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Reading for Lifelong Learning and Leadership: A PICPA Blog Series

My Hurricane Andrew Story by Bryan Norcross

By James J. Caruso, CPA, CGMA

Hurricane Andrew, a Category 5 storm, decimated parts of South Florida in 1992. Bryan Norcross, then chief meteorologist at WTVJ in Miami, is recognized for his foresight in building robust capabilities at his television news station, which were put to the test during Andrew. Norcross was the voice that galvanized the public to prepare for the storm and talked them through its scariest moments during his 23 consecutive hours on the air. There is no doubt that Norcross saved lives.

My Hurricane Andrew Story, written by Norcross and published in 2017, may seem like an odd choice for gleaning leadership lessons, but I assure you this book yields insights from the meteorological world that can inform how CPAs communicate risk and uncertainty in our financial domain.

Precision Is the Enemy of Accuracy

The National Hurricane Center’s (NHC) computer models showed various potential tracks, including westward into Florida as well as northward away from the coast. An early “official” forecast represented a “compromise” solution. Specific – or deterministic – forecasts belie uncertainty, which is especially dangerous when there is a low-probability but high-impact scenario. Deterministic forecasts imply a precision that does not exist. Since Andrew, the NHC has adopted a “cone of uncertainty” for its forecast graphic, while meteorology in general has increasingly emphasized probabilistic rather than deterministic forecasts.

When you develop financial forecasts, or judgmental estimates for financial reporting or analysis, are you implying a greater level of certainty and precision than can be justified? Financial models have the same limitations as weather models: not all variables can be measured with enough frequency or specificity. Approximations are subject to errors that compound with extrapolation into the future. Are you failing to communicate the uncertainty inherent in your forecasts or the range of possible outcomes? By being too specific, you may be providing less information with less appreciation for risk and uncertainty.

Simplicity Is Better for Providing Clarity

At one point in Andrew’s life as a tropical storm, it weakened and should have been downgraded. Expecting the storm to reorganize, the NHC continued with its tropical storm designation, even though Andrew did not meet the criteria. NHC wanted to avoid confusion in its messaging.

Accountants are hard-wired for accuracy. Our instinct is to provide every detail and disclose every possible exception. We think this is what our constituents want. Norcross chose to strike a balance between giving people what they say they want and clear, relevant communication.

Help your audience see the big picture; don’t bury them in detail.

How You Communicate Risk and Uncertainty Matters

Norcross compares two statements: “We think the storm is going to strengthen and turn north, but we don’t know when that will happen,” versus “This evening (new data) will tell us if the storm has strengthened and begun to turn north.” The first “makes the presenter seem uninformed, which lowers the confidence of the listener,” according to Norcross; the second “is positive and involves the listener in the timing and the process.”

As Norcross writes, “When a situation is uncertain, it is important to be certain about the uncertainty.” Imparting a sense of risk, uncertainty, and a range of possible outcomes can be more important than any particular weather or financial model output. But you must inspire confidence and give your audience a picture they can grasp. According to Norcross, “It comes down to these questions: What do we know? What don’t we know? And when will we know more?”

It Is Important to Communicate Uncertainty – Until It Isn’t

With landfall imminent, Norcross made several declarative forward-looking statements. He told the public that midnight was the cut-off for preparations. He said Andrew would be “without question” the costliest U.S. natural disaster. He did not mention signs of weakening in Andrew just before landfall, writing, “I thought it would confuse people. What would I say? ‘It’s looking weaker, but it might get stronger? But maybe not?’ ... (T)alking about weakening would send the wrong message.”

Ironically, precision can be the enemy of accuracy, but the definition of “precision” is situational. Too much precision can be a deterministic forecast that ignores uncertainty, or too much precision can mean the opposite – disclosing probabilities that dilute the message and undermine a call to action. Knowing which is which, and adjusting your message accordingly, is critical for proper communication of risk and impact, whether meteorological or financial.

Structure a Communication Strategy; Deviate When Necessary

Norcross notes that “(The NHC’s) structured communications system … does not always allow them to convey all they know to the public, including during the critical time before hurricane watches and warnings can be issued,” leaving a void often filled by conflicting messages from other sources. In 2013, Hurricane Sandy morphed into an “extratropical” storm as it approached the New Jersey coastline. Because the storm no longer met the technical definition of a hurricane or tropical storm, the NHC discontinued its hurricane warnings, causing the public to drop its guard despite the threat.

“Communications will be clearer if there is a consistency and a philosophy behind the format and style of the messaging,” writes Norcross. Develop a financial communication strategy for your constituents that includes a structured set of financial and management reporting tools, on a disciplined cadence, and accompanied by a management discussion and analysis (MD&A) narrative. MD&A is the perfect way to communicate risk and uncertainty, and will also clarify your own thinking. However, when an unexpected event or risk appears on the horizon, do not hesitate to go outside the existing structures or cadences.

The Most Important Information Is Not Financial

 “We study meteorology, not emergency management. Understanding and interpreting radar data, satellite images, and hurricane advisories are vastly different than advising people where to park their car and what to do with an electricity-dependent elderly parent,” writes Norcross. “The most important information I could dispense (during the peak of Andrew) would not be meteorological.”

Your audience is not interested in financial information for its own sake; they want simple, clear messages and actionable insights. Translating financial information, especially for nonfinancial constituents, is a creative process as critical to your success as your technical skills.

Luck Happens when Preparation Meets Opportunity

Quoting the Roman philosopher Seneca the Younger, Norcross acknowledges the element of luck in his early warning about the threat – his forecast could have been wrong. But Norcross had prepared himself and his television station for a low-probability, high-impact event well beforehand. “Think out as many steps and scenarios as possible ahead of time,” he advises. “That should make it easier to stay focused when the volume and the intensity of the incoming information becomes prodigious.”

If there is anything 2020 has taught us, it’s to expect the unexpected. Are you prepared for financial crises in your company? What about nonfinancial events, such as technology problems or the departure of a key employee? Make scenario planning an intentional process. You may feel you lack the bandwidth to add scenario planning to your agenda, but brainstorming hypothetical scenarios before they happen gives you a framework to process, filter, and understand what comes at you. In other words, adding some complexity up front can help you avoid becoming overwhelmed by complexity later.

James J. Caruso, CPA, CGMA, is CFO of Simplura Health Group in Yardley and a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at jcaruso@simplura.com.

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