Risk Management - Just a Numbers Game?

1. Risk Management - Just a Numbers Game? or Why engineers and the engineering profession must re-engage with this developing paradigm Geraint Bermingham URS New Zealand Ltd

2. Formal Risk Management Development Insurance Actuarial Nuclear Logic Networks Safety Critical F - N Curves Finance Probabilty Reliability Loss Control Environmental Qualitative Project Business Engineers? Value Ecological Social Latter half of 20th Century

3. Some Basics What do we mean “Risk”?

4. Risk - a word re-defined • Risk  Chance or Probability • Risk  Severity or Harm • Risk = Probability x Severity

5. Risk-BasicConcepts • Always refers to the future • Normally refers to the untoward • Always an element of uncertainty

6. Continuing Weaknesses • A clear and complete definition • ‘Present’ ‘near’ and ‘long’ Term • Measurement of ‘consequence’ • Comparison of differing risks • Prediction • Consideration of ‘uncertainty’ • Precaution • Perception/calculated

7. Terminology “Risk”,

8. Terminology • Risk • AS/NZS4360: “The chance of something happening that will have an impact upon objectives. It is measured in terms of consequence and likelihood.” • Institute of Chemical Engineers (UK): “The likelihood of a specified undesired event occurring within a specified period or in specified circumstances” • USEPA: “The probability of injury, disease, or death under specific circumstances.” The EPA go on to define “Environmental Risk” as the risk associated with the probability that a given chemical exposure may damage human health…....”

9. Risk - Alternative definitions • Risk (rare events) = Severity • Probability • Risk (complex systems) = Severity • Probability • Uncertainty • Risk = (uncertain ongoing harm) • Severity • Frequency of Occurrence • Level of knowledge

10. Perception “Risk, Impact and People”

11. NZ Societal Risk Perception and Values • 1947 - Ballantynes (41) • 1953 - Tangiwai (151) • 1968 - Wahine (51) • 1979 - Mount Erebus (257) • 1995 - Cave Creek (14)

12. Safety Acceptance Criteria N N2 ?

13. AS/NZS 4360 Process Scope/Context Identification Analysis Evaluate Treat Monitor & Review Communicate

14. An Alternative Process? Identify Issues Treat Communicate Scope Evaluate Identify Risks Analyse

15. Some Case Studies “Engineering Failures?”

16. Some Case Studies • Windscale Fire (design weaknesses) • Challenger Disaster (organisational structures) • Three more local incidents

17. Farmer Criterion 10-2 Unacceptable Risk Civil NPW Frequency Acceptable Risk 109 I131 Chernobyl? Windscale Fire

18. Challenger

19. Shuttle Management Structure • Level I - Associate Administrator • Space Flight • Level II - Manager National • Space Transportation Program • Level III - Program managers • (hardware elements) • Level IV - Contractors for • shuttle elements Institutional Chain Program Chain

20. Some More Local Incidents • Auckland Power Crisis • Governance of technology based org’s • Operational priorities/Incident Management • Technical asset management • Sydney Water Supply • Victoria Gas Supply

21. A Broader Understanding “Where does traditional analysis fit?”

22. QRA ? Time 0 Developments Piper Alpha Accident Rate

23. Risk Decision Framework • Codes Standards and Procedures • Good Practice • Professional Judgement • Detailed Analysis • Company Values • Societal Values

24. Codes, Standards & Procedures Good Practice Professional Judgement Detailed Analysis Company Values Societal Values Risk Assessment Decision Framework Decision Complexity Simple 1 Difficult Complex Increasing Complexity

25. Codes, Standards & Procedures Good Practice Professional Judgement Detailed Analysis Company Values Societal Values Risk Assessment Decision Framework Decision Complexity Simple Difficult 2 Complex Increasing Complexity

26. Codes, Standards & Procedures Good Practice Professional Judgement Detailed Analysis Company Values Societal Values Risk Assessment Decision Framework Decision Complexity Simple Difficult Complex 3 Increasing Complexity

27. Codes, Standards & Procedures Nothingnew or unusual Well understood risks Established practice Good Practice No major stakeholder implications Professional Judgement Lifecycleimplications Somerisktrade-offs/ transfers Detailed Analysis Someuncertaintyordeviationfrom standardorbestpractice Significanteconomicimplications Verynovelorchallenging Company Values Strongstakeholderviewsand Societal Values perceptions Significantrisktrade-offs/ transfer Significantuncertainties Perceivedloweringof standards Risk Assessment Decision Framework Decision Complexity Decision Context Type 1 Simple 2 Difficult 3 Complex

28. Implications for The Engineering Professionand Engineers “Risk and Society”

29. Implications for Engineers • Standards have a place (know where) • Judgement is good (but where do new generation get theirs? • Good Practice - but stay current • Analysis - develop skills and practice further where this adds value • Be part of value based decision making • Government / Corporate Governance • Engagement with society

30. Catching Up - The Science • Perception of “likelihood” • The value of ‘consequence’ • Consideration of ‘uncertainty’ • Debate of Precautionary Principle • Practical Tools • Project Management • Hazard Identification • Education/Adoption

31. Catching Up - Decision Making • Management of Technology • Senior Positions • Management Skills • Leadership

32. Catching Up - Engagement with Society • Science and Technology Education • Technically literate society • The value debate • How safe is safe • Precaution • Trust • The environment • Social benefit

33. Summary • RM is developing fast • RM now being applied to many issues • Engineers are not up with the play • Need to raise: • The practice of Risk Management • Governance of Technology • Societal Engagement