Systemic Valuation of Strategic Preparedness Through Application of the Inoperability Input-Output Model with Lessons Learned from Hurricane Katrina

The U.S. Department of Homeland Security (DHS) has mandated all regions to "carefully weigh the benefit of each homeland security endeavor and only allocate resources where the benefit of reducing risk is worth the amount of additional cost" (DHS, 2006, p. 64). This mandate illuminates the need to develop methods for systemic valuation of preparedness measures that support strategic decision making. This article proposes an analysis method that naturally emerges from the structure of the inoperability input-output model (IIM) through which various regional- and sector-specific impact analyses can be cost-effectively integrated for natural and man-made disasters. The IIM is described extensively in a companion paper (Lian et al., 2007). Its reliance on data classifications structured by the U.S. Census Bureau and its extensive accounting of economic interdependencies enables us to decompose a risk analysis activity, perform independent assessments, and properly integrate the assessment for a systemic valuation of risk and risk management activity. In this article, we account for and assess some of the major impacts of Hurricanes Katrina and Rita to demonstrate this use of the IIM and illustrate hypothetical, reduced impacts resulting from various strategic preparedness decisions. Our results indicate the capability of the IIM to guide the decision-making processes involved in developing a preparedness strategy.