Strategic Risk Management

1. Strategic Risk Management A New Approach to Risk Controversies for Organizations Block Course (January 4, 2000)

2. William Leiss • NSERC/SSHRC/Industry Research Chair in Risk Communication and Public Policy • Faculty of Management, University of Calgary • President, Royal Society of Canada • www.ucalgary.ca/~wleiss • wleiss@mgmt.ucalgary.ca

3. The Main Points • Risk Management [RM] is different from “Risk Issue Management” [RIM] • RM deals with a risk domain where risk assessment governs decision-making • RIM deals with a risk controversy where the outcome results from strategic advantage

4. The Main Points (continued) • “Failing” in risk controversies can be very expensive! • Solutions (reducing exposure) include: • Understanding the difference; • Anticipating emergent issues; • Becoming fully engaged; • Being proactive; • Staying in for the long haul.

5. Cases and Illustrations • Dioxins (MCMM Chap 3) • PCBs (MCMM Chap 8) • Silicone breast implants (MCMM Chap 5) • Alar and apples (R&R Chap 6) • BSE & CJD (MCMM Chap 1) • MCMM = “Mad Cows and Mother’s Milk,” by Powell and Leiss (1997) • R & R = “Risk and Responsibility,” by Leiss and Chociolko (1994)

6. Recent and Current Cases • MMT (website) “MMT, A Risk Management Masquerade” (September 1999) • Fisheries Management, esp. coasts “Between Expertise and Bureaucracy” (January 1999) • Climate Change (website) “The Climate Change Policy Mess” (April 1999) • “GM foods” Work in progress (November 1999)

7. Dioxin risk assessment prompts action against occupational exposure and environmental buildup 1965-1990, no significant human health, environmental risks thereafter Dioxin remains high on issue agenda, run by Greenpeace, for chemical and plastics industries down to the present, with major investments to reduce to non-detect levels Risk Domain / Risk Controversy

8. PCBs: early action to discontinue use; deal with persistence in environment, update the risk assessment, find safe ways to incinerate or otherwise dispose of stored material Misunderstandings, poor communication on acute exposure risk makes disposal moves difficult or impossible to implement easily; incremental risk from unsafe storage Risk Domain / Risk Controversy

9. Silicone breast implant risk assessment, based on epidemiology, for “systemic” health risks, shows no significant risk (non-systemic risks validated) Multi-billion dollar legal settlements against manufacturers based on jury awards in U. S. for systemic risks Risk Domain / Risk Controversy

10. ALAR and apples: risk assessments, e.g. by Health Canada, do not show clearly any significant excess risk (childhood cancer) Controversy builds over the 1980s until CBS “60 Minutes” program, masterful publicity campaign by U. S. NRDC, product withdrawn from market by Uniroyal Risk Domain / Risk Controversy

11. BSE & CJD: scientific risk assessment foiled by incomplete dose / response and exposure characterization; poor regulatory oversight; massive uncertainties and mystery about the toxic agent “Mad cow disease” concern fueled by UK government statements that “British beef is perfectly safe”; costs of over £10 billion; spillover to GM foods issue due to lack of trust in government Risk Domain / Risk Controversy

12. MMT, replaced lead in gasoline; five separate and credible Canadian risk assessments 1970s to present, have shown no significant risk to health or environment from manganese emissions Federal politicians played the “risk card” (a game of bluff) and lost; the $20m paid to Ethyl is less important than the mismanage-ment of the issue and the undermining of good risk assessment Risk Domain / Risk Controversy

13. Fisheries management: large uncertainties in the scientific models for dynamics of wild fish populations, for setting the annual allowable catch, especially for the coastal fisheries “Interference” with the science within govern-ment, responding to pressures from the competing stakeholder interests wishing to exploit the fishery; very serious economic losses on both coasts Risk Domain / Risk Controversy

14. Climate Change, high-consequence risk with massive uncertainties, very high costs for any meaningful actions; severe test for decision making, public policy, and the precautionary principle Impoverished public understanding, due to failure of governments to explain complexity, uncertainty, possible costs of both action and inaction: it will get much worse yet! Risk Domain / Risk Controversy

15. GM Foods: complex new technology with many “dread risk” elements (cloning, irreversible alteration, “playing God”); food an especially sensitive consumer domain; rapid pace of progress Monsanto and others have run roughshod over public concerns, but now momentum reversed in Europe; billions of dollars of share value erased in the past year, very uncertain future Risk Domain / Risk Controversy

16. What went wrong here? (1) • First, risk assessment was supposed to give the right numbers for risks, and this would settle things, when we lined up the list of relative risks and decided what to worry about and what not to; • It didn’t work because folks didn’t trust the numbers, those who calculated them, or those who put the “spin” on them

17. What went wrong here? (2) • Second, risk perception research was to help by explaining why and how ordinary folks think about risks in completely different ways from “experts”; • It didn’t help, because the explanations did not lead to ways of closing the gap between risk assessment and perceived risk.

18. What went wrong here? (3) • Third, risk communication was supposed to help, by showing experts how to “package” their risk messages more effectively and persuasively; • It didn’t help, because very few listened to these clever messages or changed their opinions about how to manage risks.

19. What is the lesson from all this? • Where a risk domain engenders a risk controversy, the institutions likely to be held responsible (government and industry) have two distinct and different tasks: (1) to manage the risks responsibly, and (2) to manage responsibly their involvement in the issue. Both challenges must be addressed; each demands its own type of response.

20. Towards Solutions • First and foremost, appreciate what Risk Issue Management is not: It is not the latest in “spin doctoring” which will extricate you from a sticky situation. In fact, it is exactly the opposite: It tells you to jump into the controversy, in a responsible way, rather than hunkering down and hoping it will all blow over.

21. R I M: Solutions (1) • Understand the difference [RM / RIM]: • When a risk controversy erupts, and it looks like you will be involved, call your risk issue manager first, not your toxicologist. Understand why it is, or is likely to be, an issue (i.e., a public concern) as well as a risk domain that requires also good risk management.

22. R I M: Solutions (2) • Risk Issue Forecasting: Better still, don’t wait for it to hit you in the face. Anticipate possible events, by (a) understanding the common features of risk controversies, from past events, and (b) analyzing your own business to identify potential areas of public concern. This is equally relevant both to industry and to governments.

23. R I M: Solutions (3) • Become fully engaged: Don’t hide in the hope that it will “blow over” or that others will have to deal with it. This is the most difficult lesson of all, because “instinct” says, don’t call attention to yourself. (“Let sleeping dogs lie” is the golden rule to date.) But it is much harder to deal with it after public opinion is already polarized.

24. R I M: Solutions (3.1) • Example: Monsanto and GM foods. • Monsanto has now (too late perhaps) offered an olive branch to opponents. My guess is that the industry will have to retreat first, slowing the pace of development, and taking concrete actions, in order to build a sufficient basis of trust for conducting a “free and open dialogue.”

25. R I M: Solutions (4) • Be proactive in risk communication: Take the time and resources to design a responsible strategy for full engagement, which includes deliberately calling attention to risk factors, uncertainties, etc.; in other words, do the “worst case scenario” work yourself, and tell the public about it, rather than waiting until others do it for you.

26. R I M: Solutions (5) • Stay in for the long haul: Dioxins is a 30-year risk issue. Greenpeace - and no one else - have been involved without pause for half of this time. (Also in forestry.) Without the long view, one cannot understand the constantly-shifting dynamic of the controversy, and respond effectively to each phase as it emerges.

27. R I M: Solutions (5.1) • Radio-frequency fields, GM foods, human genetic engineering, forestry practices, climate change and fossil fuel use, endocrine-disrupting chemicals also will have similar lives. Even if you are not in this business, you will be affected as a citizen and taxpayer. Make your voice heard so that we do things better.

28. R I M: Solutions (5.2) • Governments are in the most trouble of all: • Both ENGOs and industry are capable of long-term issue involvement, governments however are not (their “issue-attention” cycle is too short). As citizens, we all need to help and encourage our governments to develop the capacity to be effective risk issue managers.

29. Thank you. • Please take my card with you. You can contact me directly, and you can also visit my website to get information on how to obtain the publications referred to earlier.