BLADE SEMINAR 7th February 2001 RISK - HARD & SOFT David Blockley

Contents Introduction Risk - hard Risk- soft Risk management Conclusions

Risk = Chance + Consequences + Context Risk is about 14 years old!

Hard system Soft system Meta system Risk in Context Why = How (Who, What, Where, When)

Contents Introduction Risk - hard (action & reaction) Risk- soft Risk management Conclusions

Structural Reliability Theory Safety factor Capacity / Demand = C/D Structural reliability theory Parameters X for C, D are random variables Z = C-D p f = prob ( Z < 0 )

1 0 X Z = C-D = g (X) 1 Area under curve is 1 pfpf Z < 0Z > 0 Capacity/Resistance C Demand/Load D Here D>C defines failure Z

X1X1 X2X2 Z < 0 Z > 0 Limit state function Z = 0 pfpf m X1,m X2 Contours on the joint pdf f (X 1, X 2 ) Z = g(X 1, X 2 )

In general Z = g (C, D) = g (X) g (X) is the limit state function p f = Prob (g (X) < 0) = …... f( X (x) dx g (X) < 0

time a limit boundary x l xtxt f (x) pfpf mxmx p f = f(x, t) d (x, t) a stochastic process x>x l

time performance measure no 2 performance measure no 1 Boundaries of acceptable values defining success Initial State Final target state Trajectory of process

time a performance measure past a limit boundary Scenarios of future Scenarios of future future Damage/Failure now Target state

o oo o oo o o o oo o Series System Parallel System p f = p f (1 or 2 or 3 or 4 or 5) p f = p f (1 and 2 and 3)

o Beam Event Tree o o o o o o o o o o o Beam Sway Combined Sway Combined b c d c d b d d b c d

Consequences Values - cost, safety, profit, sustainability etc BCIOD+R business, customer, integrating, operating, delivery, regulatory Limit states & Value functions Vulnerability & Robustness

Contents Introduction Risk - hard Risk- soft (action, reaction, intention) Risk management Conclusions

RISK SOFT Precautionary Principle Environmentalists Public understanding GM Crops, BSE, mobile phones Risk Perception control, ownership Evidence Measurement

Contents Introduction Risk - hard Risk- soft Risk management Conclusions

Past Present Future Soft & Hard Hazards Preconditions, trends patterns of concern Alternative Futures (Scenarios) Soft & Hard Identification of future hazards events with risk = chances + consequences + context Evidence Remove Change process Transfer Redesign etc Reduce (Strategic) What if questions share, redesign etc Remedy (Tactics) retain, redesign make acceptable contingency plans Managing systems to success based on evidence Time

Transformation Input Output Recipe First do this then do that etc Flowchart Network Gantt Chart Activity 1 Activity Activity Process mechanism inputoutput control IDEF0 diagram

Doing a Process Roles Functions Players WHO Client/ Customers WHY Purpose, Needs, Targets Place Site WHERE WHEN Time WHAT Form State Variables KPIs Transformations Physical system Models Inputs, Outputs HOW Vision, Success Resource, Control, QA Decision, Alternatives, Criteria Evidence Risks Stakeholders NEW PROCESS

CO R I D B Key B: Business R: Regulation C: Customer O: Operation I: Integration D: Delivery Managing Relations Considering Customers Using Integrating People & Processes Doing Good Business Delivering Assets Being a hand crafted chair for comfort Being a hand crafted chair for comfort

Being Hand crafted for comfort D O C B R I Considering customer Using Managing relations Doing good business Delivering Integrating Establishing plan Accounting Controlling processes Managing staff Making Designing Deciding needs Deciding Customer s Customer needs Maintaining Sitting in chair Deciding stakeholders Hand crafting Designing structure Recruiting Procuring preparing Training Paying Public Deciding what to do Deciding budgets Projecting Returns Establishing KPIs Designing form Deciding affordability Deciding Type Asking SamplingHandling Cleaning Being Comfortable Maintaining team Regulators Key B: Business R: Regulation C: Customer O: Operation I: Integration D: Delivery

Fuzziness Choosing appropriate level of detail for model Model dependable? Parameters dependable? Includes people? Using deterministic method Note context Randomness Using probability method Note context Using result as evidence Randomness Incompleteness Including model uncertainties Use Social Process Checking for unintended effects Looking for evidence with Italian Flag Manage systems to success based on incomplete evidence - using judgement Recognising social process No Yes START END Using Interval Probability Theory Social Processes e.g. Workshops, Focus Groups, Italian Flag measure of evidence, These methods inform judgement they cannot replace it

1-1 mapping Many - 1 mapping plum pudding relation RSets on the relation R (a) (b) (c)(d) A & B not A & B A & not B not A not Bnot A & not B not A& not B not A & not Bnot A & B A & not B

HighLow Interest Min. effort Keep satisfied Keep informed Key players Power/influence High Low A Not A B Not B A & B A & not B not A & B not A & not B (a) The sets of R (b) Stakeholder diagram (c) The change process

not B A B not A m 11 m 12 m 21 m 22 m 13 m 23 m 31 m 32 m 33 Unknown A Unknown B Lower Prob (A & B) = green Upper Prob( A & B) = 1 - red Unknown (A & B) = white Italian Flag for A & B (b) (c) (a) (d) (A & B)

Green area P(A) X A Not A Red Area P(not A) White area P(unknown A) Area under whole curve = 1 i.e P(A) + P(not A) + P (unknown A) = S n (A) S p not AA X P(not A) P(A) P(unknown A) (a) (b) (c)(d)

Four Emerging Types of Problem identifying cross functional processes in large organisation troubleshooting clear processes with much multi-tasking visioning consequences of uncertainty in cross disciplinary processes looking for unintended consequences in an existing risk management system

Process A Process BProcess C Note: The owner of Process C thinks his process is very likely to fail. The owner of process A thinks his process will be successful If Process C is necessary for Process A then the two of them need to sort out the reasons for their differing perceptions

Software Juniper - exists FlowMap - exists MindMap - exists FlagAccess - prototype FlagExcel - prototype JuniperProfessional? - coming

Conclusions Integrate hard & soft risk by Systems approach based on - holons, connectivity & process Evidence Measurement & Uncertainty Mathematics