Resilience for Japan (B) 4-20-11

8/3/2019 Resilience for Japan (B) 4-20-11

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JAPAN EARTHQUAKE AND TSUNAMI 2011

INTRODUCTION AND CURRENT SITUATION

On March 11, 2011, a magnitude 9.0 earthquake struck the Island of Honshu, Japan with its epicenter in the Sendai province.This earthquake triggered a 12 meter high tsunami event along the eastern coast of Honshu. The combined force of thesetwo catastrophic events, and further exacerbated by a continuous cycle of daily earthquakes measuring between 4.5 and 7.1in intensity, as defined by the Richter scale, has caused significant damage throughout Japan. The degree of damagesuffered by the cities, villages and industrial facilities of Japan is significant and Japan’s economy was severely affected. Asa result of these events, Japan suffered significant damage, disruptions, costs and risks.

The Bank of Japan has injected over $700 billion since the catastrophe to support business and the economy. Wholecommunities and their supporting facilities were virtually destroyed. Casualties in terms of confirmed loss of life has totaled10,000 mark as of Friday, April 9th and was still climbing.

As of today, hundreds of thousands of survivors are still encamped in temporary shelters. Some 660,000 households do not

have water; more than 209,000 do not have electricity. Earthquake related damage claims could rise as high as $310 billion,Japan’s government said, making it the most costly natural disaster on record.

The total death toll from the disaster could rise much higher. Japan’s National Police Agency said that more than 17,400people are still missing. The actual totals are difficult to project, as for example police from one of the hardest-hitprefectures, Miyagi, estimate that the deaths will top 15,000 in that region alone.

In addition to the direct human and economic costs from the event and resulting disruptions. Japan faces significant threatsand risks due to the significant damage sustained by (1) its nuclear power plant complexes, (2) oil refineries, (3)

petrochemical facilities and (4) industrial chemical factories. It appears certain that the failure of several nuclear reactors atthe Fukushima Nuclear Power facility will occur and very soon. There could be a substantial release of radioactive materialincluding very dangerous and deadly isotopes of Plutonium, Cesium, Iodine and Strontium. Given the proximity ofFukushima, which is located 140 miles (220 kilometers) northeast of Tokyo, to Japan’s major cities approximately 80% of thepopulation of Japan will likely suffer some level of injury, both temporary and permanent, and death either immediately or farsooner than the victims’ expected lifetimes. Tokyo itself has a population of approximately 13.7 million in the city and over 35million in the metropolitan area). The population of Japan is approximately 135 million.

Global Resilience Advisors



JAPAN EARTHQUAKE AND TSUNMAI 2011

INTRODUCTION AND CURRENT SITUATION (CONTINUED)

Japan has been successful internally and recognized and respected as a world power. Japan’s strong and well-developedinstitutions play an essential role. These institutions have formed the backbone of Japan’s efforts to assert itself as a

constructive, respected but peaceful leader in the international arena. During normal times the cooperative spirit between the

government and business has supported the strong growth and leading position that Japan has historically earned. However,the recent catastrophe and collateral damage has exposed Japan’s and its major institutions to a high degree of impairment.This has increased the level of risk globally. If Japan’s institutions were to fail because they were not properly supported by a

resilient infrastructure then Japan would not be able to meet either its domestic or international obligations. If Japan fails todeliver on its obligations to the world community, there would be significant consequences that would result in world economicdisruptions, business failures and other costly gaps in terms of world political leadership, systems, social processes, etc. whichare valuable but not necessarily quantifiable.

Given the extremely fragile state of its nuclear facilities, particularly Fukushima, Japan is highly likely to experience a

catastrophic event. This will result in the long term impairment of approximately 70% to 80% of its land, air and water supply,never mind the projected casualty rates and economic damage. This could force up to 70% of Japan’s industrial capacity to be

shut down. Pollution from the release of radioactive matter, particularly Plutonium, Cesium and Strontium will render theenvironment of Japan as hostile and uninhabitable for time period of tens up to thousands of years.

The importance of Japan’s institutions, the risk to its population and the short time frame remaining before the likely

catastrophic event at Fukushima, make the need for Japan to act quickly to develop and implement strategies that willpreserve as much of what makes up Japan as possible. A way to do this is to employ the concept of Resilience, which largemanagement consulting firms such as McKinsey, Booz Allen & Hamilton and Accenture are well known as influential leaders in

its application. Through Resilience, Japan will be able to ensure the continuity of its institutions and the protection of itspopulation and its way of life.

A comprehensive, well-coordinated effort is required to quickly develop and implement Resilience and its supporting strategies,investments and implementation steps. We propose to coordinate and provide valuable leadership to this intensive effort.Time is not on our side, as the state of the Fukushima facility, particularly reactors 1, 2 and 3, is very fragile and vulnerable toexperiencing a catastrophic event . This event is highly likely to occur within a time period we do not believe will exceedthirty (30) days, Given the lack of historical reference for this type of disaster, the risk of multiple reactors failing and theunusual nature of this incident, we have no way to confirm the exact date and time.

2Global Resilience Advisors



Resilience incorporates necessary strategy, systems, structures, processes and supporting investments that enable

Japan to achieve its goals, protect its institutions, resume growth and manage risk.

• Resilience, according to IBM, is the ability to rapidly adapt and respond to risks and opportunities, in order to maintaincontinuous business operations, be a more trusted partner, and enable growth.

• Resilience protects the most important institutions that define Japan, and minimizes critical risks. Given Japan’s

inherent geological instability and exposure to regular tsunami’s, Japanese must implement a high degree of readiness.

• The interruption and impairment of the globally important and influential Japanese institutions, particularly Japan’s ,economy and business operations, will expose the world to a high degree of risk and loss. The current state of theworld without considering the effects of the Japanese disaster is already tenuous at best due to global economicissues, wars and social unrest. Japan must carefully consider the national and international risks to its economy,business infrastructure, political institutions and systems, social institutions and other contributions and influences such

as art, literature, music, scientific, intellectual, leadership, religious/spiritual, philosophy etc.

• Resilience will leverage available systems and technologies as well Japanese-owned foreign real estate and humanresources to provide a platform on which migrate as many of its core operations, systems and finances to saferhavens.

• Execution of a Resilience engagement for the benefit of Japan’s leading commercial and governmental institutions willrequired an intensive and well-coordinated effort to ensure success.

• It is likely that only a short time frame is available to approve and initiate the Resilience effort.


Source: IBM Corporation, MdKinsey & Co., GRA analysis



Tokyo

JAPAN EARTHQUAKE AND TSUNAMI

HONSHU AREAS AFFECTED SINCE EARTHQUAKE

From 11 MARCH To 8 APRIL, 2011

LEGEND:

POLLUTED/IMPAIRED AREAS

Per Official Announcement

Actual Area of Damage

Fukushima Nuclear

Complex (6 Reactors)

Tepco and government reports show the main areas of radiation exposure to be primarily outside of Japan's major population centers.

However, verified authoritative reports show these initial reports to be largely understated. Further, this is not a static or stagnant

situation. This incorporates a dynamic series of events that will effect large portions of Japan’s population, economy, institutions and

infrastructure.

PreliminaryWorking Draft


Source: International Atomic Energy Agency



Kashima

Chiba

Kawasaki

Iwaki

Shikoku

Negishi

Tokyo

Onahama

Ibaraki

Sendai

Fukushima Nuclear Power Complex


HONSHU: KEY NUCLEAR AND CHEMICAL AT RISK SITESAs of 7-April 2011


Due to the damage and resultant release of hazardous and toxic materials, substantially 70% to 80% of the Japanese

mainland will be substantially polluted by a combination of radiation, oil refinery and industrial chemical related

accidents. Nuclear power plant related pollution could take up to thousands of years to dissipate while other damage

such as industrial, chemical and sea water will take between 10 to 50 years to clean up.

Tokai Nuclear Power Complex

Onagawa Nuclear Site

Rokkasho RP

Nuclear Release Site

Petro/Chemical Release Site

For Reference see Appendix A-2

Global Resilience Advisors 5

Source: Chemical Industry News and Intelligence




PROJECTED RADIATION EXPOSURE TO POPULATED

AREASPost Predicted Fukushima Catastrophic Event

LEGEND:

Affected Areas

Assumes Weather at Site: Wind S/SW @ 10 km/h

80% of the population of Japan lives within “Harms Way”, that is within the range of greatestimpact of the impending nuclear disaster at Fukushima. At least three nuclear reactors havea high probability of self-destruction.

THE PREDICTED CASUALTY RATE FOR THE JAPANESE POPULATION IS VERY HIGH.

Chart Symbols – Locators

Nuclear Reactor Unit


Global Resilience Advisors

Fukushima Nuclear Power Complex:3 Critically Damaged Reactor Units

Source: Institut de Radioprotection, et de Surete,Nuclearie GRA analysis



Kawasaki

Shikoku

Levels of Contamination

Prohibited: 15 miles (500 years plus)

Exclusion: 180 miles (15-50 years)

Exposure: Long Term Health Consequences

Kashima

Fukushima I Nuclear Power Plant

Ibaraki

Onahama

Iwaki

Sendai

Tokyo

NegishiChiba


IMPENDING FUKISHIMA NUCLEAR CATASTROPHE

ESTIMATED RADIATION COVERAGE AND IMPACT


80% of the arable and habitable land area of Honshu will be unusable and even hostile.The human and other living creatures’ casualty rate will be historically high.

THE POTENTIAL CASUALTY RATE FOR THE JAPANESE POPULATION IS VERY HIGH.

Source: Department of Physics and Center for Experimental Nuclear Physics and Astrophysics,University of Washington



The consequences of the environmental damage and other disruptions already sustained by Japan, to be

further magnified by the predicted catastrophe at Fukushima, will critically Impair key Japanese institutions,

particularly its economy and business community. This will negatively affect countries and international

institutions, economically, financially and otherwise.

JAPAN EARTHQUAKE AND TSUNMAMI

DIMENSIONS OF JAPANESE INSTITUTIONS

SUMMARY OF MAJOR DOMESTIC AND INTERNATIONAL RISKS

INSTITUTION DOMESTIC RISK INTERNATIONAL IMPACT

• Economy • Default of a significant portion of Public

Debt at $2.3 Trillion (70% held by Japanese

citizens)

• Default of a significant share of PrivateDebt and the evaporation of Public Equity

of approximately $7.5 Trillion

• Loss of Private Equity Value of

approximately $ TBD (multi-trillions of US

dollars)

• Loss of value of international trade, funds

flows, foreign exchange transactions,multiplier effects > $25 Trillion per year

• Loss of ability to grow and produce nearly

100% of food supply – higher prices, and

supply shortages

• Loss of Yen value in foreign exchange reserves

• Negative Impact on world money supply, currency

markets, money flows, public equity values and

balance of payments

• International trade disruptions leads to shortages of

goods

• Sharp decrease in the value of Japan-related

investments both direct and indirect

• Loss of specialized and commodity food exports






Business • Impairment of Capital Markets – sharp reduction of

value and impairment of Japanese institutions and

their ability to access the capital markets domesticallyand internationally – Sharply higher cost of capital

• Halt of to up to 70% of manufacturing and services

industries’ activities for potentially many years

• Supply chain disruption.

• Loss of Privately-held total Equity Value $TBD

• Exodus of, injury to, and death of managers,

executives, bankers and investors

• Domestic supply chain disruptions lead to international subsidiary

shutdowns

• Disruptions of capital and operating cash flows to foreign

subsidiaries, affiliates, other business partners impact international

subsidiaries’ and foreign partners’ performance

• Foreign subsidiaries will become dysfunctional at the management

levels

• Foreign governments will lose tax revenues

• Japanese operations of foreign companies have already begun to

shut down and may report write-downs and write-offs

Political • Japanese government stability will be jeopardized.

There will be calls to dissolve the current government

and replace it with a new institution. This could be

continuous and less peaceful.

• Key institutions (e.g., political parties, government

agencies, MITI and JETRO) will be unable to function

and will not be able to provide the traditional

expected stability that comes from the cooperative

relationships between government and industry.

• Government will be unable or largely ineffective in

dealing with the aftermath of this crisis and likely

future crises.

• Japanese government no longer to can sustain its role as a

supporter and participant in a wide range of important

international institutions on a regional, global or economic basis

• The ability for allies and members of international organizations to

rely on Japan as a stable, strong country will be impaired.



SUMMARY OF MAJOR DOMESTIC AND INTERNATIONAL RISKS (CONTINUED)

9








Social • Ability to support the core values of Japanese societies

will be more difficult. Japan’s citizens may acceleratethe current tendency to adopt Western style values

and practices.

• Social institutions including family, religion, school, the

media, government, and corporations all affect

culture.

• The family, social classes, group behavior, age groups,

and how societies define decency and civility willchange as Japanese people have cope with challenges

on their homeland, and struggle to maintain their

identity. This will be particularly due to the imperative

for an exodus of a substantial part of Japan’s

population to other countries. Japan, currently

benefits from a 98.5% concentration of ethnic

Japanese. The population diversity will increase as its

citizens interact with and intermarry with other ethnic

groups, particularly in other countries.

• Family, religious values, school and education, and

literacy rates which are cornerstones of Japanese

culture and society will be impaired and diluted.

• Media (magazines, TV, the Internet) will change and

possibly weaken as Japanese identity is diluted and

challenged.

• Social institutions including family, religion, school, the

media, government, and corporations all affect culture

• The ability of Japan to protect, promote and support its

various world-wide social institutions will be impaired

as the population is physically dispersed and inter-

relations and inter-marriage with other ethnic groups

occur.

10




INSTITUTION DOMESTIC RISK INTERNATIONAL RISK

• Other/Cultural (Includes Arts,

Literature, History, Sciences,

Philosophy, Religion)

• Japan’s proud and distinct arts, architecture, literature,

media, philosophies and religion will be challenged as

Japanese both grow disillusioned and succumb to the

forces to assimilate with other peoples and cultures

• The world will miss the distinct proud and

defined Japanese cultural, scientific,

philosophical and religious characteristics and

contributions.





OTHER/CULTURAL



http://slidepdf.com/reader/full/resilience-for-japan-b-4-20-11 13/2012Global Resilience Advisors

Fukushima reactors 1, 2 & 3 have each sustained substantial damage. They are UNSAFE.

JAPAN EARTHQUAKE AND TSUNAMI 2011FUKUSHIMA REACTORS 1, 2 & 3: CURRENT MEASUREMENTS VS. OPERATING STANDARDS


* Temperature sensors fail at temperatures > 1,000 °C, therefore the actual reactor temperature is unknown but apparently well above the maximum allowed temperature

Sources: US Army Corps of Engineers, Tokyo Electric Power Company Inc, and Japan Federal Ministry for Environment, Nature Conservation and Nuclear Safety



Not only are the reactors at Fukushima UNSAFE, they are likely to experience a catastrophic event within a

short time frame, potentially 30 days from today.


JAPAN EARTHQUAKE AND TSUNAMI 2011FUKUSHIMA REACTORS 1, 2 & 3: LIKELY CATASTROPHIC EVENT JUSTIFICATIONSOURCE: SATELLITE RECONNAISSANCE DATA


INFORMATION SOURCES INFORMATION IMPLICATIONS FOR REACTORS 1, 2 & 3

• RECONNASSANCE SATELLITE • Thermal Imaging shows that the level of

heat emanating from the reactors is

significant.

• Image of Fukushima #3 from 350 miles

above the Earth. White represents

extreme heat.

• Steel liners in the containment building

are ruptured (concrete is absorbing heat

directly from fission activity).

• Salinification of the reactor core (hard

salt encasement) has occurred around

control rods, making them less effective.

• ALL 3 REACTORS ARE UNSTABLE AND

THE SITUATION IS DETERIORATING

RAPIDLY.

Sources: TEPCO, Federal Ministry for Environment, Nature Conservation and Nuclear Safety Institut de Radioprotection et de Surete Nuclearie, Japan Atomic

Industrial Forum, IAEA, US Air Force, US Army Corps of Engineers, US Army NBC Command, NHK, CNN, and Bloomberg Images: Manufacturer T-Hawk, NRO,

TEPCO, IAEA, GRA Analysis




JAPAN EARTHQUAKE AND TSUNAMI 2011FUKUSHIMA REACTORS 1, 2 & 3: LIKELY CATASTROPHIC EVENT JUSTIFICATIONT-HAWK UNMANNED DRONE AIRCRAFT SURVEILLANCE (CONTINUED)


INFORMATION SOURCE INFORMATION IMPLICATIONS FOR REACTORS 1, 2 & 3

• T-HAWK UNMANNED AIRCRAFT

(USAF)

• Fission continues to take place in the

cores of Units 1, 2 & 3.

• Fission in storage pools for Reactors 1,

2, 3, & 4 is still occurring.

• There is not enough cold water flowinginto the reactor buildings to stop or

"cool" fission.

• The fission process in the reactors was

not stopped when the reactors were

“scrammed”.

Accumulated heat will "cook“ the

concrete which will further fracture.

Increase in water loss leads to faster“Domino Effect”: Heat => reactions

=> more decay => hydrogen gas build

up in the containment structure.

Build up of Hydrogen gas will cause

“explosion.”

• UNSTABLE REACTORS WILL RUNAWAY

AND POTENTIALLY SELF-DESTRUCT.







INFORMATION SOURCE INFORMATION IMPLICATIONS FOR REACTORS 1, 2 & 3

• INFORMED OFFICIALS

(Un-named due to nature of their roles

and responsibilities for the purposes of

this presentation)

• Several governmental and corporate

sources confirmed that Fukushima

reactors 1, 2 & 3 are likely to experience

as catastrophic, destructive event.

• “Reactors 2 & 3 are widely believed to

be destined for a bad end for a variety

of reasons.” – leading Energy expert

• “… Unfortunately, it seems your

predictions are becoming real. I just

wish the worst could be avoided.” –

Leading Japanese Executive

• There is broad consensus as to the

likelihood of a catastrophic outcome in

Fukushima and its near-term timing.

• There will be a release of radioactive gasat Fukushima. Some of this particulate

matter will find its way to the U.S.

Mainland.

JAPAN EARTHQUAKE AND TSUNAMI 2011FUKUSHIMA REACTORS 1, 2 & 3: LIKELY CATASTROPHIC EVENT JUSTIFICATION(CONTINUED)







RESILIENCE INITIATIVE RECOMMENDATIONS

REASONS FOR ADOPTING A RESILIENCE STRATEGY AND DISCIPLINE, NOW

• Japan will more than “Save Face” in what appears to be a very difficult and even hopeless situation – the leaders,

executives and managers of both industry and government will appear heroic to the Japanese people and the

international community . Japan will likely merit a level of respect and reverence equivalent to modern Samurai

and Shoguns

• By migrating the key systems and other information that define Japan, Resilience will protect a large proportion of

Japans' $30 trillion-plus world economic role as well as its other important world affairs leadership, financial and

social/cultural contributions, participation and influence

• Maintaining the Resiliency of Japan's political and social institutions will support the continuation andreinforcement of the many unique and highly valued aspects of Japan, including its society, culture, values,

religion, philosophy, media and trends

• The cost of adopting and implementing Resilience for Japan will be far less than the $700 billion + that has been

injected by the Bank of Japan since March 11th to support Japan’s priorities including the economy, stock market

and Tepco





BENEFITS/UPSIDES

• Fukushima disaster is averted – yet Japan still has a viable plan for the future as there are many dangers

and unknowns facing Japan and others in the future

•The world community appreciates the products of Japan’s resilience initiatives and elevates Japan and its

leaders to a high level, possibly equivalent to the Shoguns and Samurai of ancient Japan. As a result

Japans leaders may earn recognition for their strength, leadership, vision and discipline.

RISKS/DOWNSIDES

• The highly probable Fukushima Nuclear Reactor Explosion event may have a worse impact than forecast

on Japan and possibly internationally.

• Project management issues including cost overruns, billing receivables issues, client communications,

etc.

• The timeline for planning and implementing Reslience is stretched out due to issues in the economy,

businesses and/or skill set of the selected consulting firm.


Japan, including its leading companies (Zaibatsu’s) and government, has limitedrisk and much to gain and protect by embracing and incorporating Resilience intoits core practices.


RESILIENCE EFFORT BENFITS AND RISKS TO JAPAN




JAPAN EARTHQUAKE AND TSUNAMIRESILIENCE CONCEPTS, STRATEGY AND IMPLEMENTATIONNEXT STEPS



• Gain consensus with clients, current and potential in Japan and/or working closely with Japanese companies

and institutions to gain consensus on the need for Resilience for Japan.

• Agree on the scope of the initial phase of this project as timely

• Prepare and finalize the requisite agreements

• Proceed with starting to plan and structure a Resilience initiative

Bi h /CV



Biography /CV

WARREN C. NAGLER, FOUNDER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER


WARREN NAGLER has over 20 years of business experience as a management consultant, private equity professional and

executive. Mr. Nagler has worked for leading international management consulting firms Booz, Allen & Hamilton, Inc. and

Accenture, Inc. (formerly Andersen Consulting). He has held financial director, vice president of finance and chief financial

officer positions with Pizza Hut, Inc. (a subsidiary of PepsiCo, Inc. (now YUM Brands, Inc.)), Liberty Hardware, a division of

the Masco Corp., Kemper National Services, Inc. (a division of the Kemper Insurance Company), and JB Oxford & Company.

He has. many years of experience in Strategy, Finance and Information Technology.

Consulting and private equity engagements experience include:

• Founded and developed GlobalBanc, LLC which is designed to change consumer savings and payments systems

similar to a bank, all over the world

• Served as Chief Operating Officer of the Western Hemisphere subsidiary of the world’s second largest manufacturer

of disposable shaving razors and related personal care products

• Developed a marketing and product distribution strategy for a Japanese manufacturer of sporting goods equipment

• Served as an interim Controller of a telecommunications firm• Assisted in the acquisition of a number of medical properties for a publicly traded REIT

• Recommended a new investment selection, review and management processes for the $1.8 billion pension plan of a

major Japanese automobile manufacturer

• Raised equity and debt capital for a European travel company and a worldwide distributor of aviation industry metals

• Assisted in the negotiation in the $40 + million acquisition of and the due diligence for an acquisition of a dairy

processing plant by a large foreign-owned dairy products manufacturer

During the Hurricane Andrew Disaster in Florida in 1992 Mr. Nagler assisted PepsiCo in bringing generators, food and water

to residents of hurricane ravaged South Miami, FL and established a private equity fund that acquired and rebuilt homesthat had been damaged by a Force 5 (maximum) hurricane.

Mr. Nagler earned his MBA from the Harvard Business School . He received his BA in Economics from the University of

California, Berkeley where he served as student government Chief Financial Officer and a member of a Chancellor’s Advisory

Committee. He has earned Series 7, 66 and 27 license designations from FINRA (formerly the NASD).

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