing on another exchange, at least on another continent, and preferably in the opposite hemisphere or near the equator where EMP effects are always less severe </li></ul><ul><li>You should ensure that the exchange that currently trades your stock has hardened its computer facilities and has redundant data back-up on another continent and/or in another hemisphere or near the equator </li></ul><ul><li>If maintaining a public listing overseas is considered too expensive, then consider making a private agreement with a major brokerage firm (e.g., Goldman Sachs or UBS) on another continent or in the other hemisphere to at least carry on block trades (10,000 shares or more). This brokerage could then also work with aggregators, or serve as the aggregator itself, so retail investors owning less than 10,000 shares could also continue to trade your stock </li></ul><ul><li>If you take the risk of having no liquidity outlet for your investors, and your stock cannot be traded for weeks or months, once trading resumes, your stock will bear the burden of an “EMP discount” for years, or be permanently shunned by distrustful investors </li></ul><ul><li>In contrast, if you maintain investor liquidity during national or continent-wide emergencies – and actually benefit financially from disasters and/or demonstrate corporate resiliency – your stock will be seen as a desirable “store of value” (like gold or silver) for years or decades </li></ul>
  38. 38. The HelioEconometric Research Institute <ul><li>The EMP Defense Council(sm) is seeking U.S.$ 5 million of funding to establish the non-profit HelioEconometric Research Institute, which will be the world’s first think tank dedicated to studying and quantifying the economic impact on human populations of solar events </li></ul><ul><li>The current failure of companies and world governments to prepare for solar EMP is partially due to a lack of statistically-rigorous studies and hard data quantifying the probability of economically damaging EMP events </li></ul><ul><li>Any existing think tanks or academic departments touching on this topic are not truly interdisciplinary, but, rather, dominated by one discipline such as astronomers or economists </li></ul><ul><li>An interdisciplinary integrative approach is needed that includes economists, astronomers, geophysicists, epidemiologists, business continuity/disaster recovery specialists, game theorists and mathematicians, and agronomists & hydrologists, among others </li></ul><ul><li>Our relationship with the Institute will be arm’s-length so that the research of the Institute will not be considered biased by our for-profit advisory business </li></ul><ul><li>Solar Flare Economic Damage Scale : The initial, main goal of the Institute will be to quantify the probability of earth-directed X-class solar flares (the most violent class) over the next 25 years, and to develop a solar “EMP Richter Scale” to detail rigorously the economic damages such flares would produce </li></ul><ul><li>All scientific methods and econometric models developed or used by the Institute will be open-source and published broadly for free adoption by anyone worldwide </li></ul><ul><li>The Institute will be free-standing and not associated closely with any academic or semi-governmental organization that would overly influence its research or impose high “over-head” charges on grants made to outside researchers (external funded research) </li></ul>
  39. 39. Again… Key Deliverables of the EMP Defense Council (sm) <ul><li>New Product Innovation or Product Line-Extension Strategies to Monetize EMP events or the Possibility of EMP events </li></ul><ul><li>Marketing, Advertising & Positioning Strategies for the same </li></ul><ul><li>Economic Impact Studies to Quantify EMP Damages </li></ul><ul><li>Human Factors Design & Organizational Design for EMP Preparedness and Corporate Robustness / Resiliency </li></ul><ul><li>Supply-chain Hardening Strategies & Tactics </li></ul><ul><li>EMP-Awareness Training Programs for All Employees, especially Top Management </li></ul><ul><li>Rapid Connections & Introductions to EMP-savvy partners in the areas of Insurance, EMP Mitigation/Hardening, Utilities/Power-Generation Planning, Telecommunications and Product Design, among others </li></ul><ul><li>Plus many other check-list items needed to prepare for EMP and/or many other negative “black swan” events </li></ul>
  40. 40. Summary & Conclusion (#1) <ul><li>Preparedness for EMP can be a business opportunity and profit center for many companies </li></ul><ul><li>EMP defense is not an expense for disaster preparedness, but, rather, an investment in the Patrimony, Legacy and Future of your corporation </li></ul><ul><li>Many of the preparations required for solar EMP should be taken anyway to prepare for other natural disasters or negative black-swan events such as global internet viruses, acts of war, earthquakes, hurricanes, floods or pandemics. The rate of these events is increasing </li></ul><ul><li>EMP events are misclassified as HILP (high-impact, low-probability) or “100- to 150-year” events, when in truth severe EMP events occur every 35 - 45 years, and are highly likely in the next 5–7 years </li></ul><ul><li>The U.S. Government will not lead on this issue, as can be seen by the 2 proposed bills stalled in the U.S. Congress that would fund EMP hardening or anti-viral protection of the nation’s electrical grid (e.g., protection from Stuxnet-like viruses) </li></ul>
  41. 41. Summary & Conclusion (#2) <ul><li>Therefore, American corporations or foreign companies with major operations in the U.S. must show Leadership on this critical issue </li></ul><ul><li>If you do not proactively prepare for EMP, then eventually changes in the auditing & regulatory environments (Sarbanes-Oxley + SAS 94), the insurance industry, and in U.S. and international product/design standards will force your hand. </li></ul><ul><li>So why not be an industry leader, instead ? </li></ul><ul><li>We are seeking marquis clients & partners who will work with us and openly publicize their efforts to prepare for EMP – and share their lessons learned with their peers in American & European industry </li></ul><ul><li>Finally, by preparing your company for EMP you are also partially preparing and protecting yourself, your own family and your community. </li></ul>
  42. 42. With Imagination and Foresight … <ul><li>The main conclusion of the “9/11 Commission” ? </li></ul><ul><li>&quot;The most important failure was one of imagination ” </li></ul><ul><li>Excerpted from the final report of the “9/11 Commission”, properly known as The National Commission on Terrorist Attacks Upon the United States; from Chapter 11, titled: &quot;Foresight -- and Hindsight” </li></ul><ul><li>Additional reference: </li></ul><ul><li>&quot;Failure of 'imagination' led to 9/11” </li></ul><ul><li>July 23, 2004 - The Christian Science Monitor </li></ul><ul><li>&quot;The most important failure was &quot;one of imagination,&quot; says the final report. 'We do not believe leaders understood the gravity of the threat'.&quot; </li></ul><ul><li>http://www.csmonitor.com/2004/0723/p01s03-uspo.html </li></ul>
  43. 43. Principals of the EMP Defense Council (#1) <ul><li>David A. Palella </li></ul><ul><li>Founder </li></ul><ul><li>EMP DEFENSE COUNCIL(sm) </li></ul><ul><li>San Diego, California </li></ul><ul><li>cell: 619-787-5767 </li></ul><ul><li>email: [email_address] </li></ul><ul><li>http://EMP411.blogspot.com </li></ul><ul><li>EMP Defense Council [ on LinkedIn ] </li></ul><ul><li>http://www.linkedin.com/e/vgh/3702799/ </li></ul><ul><li>Mike R. Doerr </li></ul><ul><li>Chief Technical Advisor - Aviation </li></ul><ul><li>EMP DEFENSE COUNCIL(sm) </li></ul><ul><li>San Diego, California </li></ul><ul><li>cell: 760-805-1001 </li></ul><ul><li>email:  [email_address] </li></ul>
  44. 44. Principals of the EMP Defense Council (#2) <ul><li>Paul Hendershot </li></ul><ul><li>Chief Economist </li></ul><ul><li>EMP DEFENSE COUNCIL(sm) </li></ul><ul><li>San Diego, California </li></ul><ul><li>cell: 585-503-6730 </li></ul><ul><li>email:  ph@hendershoteconomics.com, [email_address] </li></ul><ul><li>Desimira “Desi” IVANOVA </li></ul><ul><li>Advisor </li></ul><ul><li>Worldwide Business Development </li></ul><ul><li>EMP DEFENSE COUNCIL(sm) </li></ul><ul><li>San Diego, CA </li></ul><ul><li>cell: 619-850-6780 </li></ul><ul><li>email: [email_address] </li></ul><ul><li>http://www.DesimiraIvanova.com </li></ul>
  45. 45. Suggested Reading about EMP <ul><li>One Second After -- a novel by William R. Forstchen – March 2009 </li></ul><ul><li>&quot;In order to graphically demonstrate the devastation of an EMP event, author Forstchen has created a novel in which the inhabitants of a small town (Black Mountain, N.C.) fight for survival in the aftermath of an E.M.P. attack.&quot; </li></ul><ul><li>http://en.wikipedia.org/wiki/One_Second_After </li></ul><ul><li>http://www.amazon.com/One-Second-After-William-Forstchen/dp/0765317583 </li></ul><ul><li>http://www.amazon.com/gp/product/0765317583?ie=UTF8&tag=surviveinplac-20 </li></ul><ul><li>http://www.savevid.com/video/emp-electromagnetic-pulse-attacks-pt1-william-forstchen.html </li></ul><ul><li>http://www.youtube.com/watch?v=Ut3RSR0dDW0 </li></ul><ul><li>http://www.smokymountainnews.com/news/item/2973-in-new-novel-outlook-is-grim-without-technology </li></ul>
  46. 46. <ul><li>Addendum for Cities / Municipalities </li></ul><ul><li>Entire contents Copyright Sept 2010 & August 2011 by David A. Palella. All rights reserved. </li></ul>
  47. 47. Suggested Action Steps for Municipalities to prepare for EMP (#1) <ul><li>Undertake an Economic Impact Study to quantify the damages to local business & industry and the downstream effect on municipal finances </li></ul><ul><li>Share the Study openly with local businesses to make them aware of this “emerging” threat – which actually has been well-known for decades </li></ul><ul><li>Take the study to your local utility companies (power, water, sewer, gas) and ask them to detail the precautions they have already taken to prepare for EMP. Their responses will not impress you. </li></ul><ul><li>Form a coalition with major local businesses to exert pressure on your utilities to Actively and Immediately begin preparations for EMP </li></ul><ul><li>Approach various alternative energy companies such as wind, solar, geothermal, etc. – and propose formation of large-scale public-private partnerships to build alternative energy plants in your municipality (or nearby) </li></ul><ul><li>Do not try to sell power back to the grid, which means connect to the grid, because then your efforts at energy autarky (self-sufficiency) will be negated fully </li></ul>
  48. 48. Suggested Action Steps for Municipalities to prepare for EMP (#2) <ul><li>Encourage major local employers to invest in preparations for EMP, and to agree in writing to offer their facilities to the city during EMP events or any other large-scale emergency (fire, earthquake, etc.) </li></ul><ul><li>Encourage major local employers to view EMP as a business and profit opportunity – not an expense ! -- which is the central message of the EMP Defense Council ! </li></ul><ul><li>Share the Economic Impact Study with your local emergency services (police, fire, ambulance, etc.) and private security companies, and encourage them to take action to prepare </li></ul><ul><li>Hospitals will be especially vulnerable in an EMP event. Educate them to prepare. </li></ul><ul><li>If you have nearby units of the National Guard, Coast Guard, Border Patrol, FBI, etc., work with them to prepare contingency plans for EMP </li></ul><ul><li>Publicize nationwide your city’s active preparations for EMP (and other major catastrophes) and project an image of stability and safety – no matter what happens -- to attract new business investment. Similar to the “Non-stop Computing” slogan of Tandem Computers </li></ul><ul><li>Many of the steps above should lead to local investment, job creation, and increases in municipal revenue </li></ul>
  49. 49. Again… Why Should Your City Prepare for EMP Events ? <ul><li>Because many of the exact same preparations are also needed for: </li></ul><ul><li>-- major earthquakes </li></ul><ul><li>-- flu pandemics / epidemics or quarantines </li></ul><ul><li>-- hurricanes </li></ul><ul><li>-- dirty nuclear or radiological bombs </li></ul><ul><li>-- nuclear reactor melt-downs / leaks </li></ul><ul><li>-- large-scale cyber / viral attacks on internet and/or power-grid </li></ul><ul><li> management / control centers (e.g., the Stuxnet virus); and </li></ul><ul><li>-- other national emergencies or negative “Black Swan” events (and, yes, black swan events can be positive ) </li></ul>
  50. 50. <ul><li>Entire contents Copyright Sept 2010 </li></ul><ul><li>& August 2011 by David A. Palella. </li></ul><ul><li>All rights reserved. </li></ul>

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