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“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Integrated Risk Management Institute for Water Resources 2010.

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Presentation on theme: "“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Integrated Risk Management Institute for Water Resources 2010."— Presentation transcript:

1 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Integrated Risk Management Institute for Water Resources 2010

2 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Risk Risk is a measure of the probability and consequence of uncertain future events Risk includes –Exposure to losses (hazards) Risk –Potential for gain (opportunities) Reward 2

3 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Risks of Interest Existing-risk to life and safety, property damage, et al Risk reduction-what can we avoid, prevent, mitigate Residual risk-what remains after mitigation, flood hazard that remains Transformed risk-slow rise in floodwaters to catastrophic overtopping Transferred risk-induced flooding

4 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Potential Rewards Completing a project or activity at or under cost Completing a project or activity early on schedule Project performs at or exceeds expectations New methods save resources

5 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions US Army RM Guidance Composite Risk Management Field Manual 5-19 establishes CRM as the Army’s primary decision-making process for identifying hazards and controlling risks across the full spectrum of Army missions, functions, operations, and activities. THIS DOES NOT MEET NEEDS OF CIVIL WORKS

6 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions 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

7 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Working Definition Risk management is the process of problem finding and initiating action to identify, evaluate, select, implement, monitor and modify actions taken to alter levels of risk, as compared to taking no action, while taking uncertainty into account. 7

8 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Honest Brokers

9 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Characteristics of Integrated Risk Management Universal Applicability-horizontal & vertical Analytically-based and judgment-driven Simple and Flexible Systematic and Scalable Iterative Transparent and Open Documented

10 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions When To Do Risk Analysis Extensive Risk Analysis W/ Adaptive Management Routine Risk Analysis Modest Level of Risk Analysis No Risk Analysis Required Consequence of Being Wrong Uncertainty Much Grave Little Minor Personnel assignments Routine purchases Data collection Some permit applications Routine coordination activities Administrative activities Budget updates Congressionals Lake siltation Allocating O&M resources in District Managing construction projects Annual budget/programs management Recon Studies Allocating inspection resources Feasibility studies Project design Emergency Management activities Special programs, e.g., noxious weeds Dam safety program Flood risk management Corporate budget IPET Post-disaster work Complex FRM or other investigations Landscape scale studies e.g. CERP Climate change

11 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Establish Decision Context Identify Risks Analyze Risks Evaluate Risks Risk Mitigation Monitor, Evaluate, Modify Consult, Communicate and Collaborate Risk Assessment Adapted from ISO 31000- Risk Management—Principles and Guidelines

12 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions 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

13 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Establish Decision Context Identify Risks Analyze Risks Evaluate Risks Risk Mitigation Monitor, Evaluate, Modify Consult, Communicate and Collaborate Risk Assessment Adapted from ISO 31000- Risk Management—Principles and Guidelines

14 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions 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.

15 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Risk Identification 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

16 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Establish Decision Context Identify Risks Analyze Risks Evaluate Risks Risk Mitigation Monitor, Evaluate, Modify Consult, Communicate and Collaborate Risk Assessment Adapted from ISO 31000- Risk Management—Principles and Guidelines

17 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions 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

18 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Increase or Decrease Risk Risk Narratives Evidence Mapping Screening Ratings Rankings Enhanced Criteria Ranking Operational Risk Management (Risk Matrix) Develop a Generic Process Qualitative Assessment Models Multi-Criteria Decision Analysis Qualitative Risk Assessment

19 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Quantitative Risk Assessment Safety Assessment Scenario Planning Scenario Analysis –Deterministic Scenario Analysis –Probabilistic Scenario Analysis Sensitivity Analysis Uncertainty Analysis Modeling Vulnerability Assessment

20 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Establish Decision Context Identify Risks Analyze Risks Evaluate Risks Risk Mitigation Monitor, Evaluate, Modify Consult, Communicate and Collaborate Risk Assessment Adapted from ISO 31000- Risk Management—Principles and Guidelines

21 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions 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

22 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Evaluate Risks Is the risk acceptable? With stakeholder and public input reduce unacceptable risks to a tolerable level Tolerance is based on trade-off among residual risk, cost of risk reduction and other factors Evaluate Risks

23 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Establish Decision Context Identify Risks Analyze Risks Evaluate Risks Risk Mitigation Monitor, Evaluate, Modify Consult, Communicate and Collaborate Risk Assessment Adapted from ISO 31000- Risk Management—Principles and Guidelines

24 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions 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

25 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Risk Management Strategies General Strategies Accept Manage –Avoidance –Reduce probability of event (prevent) –Reduce consequence of event (mitigate) –Insurance –Retain the risk More Specific Build confidence and trustworthiness Involve affected people Deliberation Accountability Continuous research Reduce uncertainties Clarify facts Transfer Transformation Development of substitutes Containment Increasing resilience–surprises do less harm Precautionary principle Constant monitoring Adaptive management 25

26 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Establish Decision Context Identify Risks Analyze Risks Evaluate Risks Risk Mitigation Monitor, Evaluate, Modify Consult, Communicate and Collaborate Risk Assessment Adapted from ISO 31000- Risk Management—Principles and Guidelines

27 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Communicate, Consult and Collaborate 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.

28 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Communicate, Consult and Collaborate 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

29 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Who Owns the Risk Many risks are shared ownership –Corps –Non-federal partners –Stakeholders –The public All must know and accept their responsibilities Ownership can change over life-cycle

30 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Establish Decision Context Identify Risks Analyze Risks Evaluate Risks Risk Mitigation Monitor, Evaluate, Modify Consult, Communicate and Collaborate Risk Assessment Adapted from ISO 31000- Risk Management—Principles and Guidelines

31 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions 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

32 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Monitor, Evaluate, Modify Implication of uncertainty is that 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

33 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Establish Decision Context Identify Risks Analyze Risks Evaluate Risks Risk Mitigation Monitor, Evaluate, Modify Consult, Communicate and Collaborate Risk Assessment Adapted from ISO 31000- Risk Management—Principles and Guidelines Risk Informed Decision

34 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Risk-Informed Decision Making Confluence of risk management and risk assessment –Assessors convey significance of uncertainty –Managers take it explicitly into account in decision making Develops and uses risk information to aid decisions made under uncertainty –Decision metrics and rules developed by decision makers –Use risk assessment approach to develop science-based values of risk metrics

35 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions The Job Success in risk management is defined by practical and useful solutions for dealing with uncertainty It is the risk assessors’ job to address the uncertainty and variability in inputs It is the risk managers’ job to address the uncertainty and variability in the decision criteria –And to manage risks that are not acceptable

36 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Metrics Are Needed Decision criteria will reflect –Risk metrics become more critical Existing risk, risk reductions, residual risk, transformed risk, transferred risk –Other risk management objectives These are the usual impacts of interest to decision makers –Costs, benefits, compliance with laws, budget impacts, capability, and so on

37 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions What Kinds of Decisions Is the status quo acceptable? Can we accept this risk? If not, can we render it acceptable, can we avoid it? If not, what level of risk is tolerable? What is the best way to achieve a tolerable level of risk?

38 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Two Important Ideas Acceptable Risk-A risk whose probability of occurrence is small, whose consequences are so slight, or whose benefits (perceived or real) are so great, that individuals or groups in society are willing to take or be subjected to the risk (or that the event might occur). Tolerable Risk-A tolerable risk is a non- negligible risk that has not yet been reduced to an acceptable level, but the risk is tolerated due to the inability to reduce it further, the cost of doing so or the magnitude of the benefits associated with the risky activity.

39 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions General Risk Management Strategies Accept Manage –Avoidance –Reduce probability of event (prevent) –Reduce consequence of event (mitigate) –Insurance –Retain

40 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Principles for Choosing Management Option Policy Zero Risk Weight-of-evidence Precautionary Principle ALARA Principle ALOP Principle Reasonable Relationship Safety Standards

41 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Safety Standards Safety standards –Thresholds –Balancing standards Risk-Benefit Trade-Off: Greater benefit => Greater acceptable risk Comparative Risk Analysis: Rank risks for seriousness of threat posed Benefit-Cost Analysis: Economic efficiency

42 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions When Opportunities are Uncertain Consider net NED benefits as a decision criterion before risk informed decision making—an easy choice Decision making will become multi- dimensional—values and uncertainty. Can we handle that? Net BenefitsPlan 1: RedPlan 2: BluePlan 3: Green Mean$6,998,000$6,001,142$4,000,039

43 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Methods in Use Qualitative Risk Assessment Probabilistic Risk Assessment Multi-Criteria Decision Analysis

44 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Probabilistic Risk Assessment P(Negative return) Which is the best plan now?

45 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions MCDA Well-suited to multi-dimensional decision making

46 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Possible Rules for Making Decisions Under Uncertainty Maximax—appeals to gamblers (blue) –Choose plan with best upside payoff Maximin—appeals to cautious (purple) –Choose plan with best downside payoff Laplace—risk neutral (red) –Choose plan based on expected value payoff Hurwicz—neither neutral nor extreme –Choose plan based on assigned weights Regret-make wrong decision and regret it –Identify the maximum regret associated w/ each choice –Choose plan that minimizes this regret

47 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Regret States of the world MinMax Red $ (10,173,310) $ 23,635,943 Blue $ (4,114,583) $ 16,894,192 Green $ (15,726,346) $ 19,273,900 Regret Matrix Maximum Red $ 6,058,727 $ - $ 6,058,727 Blue $ - $ 6,741,751 Green $ 11,611,763 $ 4,362,043 $ 11,611,763 Minimax $ 6,058,727 If we choose red our regret will at most be $6.1 million

48 “ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Just Give Me The Number Is Gone Uncertainty assures we do not know the number –If one even exists Analysis must honestly address the things that are not known and convey this information and its significance to decision makers Decision making will become more probabilistic

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