Integrated Risk Management

1. Institute for Water Resources 2010 Integrated Risk Management Charles Yoe, PhD cyoe1@verizon.net

2. 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

3. Risk 3 • Risk is a measure of the probability and consequence of uncertain future events • Risk includes • Potential for gain (opportunities) • Exposure to losses (hazards)

4. 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

5. 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

6. Risk Management-Informally • What is the problem? • What questions do we want risk assessment to answer? • What can be done to reduce the impact of the risk described? • What can be done to reduce the likelihood of the risk described? • What are the trade-offs of available options? • What is the best way to address the described risk? • Is it working? 6

7. 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. 7

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

9. The Job! • Risk managers are responsible for risk analysis • Identify or validate problems • Make sure risk communication takes place • Ask questions of staff, which when answered, provides the information they need to make decisions • Manage risks that are not acceptable • Make sure mitigation is working 9

10. 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

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

12. Establish Decision Context Description 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 • 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.

13. 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

14. 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

15. Identify Risks Description 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. • 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.

16. 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

17. Analyze Risks Description 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 • 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.

18. 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

19. Evaluate Risks Description 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 • 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.

20. 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

21. Risk Management Decision Description 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 option’s success When appropriate, an adaptive management plan An implementation plan An implemented plan • 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.

22. 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

23. Risk Management Strategies General Strategies 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 • Accept • Manage • Avoidance • Reduce probability of event (prevent) • Reduce consequence of event (mitigate) • Insurance • Retain the risk 23

24. Who Owns the Risk • Many risks are shared ownership • Corps • Non-federal partners • Stakeholders • The public • All must know and accept their responsibilities

25. Communicate, Consult and Collaborate Description Outputs Preparing and executing a public involvement plan including provisions for risk communication. • 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.

26. 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

27. Monitor, Evaluate, Modify Description Outputs A plan for monitoring, reviewing and modifying the implemented solution Implementation of that plan • 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.

28. 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

29. Coming soon in an EC near you!

30. Questions?