On how to deal with deep uncertainties in a risk assessment and management context

Proposal of Risk Identification Methodology Using the Prompt List on the Example of an Air Carrier

Risk management and safety are often-mentioned topics that dominate, especially in this period. The Safety Management System (SMS) is based on risk management, the implementation of which is required in air transport as well as in other modes of transportation. The fact is that the safety of passengers and staff is a priority for every airline, and such individuals are exposed to some common groups of risks. Risk identification is vital in successful risk management as only identified risks can be managed. Based on a study of published frameworks and standards, a risk identification methodology was designed using a prompt list of a logically arranged list of risks concerning typical aviation activities and the specific environment in which the methodology operates. The prompt list was compiled based on a context analysis, which focused on internal and external contexts and on which the structure of the prompt list was based so that risks could be moved from the list to a risk register for further processing based on various criteria. The list contains risks from several areas (economic, ecologic, social, individual, business, marketing, etc.). The design of the prompt list itself also includes a proposal for a methodology for its compilation, use, and updating.

Organizational resilience in maritime business: a systematic literature review

Purpose

One of the common solutions to the business problems, disruptions and new developments of the global world is enhancing the resilience of systems, countries and organizations. Applying resilience differs according to business environments and context-based requirements of industries, which create a lack of consensus regarding how to achieve and apply it. To fill this gap and answer the main question, this study proposes to handle the resilience concept from an organizational perspective. By using an organizational point of view this study aims to offer an applicable philosophy that can be used by a wide range of stakeholders.

Design/methodology/approach

The main question of the study is to figure out whether “Is there any approach/lens to achieve resilient organizations which can be applied by the stakeholders of the system.” To reach such a “common application/approach” where the stakeholders can reach a consensus, a systematic literature review has been conducted to determine the existing approaches and practices.

Findings

The contribution of the study lies in two folds: to offer a maritime business resilience definition from the organizational point of view and to show the requirement of organizational resilience management philosophy in the maritime business context. An applicable framework is offered for the stakeholders of the maritime business transport system.

Research limitations/implications

The research has some limitations. This study is designed on a systematic review to figure out existing approaches used in the maritime business field and to defend and prove the necessity of organizational resilience management philosophy in maritime business management which helps organizational survival. Further research should use different methods to empirically test the conceptual model according to different segments/stakeholders of the maritime industry. Also, this research opens a new field of study about resilience subject from the maritime context where organizational approach mentions hardly any. Therefore, future studies should investigate developing key performance indicators of components of the proposed model and its effects on maritime organizations.

Practical implications

As a volatile industry, increasing resilience capability helps maritime organizations to decrease the effects of disruptions while at the same enable them to operate the core business functions in the maritime business. Maritime business needs to solve not only one-time problems but also needs to resolve and exploit new opportunities from disruptions via resilient management philosophy, which help organizational adaption in fluctuating periods. To prevent such problems and become ready for complex environmental changes, organizational resilience management philosophy is vital.

Social implications

Organizational resilience offers maritime business a holistic approach to evaluate problems of the system by submitting multiple ways to handle problems that help to manage uncertainty and change. Resilient management philosophy enables maritime business organizations to fight against their vulnerabilities that create risk, especially in a turbulent business environment.

Originality/value

The originality of the study lies in highlighting the importance of organizational resilience management philosophy in the maritime business context. And an organizational resilience framework is offered.

Handling Uncertainty in Models of Seismic and Postseismic Hazards: Toward Robust Methods and Resilient Societies

Earthquakes, tsunamis, and landslides take a devastating toll on human lives, critical infrastructure, and ecosystems. Harnessing the predictive capacities of hazard models is key to transitioning from reactive approaches to disaster management toward building resilient societies, yet the knowledge that these models produce involves multiple uncertainties. The failure to properly account for these uncertainties has at times had important implications, from the flawed safety measures at the Fukushima power plant, to the reliance on short-term earthquake prediction models (reportedly at the expense of mitigation efforts) in modern China. This article provides an overview of methods for handling uncertainty in probabilistic seismic hazard assessment, tsunami hazard analysis, and debris flow modeling, considering best practices and areas for improvement. It covers sensitivity analysis, structured approaches to expert elicitation, methods for characterizing structural uncertainty (e.g., ensembles and logic trees), and the value of formal decision-analytic frameworks even in situations of deep uncertainty.

A fuzzy approach to assess outsourcing risks in Brazilian navy industrial military organizations

Purpose

This study assesses outsourcing risks using the fuzzy analytical hierarchy process (FAHP).

Design/methodology/approach

This descriptive research combines both qualitative and quantitative approaches. Risks identified in the literature review were classified with FAHP using questionnaire data from respondents in operations, procurement and risk management in Brazilian Navy Industrial Military Organizations (OMPS-I, by its Portuguese acronym).

Findings

The results indicate that FAHP is a method capable of producing relevant information to decision-making in the risk management process. A framework was created incorporating 16 major risks related to outsourcing. The results point to higher inherent risk levels related to outsourcing in the context of OMPS-Is: in order, hidden costs and unrealized savings; loss of knowledge/skills and/or corporate memory and difficulty in reacquiring a function; and loss of opportunities and reputation. The category of economic risk was revealed as the most important.

Originality/value

This study improves understanding of outsourcing risks and improves risk assessment by refining decision-making information and developing a system of decision analysis with several criteria. It also contributes to the development and implementation of a usable version of decision analysis with several criteria at a managerial level.

Strategic Sustainability Risk Management in Product Development Companies: Key Aspects and Conceptual Approach

Society’s transition towards sustainability comes with radical change, which entails significant threats and opportunities for product development and manufacturing companies, for example related to new legislation, shifting customer preferences, and increasing raw material prices. Smart risk management therefore plays a key role for successfully maneuvering society’s sustainability transition. However, from a company perspective, it remains challenging to connect the macro-level societal change with tangible risks for the business on the micro level. Based on interviews with academic and industrial experts, this study identified 21 key aspects for sustainability risk management. Drawing on these results and research from the areas of transition design, strategic sustainable development, and sustainability risk management, a conceptual approach for strategic risk management within the sustainability transition is presented. It builds on layered, double-flow scenario modelling in which backcasting from a vision, framed by basic principles for sustainability, is combined with forecasting from the present. The implications of such scenarios, i.e., risks, can then be identified and managed. By doing so on different scales, connections between macro- and micro-level change can be established. Thereby, product development companies shall be supported in making sustainability an intrinsic part of decision-making across the strategic, tactical, and operational levels to increase competitiveness while contributing to the transition towards a sustainable society.

Impact of Uncertainty Parameter Distribution on Robust Decision Making Outcomes for Climate Change Adaptation under Deep Uncertainty

Deep uncertainty in future climatic and economic conditions complicates developing infrastructure designed to last several generations, such as water reservoirs. In response, analysts have developed multiple robust decision frameworks to help identify investments and policies that can withstand a wide range of future states. Although these frameworks are adept at supporting decisions where uncertainty cannot be represented probabilistically, analysts necessarily choose probabilistic bounds and distributions for uncertain variables to support exploratory modeling. The implications of these assumptions on the analytical outcomes of robust decision frameworks are rarely evaluated, and little guidance exists in terms of how to select uncertain variable distributions. Here, we evaluate the impact of these choices by following the robust decision-making procedure, using four different assumptions about the probabilistic distribution of exogenous uncertainties in future climatic and economic states. We take a water reservoir system in Ethiopia as our case study, and sample climatic parameters from uniform, normal, extended uniform, and extended normal distributions; we similarly sample two economic parameters. We compute regret and satisficing robustness decision criteria for two performance measures, agricultural water demand coverage and net present value, and perform scenario discovery on the most robust reservoir alternative. We find lower robustness scores resulting from extended parameter distributions and demonstrate that parameter distributions can impact vulnerabilities identified through scenario discovery. Our results suggest that exploratory modeling within robust decision frameworks should sample from extended, uniform parameters distributions.

Company Risk Management in Light of the Sustainability Transition

Many of the most important business and economic risks are directly linked to environmental and social issues. This includes both threats and opportunities, not only in relation to reputation, which is often mentioned in this context, but, even more importantly, in relation to innovation capability and legislative change on inevitably more and more sustainability-driven markets. It is, however, unclear through which mechanisms such sustainability risks currently affect companies and how they can be systematically identified and managed. Based on the Framework for Strategic Sustainable Development, this study investigates the dynamics and implications of society’s sustainability transition from a company risk management perspective. In addition, exploratory and descriptive studies were conducted at two large product innovation companies to identify current risk management practices and preconditions for sustainability integration. The results reveal that a society moving closer towards a collapse of environmental and social systems leads to increasing sustainability-related threats for unsustainable businesses and increasing opportunities for sustainable businesses. Also, risk management is found to be a promising way for maneuvering in a smart zone between being too passive and being too pro-active in relation to sustainable innovation. The study participants at the case companies were knowledgeable about risk management in general but were largely unfamiliar with risks associated with sustainability and no processes or support tools exist to work systematically with such risks. Key steps to accomplishing an integration of a strategic sustainability perspective into risk management are proposed as: (i) identifying the effects of sustainability issues on internal and external stakeholder value; (ii) actively including sustainability in objective setting and cascading objectives across the levels of the organizational hierarchy; and (iii) developing concrete support for identifying, assessing, and managing economic sustainability risks. Thereby, companies can enhance their competitiveness while providing leadership in the sustainability transition.

Quantifying the Effects of Expert Selection and Elicitation Design on Experts' Confidence in Their Judgments About Future Energy Technologies

Expert elicitations are now frequently used to characterize uncertain future technology outcomes. However, their usefulness is limited, in part because: estimates across studies are not easily comparable; choices in survey design and expert selection may bias results; and overconfidence is a persistent problem. We provide quantitative evidence of how these choices affect experts' estimates. We standardize data from 16 elicitations, involving 169 experts, on the 2030 costs of five energy technologies: nuclear, biofuels, bioelectricity, solar, and carbon capture. We estimate determinants of experts' confidence using survey design, expert characteristics, and public R&D investment levels on which the elicited values are conditional. Our central finding is that when experts respond to elicitations in person (vs. online or mail) they ascribe lower confidence (larger uncertainty) to their estimates, but more optimistic assessments of best-case (10th percentile) outcomes. The effects of expert affiliation and country of residence vary by technology, but in general: academics and public-sector experts express lower confidence than private-sector experts; and E.U. experts are more confident than U.S. experts. Finally, extending previous technology-specific work, higher R&D spending increases experts' uncertainty rather than resolves it. We discuss ways in which these findings should be seriously considered in interpreting the results of existing elicitations and in designing new ones.

Of Disasters and Dragon Kings: A Statistical Analysis of Nuclear Power Incidents and Accidents

We perform a statistical study of risk in nuclear energy systems. This study provides and analyzes a data set that is twice the size of the previous best data set on nuclear incidents and accidents, comparing three measures of severity: the industry standard International Nuclear Event Scale, the Nuclear Accident Magnitude Scale of radiation release, and cost in U.S. dollars. The rate of nuclear accidents with cost above 20 MM 2013 USD, per reactor per year, has decreased from the 1970s until the present time. Along the way, the rate dropped significantly after Chernobyl (April 1986) and is expected to be roughly stable around a level of 0.003, suggesting an average of just over one event per year across the current global fleet. The distribution of costs appears to have changed following the Three Mile Island major accident (March 1979). The median cost became approximately 3.5 times smaller, but an extremely heavy tail emerged, being well described by a Pareto distribution with parameter α = 0.5-0.6. For instance, the cost of the two largest events, Chernobyl and Fukushima (March 2011), is equal to nearly five times the sum of the 173 other events. We also document a significant runaway disaster regime in both radiation release and cost data, which we associate with the "dragon-king" phenomenon. Since the major accident at Fukushima (March 2011) occurred recently, we are unable to quantify an impact of the industry response to this disaster. Excluding such improvements, in terms of costs, our range of models suggests that there is presently a 50% chance that (i) a Fukushima event (or larger) occurs every 60-150 years, and (ii) that a Three Mile Island event (or larger) occurs every 10-20 years. Further-even assuming that it is no longer possible to suffer an event more costly than Chernobyl or Fukushima-the expected annual cost and its standard error bracket the cost of a new plant. This highlights the importance of improvements not only immediately following Fukushima, but also deeper improvements to effectively exclude the possibility of "dragon-king" disasters. Finally, we find that the International Nuclear Event Scale (INES) is inconsistent in terms of both cost and radiation released. To be consistent with cost data, the Chernobyl and Fukushima disasters would need to have between an INES level of 10 and 11, rather than the maximum of 7.

Scenario Discovery with Multiple Criteria: An Evaluation of the Robust Decision-Making Framework for Climate Change Adaptation

There is increasing concern over deep uncertainty in the risk analysis field as probabilistic models of uncertainty cannot always be confidently determined or agreed upon for many of our most pressing contemporary risk challenges. This is particularly true in the climate change adaptation field, and has prompted the development of a number of frameworks aiming to characterize system vulnerabilities and identify robust alternatives. One such methodology is robust decision making (RDM), which uses simulation models to assess how strategies perform over many plausible conditions and then identifies and characterizes those where the strategy fails in a process termed scenario discovery. While many of the problems to which RDM has been applied are characterized by multiple objectives, research to date has provided little insight into how treatment of multiple criteria impacts the failure scenarios identified. In this research, we compare different methods for incorporating multiple objectives into the scenario discovery process to evaluate how they impact the resulting failure scenarios. We use the Lake Tana basin in Ethiopia as a case study, where climatic and environmental uncertainties could impact multiple planned water infrastructure projects, and find that failure scenarios may vary depending on the method used to aggregate multiple criteria. Common methods used to convert multiple attributes into a single utility score can obscure connections between failure scenarios and system performance, limiting the information provided to support decision making. Applying scenario discovery over each performance metric separately provides more nuanced information regarding the relative sensitivity of the objectives to different uncertain parameters, leading to clearer insights on measures that could be taken to improve system robustness and areas where additional research might prove useful.