Integrated Risk Management Charles Yoe, PhD Institute for Water Resources 2009

Learning Objectives At the end of this session participants will be able to: –Define and discuss risk –Discuss risk management –Identify and discuss the elements of the risk management model proposed for the Corps

Risk Explained o Risk –chance of something happening that will effect National or Corps’ objectives o Measured in terms of consequences and likelihoods o Consequence can be negative (loss) or positive (potential gain) o Uncertainty can produce results better or worse than expected

Risk Management Essentially, making decisions under uncertainty Planning, analyzing, organizing, implementing and monitoring efforts to control the effects of uncertainty on the Corps’ Civil Works Program

Characteristics of Integrated Risk Management Universal Applicability Analytically-based and judgment-driven Simple and Flexible Systematic and Scalable Iterative Transparent and Open Dcoumented

Establish Decision Context Identify Risks Analyze Risks Evaluate Risks Risk Mitigation Monitor, Evaluate, Modify Communicate and Consult Risk Assessment COE Risk Management

Establish Decision Context Description This task establishes the decision context in which a risk management decision will be made. It includes defining the management problem, and establishing the measurable objectives of the activity to which the risk management process is being applied. Decision making criteria, evident uncertainties, and the questions to be answered in subsequent analytical steps are identified in this step. Outputs A written problem statement A written statement of the activity’s objectives A written list of management information questions A written list of the decision criteria A written list of the key uncertainties

Establish Decision Context Something triggers RM activity Decision problem is defined Goals, objectives, and strategies of RM identified and articulated Decision criteria explicitly considered so appropriate information is gathered Stakeholder and public involvement begins Establish Decision Context

Defining a Problem Problem identification-recognizing a problem exists Problem acceptance-deciding to focus attention and resources on it Problem representation-articulating the problem for the Corps and others and linking it to possible solutions Establish Decision Context

Identify Risks Description Identify the risks relevant to the decision context. This means identifying but not yet quantifying the consequences (positive or negative) and likelihoods and how they will be expressed. It includes asking and answering “what can go wrong” and “how can it happen” about the problem setting. Outputs A narrative description of the risks or significant uncertainties of concern to this risk management activity. A decision whether or not to pursue a risk assessment.

Tasks Start of risk assessment when one is done Identify –Presenting/existing risks –Risk reductions –Residual risks –Risk transformations –Risk transfers Ask and answer (scenarios) –What can go wrong? –How can it happen? Methods depend on nature of activity, process, or asset Stakeholder and public involvement Identify Risks

Analyze Risks Description Estimate the consequences and likelihoods of the risks identified in the previous step. At the same time recognize and report decision critical uncertainties and incorporate them as a source of risk. The consequence and likelihood for each risk may be combined to produce an estimated level of risk. Alternative management strategies are analyzed in this step. This is often the principle analytical step in the risk management process. Outputs Written answers to the risk managers’ questions with a focus on relevant uncertainties Descriptions of formulated alternative risk mitigation strategies Risk characterization of each significant risk with a focus on relevant uncertainties Formal risk assessment if required

Analyze Risks Remainder of risk assessment Each individually identified risk is analyzed –Gather information –Identify and assess significant sources of uncertainty –Identify options for achieving RM objectives and solving the problems –Evaluate and compare risk management options while accounting for uncertainty Analyze Risks

Evaluate Risks Description Risk management alternatives are evaluated and compared to identify the best solution. This evaluation includes consideration of the risk and other values important to the decision. The evaluation will consider the cost to reduce increments of risk; who bears the risk; what risks are managed, reduced, borne, transferred, and so on. Outputs An effective summary or display of the uncertainties most relevant to the risk manager’s decision Display of the varying contributions of the risk management options to the risk management objectives and other social values considered in the decision process

Evaluate Risks Separates minor/acceptable risks from major/unacceptable risks With stakeholder and public input determine if risk is tolerable or not Tolerance is based on trade-off among residual risk, cost of risk reduction and other factors Evaluate Risks

Risk Management Decision Description A decision is made to accept or take action to manage the identified risks. If action is taken, a risk management strategy is developed and implemented. Desired and measurable outcomes of the management strategy are identified at this step so the success of the plan can be monitored and evaluated. To the extent there is significant analytical uncertainty, the risk management strategy will include an adaptive management plan to reduce such uncertainties over time and as needed modify the execution of the actions taken. Outputs Determination of a tolerable level of risk for this risk management issue Selection of the best risk management option Identification of measurable desired outcomes to monitor the options success When appropriate, an adaptive management plan An implementation plan An implemented plan

Risk Mitigation Reduce unacceptable risks to TLR –Combinations of options may be needed RM plan should identify mitigation measures, responsibilities, schedules, expected outcomes, and measurements associated with mitigation strategy It’s critically important to identify desired outcomes of RM strategy prior to implementation Risk Mitigation

Mitigation Strategies Acceptance/retention Avoidance Reduction Transfer or risk sharing Containment Constant monitoring Continuous research Development of substitutes Precautionary principle Increasing resilience- resistance and robustness to surprises Treatment of risk Build confidence and trustworthiness Reduce uncertainties Clarify facts Involve affected people Deliberation Accountability Risk Mitigation

Communicate and Consult Description Active communication is an essential part of risk analysis. Communicate and consult with internal and external stakeholders as appropriate at each stage of the process. If there are shared risk management decisions, they should be identified, the decision participants recorded and a formal agreement documenting the shared responsibility for the decision prepared and signed by all responsible participants. Outputs Preparing and executing a public involvement plan including provisions for risk communication.

Communicate and Consult Keep all stakeholders informed about –Process –Findings of risk assessment steps –Nature of risk and its associated benefits –Deliberations that lead to risk management decision –Their role in implementing the solution Continual communication among participants to minimize misunderstandings and surprises at the end of the process Communicate and Consult

Monitor, Evaluate, Modify Description There are several purposes of post implementation monitoring. One is to assure that there is progress toward achieving the outcomes of the implemented risk management strategy. If there is an adaptive management process there will be data collection targeted to testing hypotheses required to reduce analytical uncertainties identified in the initial planning process. This task also scans the overall setting for the activity to identify hazards or changes in socioeconomic preference or conditions that may not have been recognized during the initial risk analysis process, or that may have changed in their significance. In all cases, the risk mitigation strategy may be modified in accordance with what is learned. Outputs A plan for monitoring, reviewing and modifying the implemented solution Implementation of that plan

Monitor, Evaluate, Modify Implication of uncertainty is RM is evolutionary decision making Assure decision is having desired outcome Monitoring-gather information that measures progress toward desired outcome(s) Information is evaluated to determine if adequate progress is being made toward outcomes If outcomes are not satisfactory changes are needed A mechanism for change, e.g. adaptive management plan, is part of best practice Monitor, Evaluate, Modify

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