LA Wildfires Uncover Critical Gaps in Risk Management Strategies

The devastating Los Angeles wildfires of this year have sparked a renewed focus on risk management strategies. Beyond the immediate destruction, these events underscore the necessity for Multi-Event Simultaneous Scenario (MESS) planning—a forward-thinking approach that considers how multiple concurrent risks can amplify one another.

"Historically, we’ve always planned for individual events, whether environmental—hurricanes, snowstorms, flooding—or geopolitical," says Craig Spielmann, a risk management expert. "But the absence of planning for simultaneous events is a critical gap, as the LA wildfires demonstrate."

Beyond One-in-a-Thousand-Year Events

In recent years, the frequency of so-called "one-in-a-thousand-year events" has increased dramatically. "When you model scenarios involving multiple risks—say, a geopolitical conflict coinciding with a natural disaster—the response changes dramatically compared to handling one isolated event," Spielmann explains.

He cites COVID-19 as a recent example of a multi-event crisis. "While the pandemic raged, the shift to remote work opened a wave of cyberattacks. These weren’t isolated risks; they fed off each other, creating compounded challenges."

The LA wildfires are another case in point. "You have a fire that starts, but then you add high winds, and the situation becomes exponentially worse," Spielmann notes. "The devastation is reminiscent of World War II bombings."

The Financial Ripple Effect

Climate events like the LA wildfires have direct implications for the financial sector. As Spielmann outlines, destroyed properties lead to uninsured losses, mortgage defaults, and economic ripples that can destabilize institutions. "If someone loses their home, they’re not going to pay their mortgage. Smaller institutions with less capital cushioning will feel the brunt of this."

He stresses the need for financial institutions to adapt. "If we ignore events like this in our planning, we’re setting ourselves up for disaster. MESS planning is a no-brainer."