Principles of Risk Analysis: Decision Making Under Uncertainty

576 Pages·2011·12.21 MB·English

by  Charles Yoe

Food Science & Technology
PRINCIPLES OF
R
P
RISK ANALYSIS
I R
S
I
DECISION MAKING UNDER UNCERTAINTY
K
N
In every decision context there are things we know and things we do not know.
C
Risk analysis uses science and the best available evidence to assess what we A
know—and it is intentional in the way it addresses the importance of the things we
I
don’t know. Principles of Risk Analysis: Decision Making Under Uncertainty N P
lays out the tasks of risk analysis in a straightforward, conceptual manner that
L
is consistent with the risk models of all communities of practice. It answers the A
questions “what is risk analysis?” and “how do I do this?” E
L
Distilling the common principles of the many risk tribes and dialects into serviceable S
Y
definitions and narratives, the book provides a foundation for the practice of risk

analysis and decision making under uncertainty for professionals from all walks of S O
life. In the first part of the book, readers learn the language, models, and concepts of
I
risk analysis and its three component tasks—risk management, assessment, and S F
communication. The second part of the book supplies the tools, techniques, and

methodologies to help readers apply the principles. From problem identification
and brainstorming to model building and choosing a probability distribution, the
author walks readers through the how-to of risk assessment. Addressing the
critical task of risk communication, he explains how to present the results of
assessments and how to develop effective messages.
The book’s simple and straightforward style—based on the author’s decades of
experience as a risk analyst, trainer, and educator—strips away the mysterious
aura that often accompanies risk analysis. It describes the principles in a manner
that empowers readers to begin the practice of risk analysis, to better understand
and use the models and practice of their individual fields, and to gain access to
the rich and sophisticated professional literature on risk analysis.
Y
O
E
K12690
K12690_Cover.indd 1 8/18/11 12:49 PM
PRINCIPLES OF
RISK ANALYSIS
DECISION MAKING UNDER UNCERTAINTY

PRINCIPLES OF
RISK ANALYSIS
DECISION MAKING UNDER UNCERTAINTY
CHARLES YOE
CRC Press
Taylor & Francis Group
6000 Broken Sound Parkway NW, Suite 300
Boca Raton, FL 33487-2742
© 2012 by Taylor & Francis Group, LLC
CRC Press is an imprint of Taylor & Francis Group, an Informa business
No claim to original U.S. Government works
Version Date: 2011913
International Standard Book Number-13: 978-1-4398-5750-2 (eBook - PDF)
This book contains information obtained from authentic and highly regarded sources. Reasonable efforts
have been made to publish reliable data and information, but the author and publisher cannot assume
responsibility for the validity of all materials or the consequences of their use. The authors and publishers
have attempted to trace the copyright holders of all material reproduced in this publication and apologize to
copyright holders if permission to publish in this form has not been obtained. If any copyright material has
not been acknowledged please write and let us know so we may rectify in any future reprint.
Except as permitted under U.S. Copyright Law, no part of this book may be reprinted, reproduced, transmit-
ted, or utilized in any form by any electronic, mechanical, or other means, now known or hereafter invented,
including photocopying, microfilming, and recording, or in any information storage or retrieval system,
without written permission from the publishers.
For permission to photocopy or use material electronically from this work, please access www.copyright.
com (http://www.copyright.com/) or contact the Copyright Clearance Center, Inc. (CCC), 222 Rosewood
Drive, Danvers, MA 01923, 978-750-8400. CCC is a not-for-profit organization that provides licenses and
registration for a variety of users. For organizations that have been granted a photocopy license by the CCC,
a separate system of payment has been arranged.
Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used
only for identification and explanation without intent to infringe.
Visit the Taylor & Francis Web site at
http://www.taylorandfrancis.com
and the CRC Press Web site at
http://www.crcpress.com
Contents
Preface........................................................................................................................xv
About.the.Author.......................................................................................................xxi
1 The Basics............................................................................................................1
1.1. What.Is.Risk?.............................................................................................1
1.2. What.Is.Risk.Analysis?..............................................................................4
1.3. Why.Do.Risk.Analysis?.............................................................................8
1.4. Who.Does.Risk.Analysis?.........................................................................9
1.4.1. A.Brief.Historical.Perspective.on.Risk.Analysis.........................9
1.4.2. Government.Agencies................................................................14
1.4.3. Private.Sector.............................................................................14
1.5. When.Should.We.Do.Risk.Analysis?......................................................14
1.6. Organization.of.Book..............................................................................17
1.7. Summary.and.Look.Forward...................................................................20
References...........................................................................................................21
2 Uncertainty........................................................................................................23
2.1. Introduction..............................................................................................23
2.2. Uncertainty.from.75,000.Feet..................................................................25
2.3. The.Uncertainty.on.Your.Desk................................................................27
2.3.1. Knowledge.Uncertainty.or.Natural.Variability?.......................28
2.3.2. Types.of.Uncertainty..................................................................30
2.3.3. Quantity.Uncertainty.................................................................31
2.3.3.1. Empirical.Quantities..................................................32
2.3.3.2. Defined.Constant.......................................................33
2.3.3.3. Decision.Variables.....................................................34
2.3.3.4. Value.Parameters.......................................................34
2.3.3.5. Index.Variables..........................................................34
2.3.3.6. Model.Domain.Parameters........................................35
2.3.3.7. Outcome.Criteria.......................................................35
2.3.4. Sources.of.Uncertainty.in.Empirical.Quantities.......................35
2.3.4.1. Random.Error.and.Statistical.Variation....................35
2.3.4.2. Systematic.Error.and.Subjective.Judgment...............36
2.3.4.3. Linguistic.Imprecision...............................................36
2.3.4.4. Natural.Variability.....................................................37
2.3.4.5. Randomness.and.Unpredictability............................37
2.3.4.6. Disagreement.............................................................37
2.3.4.7. Approximation...........................................................37
2.4. Being.Intentional.about.Uncertainty.......................................................38
2.5. Summary.and.Look.Forward...................................................................40
References...........................................................................................................40
v
vi Contents
3 Risk Management.............................................................................................43
3.1. Introduction..............................................................................................43
3.2. Identifying.Problems.and.Opportunities.................................................45
3.2.1. Problem.Recognition.................................................................47
3.2.2. Problem.Acceptance..................................................................47
3.2.3. Problem.Definition.....................................................................48
3.3. Risk.Estimation........................................................................................49
3.3.1. Establish.Risk.Analysis.Process................................................49
3.3.2. Individual.Risk.Management.Activities....................................52
3.3.2.1. Develop.a.Risk.Profile...............................................52
3.3.2.2. Establish.Risk.Management.Objectives....................53
3.3.2.3. Decide.the.Need.for.a.Risk.Assessment....................56
3.3.2.4. Request.Information.Needed.....................................57
3.3.2.5. Initiate.the.Risk.Assessment.....................................61
3.3.2.6. Consider.the.Results.of.the.Risk.Assessment............62
3.4. Risk.Evaluation........................................................................................63
3.4.1. Principles.for.Establishing.Acceptable.and.Tolerable.
Levels.of.Risk............................................................................65
3.4.1.1. Policy.........................................................................65
3.4.1.2. Zero.Risk...................................................................66
3.4.1.3. Weight.of.Evidence....................................................67
3.4.1.4. Precautionary.Principle.............................................67
3.4.1.5. ALARA.Principle.....................................................68
3.4.1.6. Appropriate.Level.of.Protection................................69
3.4.1.7. Reasonable.Relationship............................................69
3.4.1.8. Safety.and.Balancing.Standards................................69
3.4.2. The.Decision..............................................................................70
3.5. Risk.Control.............................................................................................71
3.5.1. Formulating.RMOs....................................................................71
3.5.2. Evaluating.RMOs.......................................................................74
3.5.2.1. Comparison.Methods................................................76
3.5.3. Comparing.RMOs......................................................................77
3.5.3.1. Multicriteria.Decision.Analysis.................................78
3.5.4. Making.a.Decision.....................................................................81
3.5.5. Identifying.Decision.Outcomes.................................................83
3.5.6. Implementing.the.Decision........................................................83
3.6. Risk.Monitoring.......................................................................................84
3.6.1. Monitoring.................................................................................84
3.6.2. Evaluation.and.Iteration.............................................................86
3.7. Risk.Management.Models.......................................................................87
3.8. Summary.and.Look.Ahead......................................................................90
References...........................................................................................................92
4 Risk Assessment................................................................................................93
4.1. Introduction..............................................................................................93
4.2. What.Makes.a.Good.Risk.Assessment?..................................................93
4.3. Definitions................................................................................................97
4.4. Risk.Assessment.Activities....................................................................100
Contents vii
4.4.1. Understand.the.Questions........................................................101
4.4.2. Identify.the.Source.of.the.Risk................................................104
4.4.3. Consequence.Assessment........................................................105
4.4.3.1. Dose-Response.Relationships.................................106
4.4.4. Likelihood.Assessment............................................................107
4.4.4.1. Exposure.Assessment..............................................108
4.4.5. Risk.Characterization..............................................................111
4.4.6. Assess.Effectiveness.of.RMOs................................................113
4.4.7. Communicate.Uncertainty.......................................................114
4.4.8. Document.the.Process..............................................................116
4.5. Risk.Assessment.Models.......................................................................117
4.6. Risk.Assessment.Methods.....................................................................121
4.6.1. Qualitative.Risk.Assessment...................................................123
4.6.2. Quantitative.Risk.Assessment.................................................123
4.7. Summary.and.Look.Ahead....................................................................124
References.........................................................................................................124
5 Risk Communication......................................................................................127
5.1. Introduction............................................................................................127
5.2. Definitions..............................................................................................131
5.3. Internal.Risk.Communication...............................................................132
5.3.1. Coordination.between.Assessors.and.Managers.....................132
5.3.2. Risk.Communication.Process..................................................134
5.3.3. Documenting.the.Process........................................................134
5.4. External.Risk.Communication..............................................................134
5.4.1. Risk.and.Crisis.Communication..............................................136
5.4.1.1. Risk.Dimensions......................................................136
5.4.1.2. Risk.Perceptions......................................................138
5.4.1.3. Know.and.Engage.Your.Audience..........................139
5.4.1.4. Psychographic.Information.....................................142
5.4.1.5. Risk,.Stress,.and.the.Communication.Model..........144
5.4.1.6. Three.M’s.of.Risk.Communication.........................146
5.4.1.7. Critical.Differences.in.Crisis.Communication........149
5.4.1.8. Explaining.Risk.to.Nonexperts...............................150
5.4.1.9. Explaining.Uncertainty...........................................154
5.4.2. Public.involvement...................................................................156
5.4.2.1. Planning.Stakeholder.Involvement..........................157
5.4.3. Conflict.Resolution...................................................................160
5.5. Summary.and.Look.Forward.................................................................161
References.........................................................................................................162
6 Problem Identification for Risk Management..............................................165
6.1. Introduction............................................................................................165
6.2. What’s.a.Problem?.What’s.an.Opportunity?.........................................169
6.3. Becoming.Aware.of.Problems.and.Opportunities.................................171
6.3.1. Triggers.and.Inputs..................................................................172
6.4. Problem.and.Opportunity.Identification.Techniques............................175
6.4.1. Appreciation.............................................................................176
viii Contents
6.4.2. Be.a.Reporter...........................................................................176
6.4.3. Utopia.......................................................................................177
6.4.4. Benchmarking..........................................................................177
6.4.5. Checklists.................................................................................178
6.4.6. Inverse.Brainstorming.............................................................178
6.4.7. Bitching....................................................................................179
6.4.8. Draw.a.Picture.of.the.Problem.................................................179
6.4.9. Mind.Maps...............................................................................179
6.4.10. Why-Why.Diagram..................................................................180
6.4.11. Restatement..............................................................................181
6.5. The.P&O.Statement...............................................................................182
6.6. Summary.and.Look.Forward.................................................................183
References.........................................................................................................185
7 Brainstorming.................................................................................................187
7.1. Introduction............................................................................................187
7.2. What.Can.You.Brainstorm?...................................................................188
7.3. Background............................................................................................188
7.3.1. No.Evaluation...........................................................................188
7.3.2. Unusual.Ideas...........................................................................189
7.3.3. Quantity.Counts.......................................................................189
7.3.4. Combine.and.Improve.Ideas....................................................189
7.3.5. Four.Pitfalls..............................................................................189
7.4. Avoid.Problems.in.Your.Process...........................................................191
7.5. A.Few.Good.Techniques........................................................................192
7.5.1. Brainstorming..........................................................................193
7.5.2. Brainwriting.............................................................................194
7.5.2.1. Poolwriting..............................................................194
7.5.2.2. Gallery.Writing........................................................195
7.5.2.3. Electronic.Brainwriting...........................................195
7.6. 3×.Yeah..................................................................................................196
7.7. Group.Evaluations.with.Colored.Dots...................................................199
7.8. Do.You.Need.a.Facilitator?....................................................................199
7.9. Addendum..............................................................................................200
7.10. Summary.and.Look.Forward.................................................................201
References.........................................................................................................202
8 Opportunity Costs and Trade-Offs...............................................................203
8.1. Introduction............................................................................................203
8.2. Economics.for.Risk.Managers...............................................................203
8.3. Economics.and.Decision.Making..........................................................204
8.3.1. Trade-Offs................................................................................204
8.3.2. Opportunity.Cost.....................................................................206
8.3.3. Marginal.Analysis....................................................................208
8.3.4. Incentives.................................................................................210
8.3.5. Rent.Seeking............................................................................211
8.4. Economic.Basis.for.Interactions.among.People....................................212
8.4.1. Trade........................................................................................212
Contents ix
8.4.2. Markets....................................................................................213
8.4.3. Market.Failure..........................................................................213
8.4.4. Government.Failure.................................................................215
8.5. Principles.of.the.Economy.as.a.Whole..................................................215
8.5.1. Living.Standards.and.Productivity..........................................215
8.5.2. Inflation.and.Unemployment...................................................216
8.6. Making.Trade-Offs................................................................................216
8.7. Economic.Analysis................................................................................218
8.7.1. Cost-Effectiveness.Analysis.....................................................218
8.7.2. Incremental.Cost.Analysis.......................................................219
8.7.3. Benefit-Cost.Analysis..............................................................220
8.7.4. Risk-Benefit.Analysis...............................................................220
8.7.5. Economic.Impact.Analysis......................................................221
8.8. Summary.and.Look.Forward.................................................................221
References.........................................................................................................222
9 Qualitative Risk Assessment..........................................................................223
9.1. Introduction............................................................................................223
9.2. Risk.=.Probability.×.Consequence........................................................224
9.3. A.Generic.Process.................................................................................225
9.3.1. Example.Setup.........................................................................231
9.4. More.or.Less.Risk..................................................................................233
9.5. Risk.Narratives......................................................................................233
9.6. Evidence.Maps.......................................................................................234
9.7. Ordering.Techniques..............................................................................235
9.7.1. Chronology..............................................................................236
9.7.2. Screening.................................................................................236
9.7.3. Rating.......................................................................................237
9.7.4. Ranking....................................................................................238
9.7.4.1. Enhanced.Criteria-Based.Ranking..........................238
9.7.4.2. Paired.Ranking........................................................243
9.8. The.Risk.Matrix.....................................................................................246
9.9. Qualitative.Risk.Assessment.Models....................................................249
9.10. MCDA....................................................................................................252
9.11. A.Semiquantitative.Risk.Assessment.Example.....................................255
9.12. Summary.and.Look.Forward.................................................................259
References.........................................................................................................260
10 The Art and Practice of Risk Assessment Modeling...................................261
10.1. Introduction............................................................................................261
10.2. Types.of.Models.....................................................................................262
10.3. A.Model-Building.Process....................................................................265
10.3.1. Get.the.Question.Right............................................................266
10.3.2. Know.the.Uses.of.Your.Model.................................................266
10.3.3. Build.a.Conceptual.Model.......................................................266
10.3.4. Specify.the.Model....................................................................267
10.3.5. Build.a.Computational.Model..................................................268
10.3.6. Verify.the.Model......................................................................268