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Economic Issues in Risk Analysis: Do Strategic Analysis &Planning

Economic Issues in Risk Analysis: Do Strategic Analysis &Planning. Michael R. Greenberg, Bloustein School, November 2008. Context. Proponent of Risk Analysis Risk assessment Risk management, which includes economic analyses. Two economic issues that need to be addressed.

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Economic Issues in Risk Analysis: Do Strategic Analysis &Planning

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  1. Economic Issues in Risk Analysis: Do Strategic Analysis &Planning Michael R. Greenberg, Bloustein School, November 2008

  2. Context • Proponent of Risk Analysis • Risk assessment • Risk management, which includes economic analyses

  3. Two economic issues that need to be addressed • (1) Strategic assessment of potential disasters • (2) Lifecycle cost assessment ( briefly summarize)

  4. Strategic assessment of disasters • U.S. does not systematically analyze vulnerabilities and economic implications of disasters • failed to protect engineered systems • inadequate land use-planning or design to reduce risk

  5. Inadequate planning for evacuation or relocation • Failure to understand implications of different levels and staging of restoration • Failure to provide resources that build resiliency into systems or mitigate against economic consequences

  6. Attributes for Economic Preparedness • Measure costs & benefits (Direct, indirect and induced impacts) • Geographical scale (Local, regional, multi county, state, national, international) • Temporal (aftermath, intermediate, long-term)

  7. Attributes (2) • Ability to measure policy consequences (investments in mitigative measures upgrading bridges, dams, electric power substations) • Investments in resiliency (education, alternative production methods, use alternative resources) • Impact on disadvantaged (poor, second language, immobile)

  8. Tools Input output Econometric Computable general equilibrium Regional economic models (REMI)

  9. Key Data Needs • Estimate of resiliency • spatial unevenness of vulnerability and responsiveness • insurance

  10. Be proactive with our existing tools • Local scale use Hazus to produce estimates of worst disasters for 5 years • State use CGE or econometric model to prepare plausible state estimates • Feds use REMI to develop national estimates • Prepare briefings for Congress and Executive branches. Stop being passive as if we have no capacity for strategic planning.

  11. References • M. Greenberg, M. Lahr, and N. Mantell. Understanding the economic costs and benefits of catastrophes and their aftermath: a review and suggestions for the US federal government. Risk Analysis. 27 (1), 2007, 83-96.

  12. M. Greenberg, H. Mayer, and D. Lewis, Life-cycle cost in a highly uncertain economic environment: the case of managing the U.S. Department of Energy’s nuclear waste legacy, Federal Facilities Environmental Journal, Spring, 2004, 67-82.

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