Sunday, January 8, 2012

'Just-in-time' business models and systemic risk


Chatham House report says Britain could only withstand a week of disruption after a major event before spiralling into chaos
Read it at The Guardian (UK)
'Just-in-time' business models put UK at greater risk in event of disasters, warns thinktank
by Fiona Harvey

Building to tight tolerances with little slack and no redundancy is a sophomoric engineering mistake. We don't build bridges like that to save a few bucks, because there would be huge liability exposure, not to mention the consequences of the failure itself. Why build a whole economy on that model to eek the last drop of profit?

2 comments:

NeilW said...

It's not just the JIT system for production the accountants have got hold of.

This is also sat on an 'efficient capital structure', ie a load of debt.

Tom Hickey said...

I should have added that this is apparently just what the Army Corps of Engineers did in constructing the New Orleans levies to resist a class 3 hurricane, figuring the probability of a class five was too low to be concerned with in comparison with the cost of building out to a higher tolerance. Some saving.