Banking on big boxes

Risk Management, August, 2008

Before FEMA began its response to Hurricane Katrina in 2005, local WalMart, Home Depot and Lowe's stores may have been able to utilize their supply-chains, infrastructure and decision-makers to provide emergency supplies and resources. In a recent study on the response to Katrina, Steven Horwitz, an economics professor at the Mercatus Center at George Mason University, suggests that when a major disaster strikes, big box stores have the potential to provide a significant amount of relief.

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"Disaster response happens at the local level," said Horowitz. "FEMA is not local to anyone except people who live in Washington D.C."

In the case of Katrina, the leadership of the private companies gave discretion to store managers and employees to make decisions, rather than waiting for instructions from upper-level management.

The Coast Guard was also a successful and quick responder after the hurricane. Similar to the big box stores, the Coast Guard was able to provide immediate relief, and also benefitted from placing a strong emphasis on local knowledge and a flat organizational structure.