making decisions in the face of uncertainty: · pdf filemark ferguson , science foundation ......

OFFICEOFTHEPRIMEMINISTER’SCHIEFSCIENCEADVISORProfessorSirPeterGluckman,KNZMFRSNZFMedSciFRS

ChiefScienceAdvisor

Makingdecisionsinthefaceofuncertainty:Understandingrisk

Part1May2016Availablefordownloadathttp://www.pmcsa.org.nz/Aprintedversionwillbemadeavailablewhentheseriesiscomplete.OfficeofthePrimeMinister’sChiefScienceAdvisorPOBox108-117,SymondsStreet,Auckland1150,NewZealandTelephone:+6499236318Website:www.pmcsa.org.nzEmail:[email protected]

PMCSA Risk Series Part 1

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AcknowledgmentsThefirstdraftofthispaperwaspreparedbyDrAnneBardsleyoftheOfficeofthePMCSA.Othermembersofthe Office also provided input. Early drafts were reviewed by staff of the Ministry of Civil Defence andEmergencyManagement.ThefinaldraftwasreviewedbytheCommitteeofDepartmentalScienceAdvisors.Wespecificallyacknowledgethevaluableinputofthefollowingreviewers:MarkFerguson,ScienceFoundationIreland,ChiefScienceAdvisortotheGovernmentofIrelandDavidMair,JointResearchCentre,EuropeanCommissionSarah-JayneMcCurrach,MinistryofCivilDefenceandEmergencyManagementKimWright,MinistryofCivilDefenceandEmergencyManagementMurraySherwin,NewZealandProductivityCommission,ChairStrategicRiskandResiliencePanelDavidJohnston,JointCentreforDisasterResearch,MasseyUniversity,andGNSScienceSarbJohal,JointCentreforDisasterResearch,MasseyUniversity,andGNSScienceEmmaHudson-Doyle,JointCentreforDisasterResearch,MasseyUniversity,andGNSScienceRichardBedford,RoyalSocietyofNewZealandandAucklandUniversityofTechnologyAidanGilligan,SciCom–MakingSenseofScience,Brussels

ExceptfortheOPMCSAlogo,thisworkislicensedunderaCreativeCommonsAttributionNonCom-mercial4.0InternationalLicense.


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Makingdecisionsinthefaceofuncertainty:Understandingrisk

Forward–AboutthisseriesAs the Prime Minister’s Chief Science Advisor(PMCSA), part of my terms of reference is topromote the use of science-based evidence tosupport public policy making, both within tradi-tional policy domains and also relating toquestions of new and emerging technologies.Increasingly, this work requires explaining togovernment and publics how science can assistand what science can tell us about decision-making when knowledge is incomplete. Thisincludes consideration of concepts of risk,uncertainty, probability and precaution. Few ifanydecisionscanbemadewithabsolutecertaintyof outcome. The consequence of this reality isthatsomedecisionsappeartotaketoomuchriskandothersnotenough,thelatteroftenleadingtoa sense of inaction. Indeed no innovation ispossiblewithoutsomelevelofuncertainty,soanabsolutesenseofprecautionleadstostasis.Theassessmentofvirtuallyeveryhazardandriskhasascientificdimension.Thisisparticularlysointhe cases of technology assessment and inconsidering the responses to potential naturalhazardeventsandothercrises.Scientificadviceinsuch situations includes identifying risks andopportunitiesandmanagingthemeffectively.Forinstance, providing scientific scrutiny of govern-mental riskassessmentshelps to informabetterunderstandingofthepossibleoutcomes,andthustoassistgovernmentdecision-making.The term ‘risk’ itself implies someuncertainty ofoutcome, which can be either positive or nega-tive.Dealingwiththenegativeeffectsofariskora decision − the downside of uncertainty −involves managing and minimising potentialdamagingeffects toourselvesandourcommuni-ties, economy, and environment. This requiresproactively understanding these effects and

adequatelyplanningandbeingprepared.Howev-er, for societies to progress, we must alsoconsiderthepositiveeffectsofrisk−theupsideofuncertainty indecision-making−wherepotentialbenefits can be realised. Management thenentails minimising potential negative impactswhilemaximisingtheopportunities.Assuch,itisimportanttodeterminewhetherthepotential positive effects (benefits) of a decisionmade in the face of uncertainty are likely tooutweigh thepotentialharms.Todo thisweuseriskassessments tobetter informourknowledgeand our perceptions of the risk. However, thereare many reasons why perceptions of risk varybetween people and between communities andsocieties,anditisthatvariationinperceptionthatcan make some people appear risk averse andothersfoolhardy.Thatvariationisbasedonmanyinnatebiasesandonourdifferentworldviews.†Inthe public arena this is often reflected in thepoliticalprocess.Inademocracyandinourownlives,understand-ing risk is everyone’s responsibility, from theindividual to communities, and our government.Therefore integrityof the informationweassess,and collaboration in our assessment of thisinformation, are key to enabling an informeddecisiontobemadewhentakingorfacingrisks.Inmany cases peer reviewed scientific evidence iscentral tothisprocess,butakeymessageof thisseriesofpapersisthatsciencecannothavealltheanswers.

† A worldview is a particular philosophy, or collection ofbeliefs, about life and the universe that is held by anindividualoragroup.Weusethetermtoindicatetheoverallperspectivefromwhichoneseesandinterpretstheworld.


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Scienceisaniterative,self-correctingprocessthatgradually leads toward a general consensus ofscientificviewsbasedontheconsistency,volumeand weight of evidence on a particular issue.However,thepaceofchangeoccurringtoday,andthe increasingly complex risks we face bothindividuallyandasasocietyoftenrequirechoicesto bemade and action to be taken before all ofthe desired evidence can be gathered. Wefrequently want to knowmore than science canproduce. Given that there is nearly always adegree of uncertainty in any decision, even ifscientifically informed, levels of judgement havetobemadebothinourownchoicesandinthosethatpolicymakersmakeonourbehalf.Theintentionofthisseriesofdiscussionpapersisto enable the reader to understand what riskmeans to individuals, their communities andgovernment; to promote awareness and under-standingof themanyaspectsof riskassessment,communicationandmanagement;and toconsid-erthelong-termrisksinNewZealandandhowwemight make decisions optimally when the out-comesareuncertain.Part 1 in the series is designed to provide ageneral understanding of risk and its associatedconcepts. It will introduce the reader to basicprinciples of risk management including riskassessment, the translation of science into riskcommunication, andhowweuseourbeliefs andvalues when making risk-based decisions. Agreater understanding of the concepts of risk,hazard, potential impact (consequences), vulner-ability and exposure, and the limits of scientificknowledgesurroundingthem,providesabasisforindividuals and communities to better considerthe complex trade-offs between risks and bene-fits, allowing them to formulate their ownresponses to many situations that will challengeus inthetwentyfirstcentury.Thefirstpaperwillserve as an introduction for the more in-depthdiscussion of concepts and issues in the rest oftheseries.Part2willconsider infurtherdetail theconceptsofriskperceptionandriskmanagement–inotherwords, how we think about risk and how weattempttomanageitorlivewithit.Thisleadstoadiscussion of values, biases, beliefs andworldviews that influence how we see and dealwith risk, both individually and as a society. In a

rapidlychangingworldwenowfacemanysocietaldecisions we have never faced before. Forexample, thereare risks relating tochangingandemerging technologies that had not been con-templated a generation ago. The rapid pace oftechnological change means that our society ismore connected thanever,makingournewwayof life increasingly vulnerable to disruption.Similarly, we need to think hard about how tosustain and improve our economy, while alsoprotecting our environment and distinctivebiological heritage that makes New Zealand auniquely, great place to live. Thismeansmakingdecisions and considering the trade-offs involvedin preparing for, and adapting to, our changingenvironment.Understanding the factors that canaffect our interpretation and acceptance orrejection of scientific evidence, and the trustweplace invarious sourcesof information, is criticalto our success in this regard. But none of this issimple.Part3willtacklethelonger-termtrendsthatmayaffect New Zealand and discuss the role ofgovernment in riskmanagement.Buildingon thefirst two papers, it will introduce risks, includingglobal risks, that have systemwide effects – forexample climate change, demographic changeand disruptive technologies. Understanding theinformation at hand, scientific or otherwise, isessential for policy makers and governmentofficialswhohavetodecidewhat ‘isbest’onthebasis of available evidence, while bearing theresponsibility of protecting our most valuableassets. Usually this means having to make adecision without all the answers, but it alsomeansbeingadaptiveandbeingwillingtochangepolicyresponsesinthelightofnewinformation.Italsorequiresbeingclearwithriskcommunicationso that all stakeholders including the publicunderstand the basis of decision making. Associetal approaches will be needed, the im-portance of collective consensus in riskmanagementcannotbeunderestimated.Thestoriesusedtoillustratethisseriesofpapersare chosen to demonstrate the complexities ofdecisions involving risk and uncertainty. Theyshow how values come into play, and howdifferent perceptions of risk, precaution and ourvarious distinct worldviews affect our decision-making. They also highlight essential differences


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between voluntary and involuntary risks (thosewetakeversusthoseweface).Thesecondandthirdpapers inthisserieswillbereleased later thisyear.Thegoalof thesediscus-sionpapers is tohelp improve thequalityof thepublic understanding of the many risks thatconfrontNewZealand; be it in termsof howweaddress the balance between economic growthandresourceuse,howweuseand/orcontrolnew

disruptive technologies, how we make decisionsaboutinitiativesaimedatenhancingourqualityoflifeoraddressingnaturalhazardsorthreatstoournationalsecurity.Allgovernmentsmustconstant-lyaddresssocietalandeconomicrisksoverwhichscientific knowledge, and both societal andpersonally-held values may be contested. Thediscussion that follows will attempt to addresssomeofthese issues,particularlywithintheNewZealandcontext.

SirPeterGluckmanPrimeMinister’sChiefScienceAdvisor


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Part1:Aboutrisk

TableofContents

Forward–Aboutthisseries..........................................................................................................3

AimandScope.............................................................................................................................7

Introduction.................................................................................................................................9

1.WhatisRisk?............................................................................................................................91.1Hazards,shocksandstresses...........................................................................................................101.2Exposure,vulnerabilityandresilience.............................................................................................11

2.Riskswetakevsrisksweface.................................................................................................132.1Takingrisks:voluntaryaction..........................................................................................................132.2Facingrisks:involuntaryexposure..................................................................................................14

3.Individualrisksvssocietalrisks...............................................................................................143.1Collectivedecision-making..............................................................................................................15

4.Calculatingrisk.......................................................................................................................154.1Quantitativeriskassessment..........................................................................................................16

4.1.1Identifyinghazardsandrisks............................................................................................................164.1.2Likelihoodestimation......................................................................................................................184.1.3Impact/consequenceanalysis..........................................................................................................18

4.2Acknowledginguncertainty.............................................................................................................184.2.1Complexrisksanduncertainty.........................................................................................................194.2.2Notalluncertaintyiscreatedequal.................................................................................................204.2.3Atriskofbeingwrong:Probabilisticuncertaintyandtypesoferror...............................................214.2.4Confidencemeasures.......................................................................................................................22

5.Translatingsciencetocommunicaterisk.................................................................................235.1Conveyingtechnicalinformation.....................................................................................................245.2Statisticalmisunderstandings..........................................................................................................24

6.Decidingwhenriskis‘acceptable’...........................................................................................24

7.Precautionanddecision-makinginthepolicysetting..............................................................26

8.Conclusion..............................................................................................................................27

References.................................................................................................................................28

Appendix:Formalriskanalysis...................................................................................................30Likelihoodterminology..............................................................................................................................30Consequenceterminology........................................................................................................................32Confidencemeasures................................................................................................................................32

Termsanddefinitions.................................................................................................................34


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Part1:Aboutrisk

AimandScopeThispaperisPart1inaseriesofthreediscussionpapersthataimstoprovideabroadframeofreferencefordiscussion of risk in the New Zealand context. The over-arching theme of the series is ‘decision-makingunder uncertainty’, because some degree of uncertainty underlies virtually all choices wemake, both asindividualsandcollectivelyasasociety.This firstpaperdealswith the fundamentalproblemofdefiningand interpreting ‘risk’ itself,andhow it isunderstoodandassessedfrombothscientificandpopularperspectives.Theobjectiveisnottoanalyseanyparticular risk or type of risk, but rather to clarify the conceptual frameworks and processes that allowdecisionstobemadewhenoutcomesarenotcompletelyknowableatthetime.Agreaterunderstandingoftheconceptsofrisk,hazard,potentialimpact(consequences),vulnerabilityandexposure,andthevalue,butalsothe limitsofscientificknowledge,providesabasis for individualsandcommunities tobetterconsiderthetrade-offsbetweenrisksandbenefits,allowingthemtoformulateresponsestomanydecisionsthatwemustmakeasindividualsandasasociety,andinparticularinrelationshiptomanycoreissuesthatchallengeNewZealandsociety.


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Box1Oureverydayrisks:themorningcommuteMaryhastwochoicesabouthowtogettoandfromworkeachday,andmostofthetimeshechoosestotakethebusoverdrivinghercar.Shemakesthisdecisionforanumberofreasonsthatreflecthervalues,percep-tions, her worldview and her analysis of the situation each day. One consideration is her concern for theenvironment,which favours thepublic transportoption.Butby takingthebussherisksbeingheldupbyasometimesunpredictable timetable, rather thanfeeling incontrolofherowntravel if shetakeshercar.Ontheotherhand,sheknowsthatifshedrives,shewillalmostinevitablyhavetodealwithheavytrafficonthemotorway,andhavelittlechanceof findingacarparknearheroffice.Shedoesn’tconsciouslycalculatethestatisticalprobabilityof thesedifferentscenarios,rathershemakesaninformedandratherautomaticguessbasedonherownexperience,biasesandbeliefs.Onthisbasis,Marychoosestotakethebusmostdays.Mary’sperception is that theriskofdrivinghasahighprobabilityofabadoutcome in termsof trafficandparking,andthatthisoutweighsthebenefitofdrivinghercartowork.Sheisnoteventhinkingaboutthefactthatthephysicalriskofinjuryismuchhigherasthedriverofacarthanasapassengeronabus,which(ifshewasveryanalytical)mightfurtherswayherdecision.Gettingoffthebusacrosstheroadfromherofficepresentsanotherdecision;oneshemakeseveryday,anddoessomostlysubconsciously.Theroadisbusyandsheneedstocrossit.Carsandbusescomearoundthecorneratspeed,andtheroadiswide.Itismorethanamatterofafewstepstotheotherside.Shecouldwalkabout100metresdownto the crossingandwait for the lights – but this increases thedistanceshehas totravelandthetimeitwilltake–orshecoulddashacrossfromwhereshedisembarks,takingtheshortestpathtoherofficedoor.Sheisnottheonlyonemakingthischoice,andmostwhoareheadinginthesamedirectionchoosethedirectpath–theyjaywalkacrosstheroad.Thisbehaviourbyothersisasocialcuethatislikelytoinfluenceherdecision,particularlyifsheseessomeonesheknows(andtrusts)doingthesame.Herbehaviourwillalsobeaffectedbyherpastexperienceonthisroad–shehasdonethismanytimesbeforeandisreason-ably confident about thedynamicsof thehazards aroundher. Shebelieves inherownability to judge thespeedanddistanceof the approaching vehicles and to get across the road fast enoughbetweenspurts oftraffic.Mary’schoiceandbehaviourincrossingtheroadareinfluencedbythevaluesheplacesonsavingtimeversusriskinginjury.Theriskitselfmightbemodifiedbyotherfactors,someofwhichareoutofhercontrol,suchasthe road surface conditions (e.g. wet surface, unobserved tripping hazards), the sometimes unpredictablebehaviour of drivers, aswell as themargin of safety she allows in the timing and speed of her crossing –reflectingherappetiteforrisk.Shemakesthedashratherthanheadingforthecrossing.


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IntroductionAs Mary’s story (Box 1) illustrates, we all makenumerous choices on a daily basis, some con-sciousandsomeunconscious,thatinvolvevaryingdegrees of risk and uncertainty. We face themfrom themomentwegetoutofbed. Some riskswill be under our control, and somewill not be.From dodging the obstacles in our path to theshower,towhatwedointhekitchen(thinkofallthe hazards in the kitchen), to our mode oftransporttoworkandthepeopleweinteractwithalongtheway,ourchoiceswillaffecttheoutcomeof our day in both obvious and inconspicuousways. Our food choices can carry health risks –both in the long term (leading to obesity andheart disease) and sometimes acutely (riskingfoodpoisoning),asdothetoolsweusetoprepareit, depending on the actions of ourselves andothers. Traveling by any means from home toworkinvolvesrisksanduncertainties,butwemustchooseawaytogetthere.Similarly, virtually every decision that govern-ments must make on our behalf involves somelevel of uncertainty. Unintended consequencesare common in our private choices and certainlyare so in policy-making, and yet decisions bygovernments often cannot wait. Indeed, adecisionnottodoanythingisstilladecisionwithconsequences.Increasinglywemust,associeties,makedecisionswithregardtonewtechnologies.Whenshouldweadoptthem?Whenshouldwecontrolthem?Thehistoryofhumaninnovation–fromtheinventionoffiretoadvancesinmolecularbiology–demon-strates that every technology has both benefitsanddownsides.Thepaceofdevelopmentofnewtechnologies such as the “internet of things”‡,machine learningandartificial intelligence,brain-machine interfaces, gene editing and driverlesscars, to name but a few – will all bring thiscomplexequationofdecisionmakingbysocietiesinto sharp focus. Without some risk taking ‡ The Internet of Things (IoT) describes the system ofinterconnected ‘things’ via the internet. Each device has aunique identifier (numeric or alphanumeric codes) allowinginteractions across the network. The ‘things’ could becomputingdevices,digitalormechanicalmachines(e.g.carswithsensors),objects,animals(e.g.implantedwithabiochiptransponder)orpeople(e.g.withaheartmonitor).

innovation is impossible, because every innova-tion involves some level of uncertainty as to itseffects.When the automobile was first inventednoonewouldhaveforeseen its impactsforgood(masstransport)andbad(pollution,injuries,etc.)onsociety.Thesamecanbesaidof technologiessuchastheinternet–ithasmadeourlivesmucheasier but it has also changed thewaywe com-municatedandlearn,changedconceptsofprivacyand personal space, and it has exposed youngpeopletocyberbullying,sextingandpornography.Its long-term effects on brain-development areuncertain.Evenconceptssuchasthenation-stateand the representative nature of democracymightbethreatened.Some degree of risk is present in everything wedo.Successfulentrepreneursandmilitary leadersare successful often because they have takenrisks; but equally, failed entrepreneurs andgeneralsmayhavefailedeitherbecausetheyhavebeen too risk-averse or have taken too great arisk.As individualsandasasociety,wetakeriskstoachievebenefits,andweavoidriskstoprotectourselves from harm. We constantly makedecisionsthatcarrysomelevelofrisk,oftenwithincompleteknowledgeofpossibleoutcomes,andinsituationswherewecannotwaitforadefinitiveanswerbeforeadecisionmustbe taken.Wecanprepare to the best of our ability and still benegatively affected. Or we can take a carefreeattitude towards the hazards and risks we faceandgetawaywithit,atleastsomeofthetime–thoughwecanneverknow for sure thatwewill.Thefutureisinherentlyuncertain.The intent of the following discussion is not toshape any particular risk assessment or decision;rather it is to assist individuals, communities,policymakersandpoliticianstobetterunderstandwhatriskisandthevariouswayitisapproached,soastoenableconstructivediscourseoncomplexmatterswheredecisions cannotwait,but factorsremain uncertain and the values associatedwiththedecisionmaywellbeindispute.

1.WhatisRisk?Thismayseemlikeasimplequestion,butthereisno straightforward answer. The term ‘risk’ has awiderangeofconnotations,butallimplythattheoutcomeofanactionoreventisuncertain–itcan


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be a negative threat or a positive opportunity,with consequences affecting something of value(referred toas ‘assets’). ‘Risk’ isoftendefinedasthe combination of the likelihood of occurrenceand the consequence of exposure of assets to a‘hazard’. Themagnitude of the risk is influencedby the level or frequency of exposure and thevulnerability of the assets, the characteristics ofthehazard,andhowlikelyaneventistooccur.Akeyemphasisofthisseriesisthatalthoughriskcan be defined in a concise and technical way§(see Box 2), the perception of risk is a broaderconcept that is ultimately dependent on socialand individual values. Sometimes taking risks(voluntarily)canleadtogreaterrewards,asinthecase of the successful investor, but in othersituationsitcanleadthesamepeopletosubstan-tiallosses.Theinvestmentoutcomewillbeinpartdetermined by how the investor weighs up and

§ The Australian and New Zealand Standard Risk Management Guidelines define risk as the effect of uncertainty on objectives. The ‘effect’ implied here can be either positive or negative – it is a deviation from what is expected in terms of financial, environmental, health and safety, or other goals (‘objectives’). (Standards New Zealand, 2009)

makeschoicesinthefaceofuncertainty,butalsoby externalities beyond his or her control (forexample the New Zealand economy could begreatly affectedbyunanticipateddecisionsmadeby amajor economic power). In other situationsthereisnochoicebuttofacerisks(involuntarily),and prepare for the possible consequences. Forexample,to livenearlyanywhereinNewZealandcarrieswithittheriskofbeingexposedtooneormore natural hazards including volcanoes,earthquakes and floods. Our approach to riskobviously differs between these different situa-tions, both individually and as a society andnation.

1.1Hazards,shocksandstressesTo understand risk, we must first understand‘hazards’ (see Box 2). The term hazard refers toanysourceofpotentialharm,includinglossoflifeor injury, property damage, social and economic

Box2SomeimportantdefinitionsAsset:anythingofhumanvalue; includespeople/populations,systems,communities,thebuiltdomain,thenaturaldomain,economicactivitiesandservices,trustandreputationExposure:People,property,systems,orotherassetspresentinhazardzonesorexposedtohazardsthataretherebysubjecttopotentiallosses.Hazard:anysourceofpotentialharm, including lossof lifeor injury,propertydamage,socialandeco-nomicdisruptionorenvironmentaldegradation.Resilience: being shock-ready, and having the ability to resist, survive, adapt and/or even thrive inresponsetoshocksandstresses.Resiliencecanbedefinedintermsofsocietal,economic,infrastructure,environmental,culturalcapital,socialcapital,and/orgovernancecomponents.Risk: a combinationof the likelihood of occurrence and themagnitudeof impact (consequences) of ahazardeventonpeopleorthingsthattheyvalue(assets).Riskismodifiedbytheextentofexposureofanassettoahazard,andthevulnerabilityoftheassettotheharmfulconsequencesofthehazard.TheAustralian and New Zealand Risk Management Guidelines define risk as the effect of uncertainty onobjectives.Shock: a sudden,disruptive eventwithan importantandoftennegative impactona system/sand itsassetsStress:a long term, chronic issuewith an important andoftennegative impact on a system/s and itspartsVulnerability:thecharacteristicsandcircumstancesofanassetthatmakeitsusceptibleto,orprotectedfrom,theimpactsofahazard


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disruption or environmental degradation. Whatmakes something a hazard is the fact that bybeing exposed to it there is a possibility forsomething to gowrong. A hazard has no impactanddoesnotcreateariskunlessthereisexposureto it. Potential hazards are everywhere – in thekitchen drawer, the foodswe eat, the consumerproducts we rely on, our modes of transport,where we choose to live, and the activities wepursueinworkandleisure.Hazardscanbenaturallyoccurring(e.g.geologicalor biological hazards such as fault lines or infec-tiousagents)orcanbeinducedbyhumanactivity(e.g. technologicalorsociologicalhazardssuchasindustrial chemicals or terrorism). A disruptive,hazard-related event may be referred to as a‘shock’. The extent of harm or impact resultingfrom suchanevent can sometimesbemeasuredquantitatively and expressed in monetary value,numberofliveslost,etc.,butmanyconsequencescan only be expressed descriptively, in terms ofother emotional, environmental and/or socialimpacts.Long-term, chronic conditions or trends (alsoknown as ‘stresses’) that have important, oftennegative impacts can become or contribute tofuture shocks. For example, the slowly rising sealevels,associatedwithclimatechange, isa stressthat if combined with a low-pressure weathersystemcontributetothestormtocreateagreatershock.

1.2Exposure,vulnerabilityandresilienceIn order to be at risk, people and/or things ofvalue (assets)havetobeexposedtoahazard. Inaddition to human lives and health, assets caninclude our built or natural environment, ourcommunities and economic activities, and evenour national or personal reputation. A hazard towhichpeopleorassetsarenotexposeddoesnotcreate a risk, but could have the potential tocreateariskinthefuture.Forexample,atsunamithatonlyreachesshoreonadesertedislandisnot

arisk,becausenoassetsareexposedto it,but ifthe island is later occupiedby humans, they andtheir communities will be exposed to the risk offuturetsunamis.Similarly, ifoneneveropensthekitchendrawerwherethemeatcleaver isstored,the meat cleaver cannot cause harm, but usedcarelesslytheriskof injurycanbesignificant. Ifagunislockedinasafeitcannotcreateariskandisnotahazard,butleftloadedinabackyardwherechildren are playing it is amajor hazard and riskhasbeencreated.The degree to which we (or our assets) arenegatively affected by exposure to a hazard isinfluenced by our vulnerability (or that of ourassets) and our resilience to that hazard. Theeffectofexposuretohazardsonourriskprofileisevident when we think about the potential fordisasters to occur. The impacts of natural disas-ters are increasing both in New Zealand andglobally,butgenerallynotbecausetherearemorehazardsaroundus (althoughclimatechangemaybeincreasingthefrequencyofshocks).Ratherthemaindriverofourincreasedriskisthatouroverallexposure is increasing, as for example,more andmore people are living in regions prone tofloodingandcoastalerosion.Thustherearemoreassets, people, interconnected services andcritical infrastructurebeingexposed to risks thaneverbefore(seeBox3).Vulnerabilityreferstocharacteristicsandcircum-stances that make an asset susceptible to thepotentially damaging impacts of a hazard. Thedegree of vulnerability is influenced by physical,social, economic, and environmental factors.Whileexposure itselfcreatesvulnerability,poorlyconstructed buildings, inadequate or poorlymaintained infrastructure, and high populationdensityfurtherexacerbatecommunityvulnerabil-ity. Conversely, it is possible to be exposed to ahazard but to have reduced vulnerability if thecommunity has the capacity tomitigate possiblelosses by improving building design and infra-structure.


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Thus the concept of vulnerability conveys theunderstandingthattheimpactsofahazardeventare partially a function of the preventive andpreparatory measures that are employed toreducetherisk,butalsoof the inherentqualitiesthat make one asset experience greater harmthananotherwhenexposedtothesameshockorstress. For example, buildings or infrastructuremaybemorevulnerabletoearthquakedamageifmadeofbrittleand/orweakmaterialsratherthanflexible and/or strong ones. Factors such as lowincome, immobility, poor physical condition orlack of social support may make some peoplemore vulnerable than others to the effects of ashock.In many cases it is not possible to completelyeliminate exposure, so we live with a level ofresidual, ‘tolerable’ risk (see section 6) andmustbe prepared for the possibility of a disruptiveevent. For example, many communities in New

Zealand reside in earthquake-prone zones, andwe try to anticipate the possibility of an eventthrough building codes and disaster prepared-ness. The more prepared we are, the lessvulnerable–andlessnegativelyaffected–wewillbe in the face of such shocks and stresses.However if we are not aware of the risks, wecannotprepareforthem.Resilience is insomewaysthecountertovulner-ability. It is defined as being shock-ready, andhaving the ability to resist, survive, adapt and/oreven thrive in response to shocks and stresses.Resilience encompasses societal, economic,infrastructureandenvironmentalcomponents,aswellasculturalcapital,socialcapital,andgovern-ance.Individualsandcommunitieswhoknowhowto limit their exposure to hazards or decreasetheir vulnerability and areprepared for a disrup-tiveeventwilltendtobemoreresilientinthefaceof challenges. This requires knowledge of the

Box3TheriskequationDisasterriskisincreasingmainlyasaresultofanincreasingnumberofexposedandinterconnected(andmorevulnerable)assets.Increasingresiliencecandecreasetheimpactsofrisk.


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hazards,andhavingtheskillsneededtoanticipateandcopewiththedemandsandchangingcircum-stancestheymayencounter.Resilienceisnotmerelytheabilitytorecoverandstart life‘asnormal’followingashock.Welive inachangingworldinwhichadaptabilityiskey,andthis can provide another route to greater resili-ence.Adaptable communitiesand individualsareable to respond to a shock by moving to animproved state in which they can progress andprosper in the changed environment. They canuse their own resources to build coping capacityfor shocks and stresses, rather than focusing ontheirvulnerabilityandneeds.

2.RiskswetakevsriskswefaceThewaywethinkaboutandperceiverisksaffectsthe way we deal with them. There are risks wetake (choosing an action in the view that thebenefit outweighs possible harm), and there arerisksweface (thosewedon’tchoosebuthavetodeal with). When facing risks we try to protect

ourselves; when taking risks we look for ad-vantage, but also need to prepare for possiblefailure – as does a prudent investor. Theseconsiderationsoperatebothatanindividualleveland at a societal/national level. Individuals differgreatly in their risk-takingor riskaversionbehav-iour, as do different cultures and sectors ofsociety.Andthewayscientists,actuaries,expertsand regulators think about risk can differ signifi-cantly fromhow thepublic thinks, particularly inthewaythathumanandsocietalvaluesaretakenintoaccount.

2.1Takingrisks:voluntaryactionFor those risks that we take willingly (known asvoluntaryrisk),weuseour judgmenttoconcludethat the benefits we stand to gain outweigh thelikelihoodormagnitudeofpossibleharmfromourexposure to the hazards (as in the surfing storydescribed in Box 4).Whenwe feel thatwe havepersonal choice and control, we can make whatwe consider to be informed and calculateddecisions about taking risks, even in some caseswhere the evidence would clearly point to adifferent course of action (regarding smoking ortheconsumptionofsugaryfoods,forinstance).

Box4SurfingtheunpredictableseaTane is a big-wave surfer, and takes any opportunity to get out into the waves. It is a dangerous pastime. It isunpredictable,likethesea.Helikestheadrenalinrushthatcomeswithconfrontingafearoftheunknown,andhaslearnedtotrusthisabilities.Thereisalwaysariskthatthenextbigwavewillcrushhim,buthealsoknowsthatriskand opportunity go hand-in-hand. Hemight hesitate andmiss awave – caught by another surferwith a biggerappetitefortherisk.Catchingawaveistheriskpayoff:thehardwork,thewipeouts,andthepainareallworthitwhenhegetsthatperfectride.Themorewaveshegoesfor,themoreriskhetakes,butthemoreperfectwaveshewillcatch.Thereareotherriskstoo–shouldTaneworryaboutsharks?DespitetherelativelyhighincidenceofsharkattacksinNewZealandwaters comparedwith someother coastlines, theabsolute risk is low.Fatal sharkattacksoccur inNew Zealand at an approximate frequency of once every 13 years. The average person has little to fear fromsharks.iSurferslikeTane,however,placethemselvesinthedomainofsharksmorefrequently,becausethebiggestwaveshewantstosurfareonacoastlinewheregreatwhitesarefrequentlyseen.Isitworththerisk?Tanethinksso.Taneisamongthosewhofeelgreatpleasureinvoluntaryrisktaking.Heenjoysopportunitiesandthechallengeofbeingoutofhis‘comfortzone’,topushhimselfandconquerfear.Hisriskappetiteisfundamentallyassociatedwithhisemotions.LifeforTaneisdullwithoutrisk–nothingventured,nothinggained.


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An appetite for taking voluntary risks is based inpart on personality and in part on one’sworldview.Wehavepersonalviewsonwhatisanacceptable level of risk for ourselves,whichmaybedifferent from that of society as awhole.Wealso have different views about balancing costsandbenefitsthatwillaffectustodayversusthosethat will affect us later in life (think of our verydifferent views about smoking or building upsavings for retirement). As a society we makedecisions that involve some uncertainty, andtherefore risk, in order to advance and improvesocietal function and our quality of life, but asindividualsweall havedifferentwaysofperceiv-ingandestimatingriskandthuswe interpret thebenefits and costs of those decisions differently.Indeedtheimpliedcost-benefitanalyseswilloftenbedifferentforasocietyasawholeandforusasindividuals.This isonereasonwhypoliticianscanmakedecisions onour behalf thatwe personallydonotlike.

2.2Facingrisks:involuntaryexposureWeallfacerisksthatarenotofourchoosing,andthat may be outside of our control: these arereferred to as involuntary risks. Someare associ-atedwithnaturalhazardsandothersarehuman-made. Some of these risks can be mitigated bypreparationtoreduceourexposureorvulnerabil-ity to their potential adverse effects. For natural

hazardssuchastsunamis,floodsandearthquakes,we have warning systems and evacuation plans,andregulationsaroundwherehomescanbebuiltand the standards thatmust bemet in order toreducetheimpactofsuchevents.However,someexposurescannotbeavoided,andthereareotherrisks thatwehave far lessability tomitigate.Wemayperceivetheserisksasbeingparticularlyhighbecausewehave lesscontroloverthem,andthepossibleoutcomesmaybeunwantedorunknown(see Box 5). Often when the issues are conten-tious,stakeholderswithvested interestsorthoseholding particularly strong opposing worldviewsmaypromoteconfusingormisleadinginformationthatcanfurtheraffectourownassessmentoftherisk.

3.IndividualrisksvssocietalrisksThe scenarios described above touch on how anindividual’sriskperceptioninfluenceschoicesandbehaviours. But the societal perspective on thesame types of behaviours can be very different.Anactivitythatisacceptabletouspersonally(forexamplesmokingmarijuanaorbreakingthespeedlimit) may not be acceptable for the wholepopulation, or conversely, an activity or choicethat the majority of people agree with (e.g.abortion rights), may not be agreeable to anindividual who holds a particular opposingworldview.

Box5Involuntaryexposures-AgriculturalspraydriftNewZealand’shorticulturalsectorhaslongreliedontheuseofpesticidesandherbicidestocontrolinvasivepestsandweedsthatthreatentochokecrops.Althoughbiotechnologicalapproaches(basedongeneticapproaches)areemerging,societyhasnotdeemedtheseacceptableinNewZealand.Farmersmustchooseamongavailableoptions–typicallythelong-usedagrichemicalsolutions–toproducethebestcropyieldinthemostacceptablemanner.Itis a risk-based decision, and the farmer’s choice to spray crops on his or her own land can have consequencesbeyondthefarmgate.Dropletsof spraycandrift inthewindandendup inneighbouringproperties,orevenatsignificantdistancesfromthetargetsite,potentiallyexposingpeopleandanimalstoharmfulsubstances.Affected neighboursmay view their rights not to be exposed to pesticides as being overridden by the farmer’srightsregardinghowhechoosestousehis land.Theperceptionof riskbyneighbours canbehigh,andexposedgroups may attribute symptoms or diseases that they experience to the chemical sprays, whether or not anassociationcanbe identifiedbyepidemiologists.Becausethe risk is involuntary,andtheypersonallymayseenobenefit,theyareunlikelytoseeeye-to-eyewiththepesticide-usingfarmers,nomatterhowjustifiedthefarmers’argumentsareinthedecisionstheyhavemadetousethem.


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Weoftenmakeriskychoicesthataffectourselvesalone, but sometimes the risks we take affectothers,andquestionsariseoverpersonalinterestversus the common good. In some situationsweareprohibitedfromtakingtoogreatarisk,suchasexcess alcohol drinking, speeding or usinghandheld mobile phones while driving. This isbecausesuchpersonalrisktakingcaneasilyaffectothersorcreateproblemsandcostsforsociety.As a society we apply safeguards to reduce ormitigate risks where possible, and where it isdeemed justifiable on a societal and fiscal basis.But even though we exercise precaution, we donot try to remove every risk we face. This is acomplex judgment process for both local andcentralgovernmentandforindividuals.Itleadsusto fence swimming pools to prevent accidentaldrownings but not to place shark nets on ourbeaches for the much rarer but equally tragicshark attacks. We mitigate the risk associatedwith road crossingsby installing traffic lights andpedestrian signals at busy intersections, so thatthechanceof injuryordeathforanysingleroad-crossingislow.Butthemoreweexposeourselvesto the hazard (and the more people who areexposed),thehighertherisk;themorechancewehave to be injured. Each individual’s small riskaddsuptoa reasonablyhighriskovera lifetime,and high societal cost. Hundreds of millions ofdollars per year are spent as a result of roadcrashes involving pedestrians ($405 million in2014(MinistryofTransport,2015)) inadditiontothelargebutintangibleemotionalandsocialcostsofthesefatalitiesandinjuries.

3.1Collectivedecision-makingOur individual behavior patterns and responsesare often very different in situations where wedecide to do something compared to whensomeoneelsemakesadecisionthatwillaffectus.But a characteristic of an organised democraticsociety is that decisions are constantly beingmadebyothersonourbehalf.Inarepresentativedemocracy, we hope that such decisions willreflect the best possible assessment of risk, costand benefit, but an ‘objective’ analysis may notalways align with public perception or opinion.Popular opinion and electoral consequences arelikely to be a consideration in any government’sassessment of and response to risk. No matter

whatthedecisionis,somepeopleinthecommu-nitywill feel that theyarebeingexposed to risksover which they have no control. This type ofdecision-making is necessary for a society tofunction, but will always generate some level ofconflict. Even if we have a personal appetite forrisk,wemayopposeariskydecisionthatistakenforsociety’sbenefit,eitherbecausewearelessincontrol of it, we have insufficient knowledge ofthe uncertainties, or we have differing valuesregardingthepossibleoutcomesandourchancesofpersonalbenefit. In these situations, a riskwetakeasasociety isperceivedasa riskwefaceasanindividual.The fluoridation of water is an example. Wherewehavereticulatedwater,decisionsareeffective-ly made on our behalf by an authority as towhether to fluoridate it. Robust evidence fromthepublichealthandscientificcommunitypointstomajorbeneficialeffectsoffluoridationofwaterthathasalownaturalfluoridecontent.Butothersrejectthisdecision,citingavarietyofobjections–someofaphilosophicalnatureandsomebecausetheir reading or interpretation of the availabledata leads them to believe it creates an unac-ceptable risk. Governments take differentapproachestohandlingthistypeofirreconcilableconflict, but increasingly realise that formalscientific assessment is important to assistingdecisionmakinginsuchsituations.Inourdailyliveswefrequentlymakechoicesthathave uncertain consequences. But in the face ofuncertainty and conflicting values, how dosocieties make rational and responsible choices?Howdowe setourpriorities?Howdowedeter-minetherelativemeritsofoutcomes?Whatvaluesystem should we use? These are importantquestions that constantly challenge those taskedwith evaluating risks in order to make policydecisions on our behalf. In an effort to be asobjective as possible, policymakers use themethodologies of scientific risk assessment as astartingpoint.

4.CalculatingriskOn an individual basis, we tend to use ‘rules ofthumb’ (sometimes called heuristics) in makingrisk judgments based on our familiarity with the


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risk, how easily the possible negative conse-quencescometomind,andhowmuchcontrolwehave over them. The road-crossing scenariodescribed in Box 1 illustrates how we makesubconscious decisions about accepting risk ineveryday life. Most people are unlikely to gothroughaconsciousandcomplexdecision-makingprocessevery time theycrossa road.Rather,weeach have general tendencies tomake relativelysafeorunsafechoices,supportedorreinforcedbyour past experience, beliefs and attitudes. In theroad-crossing situation, car speed and distancepresentanobjectivehazard.Ourownjudgmentofthem may or may not be accurate. We makepredictions of the probable outcome that reflectourpersonaljudgmentor‘bestguess’(sometimescalledour‘subjectiveprobability’)ofsafetybasedonpastexperience,intuition,andopinionandnotonmathematical calculations. Our judgment canchangeasourknowledgeofthehazardincreases.In some situations, the risk (in the road crossingexample, the risk of injury or death) can beestimatedasanobjectiveprobability–astatisticalcalculation based on the frequency of observedevents.Onaveragemorethantenpedestriansperweek are injured on New Zealand roads, and inurban areas pedestriansmake up over a quarterof all road fatalities. The vast majority (90%) ofpedestrian fatalities occur when crossing a road(rather than walking on a footpath), and mostoccur when a pedestrian is jay-walking. Whentryingtocrossawayfromcontrolledcrossings,thepedestrianhastomakemorerisk-basedchoices–where,whenandhowtocross–andtheobjectiveprobabilityofharm is elevated, regardlessof theindividual’ssubjectiveanalysis.

4.1QuantitativeriskassessmentScientists generally think about risk in a moreformal way, relying on apparently objectiveprobabilities and impacts wherever possible. Butthey also make judgments that are unavoidablysubjective to varying degrees, because scientificprocesses can at best provide estimates, ratherthancertainty,aboutpossibleoutcomes.Risk assessment is the process of evaluating thelikelihoodandconsequenceofahazardousevent.Quantitative risk assessment aims to describe,andwherepossible,quantifyriskasaccuratelyas

possible using standardised processes that allowfor comparison of different kinds of risks. Itinvolveshazardidentificationandcharacterisationofpossibleconsequences,acalculatedestimationof the likelihood of occurrence of an event, andassessment of exposure and vulnerability thatinfluence the potential extent and magnitude ofanevent’s impact.This leadstoanassignmentofa score that represents the seriousness (andtherefore the tolerability or otherwise) of therisks.Thebasicquestionsposedinariskassessmentprocessaddressthemaincomponentsoftheriskequation:

• Hazardidentification:Whatcouldcauseharm?

• Riskcharacterisation:Whatcouldgowrong?

• Likelihood/probabilityestimation:Howlikelyisittohappen?

• Consequenceanalysis:Howbadwillitbe?Whatlevelsofvulnerabilityandresilienceexist?

On a national level, risk assessments are oftenundertaken to identify and evaluate significantrisks, not only to improve our awareness andanticipation of the risks, but also to providepolicymakers with information to choose riskmanagement activities and resources (e.g.investments inmonitoringorstructuralmeasurestominimiseriskorreduceexposure).Thistypeofanalysis focuses the risk debate on technicalfactors, so as to decide on risk issues as‘rationally’ as possible, and to identify a level of‘acceptable’risk(seesection6).

4.1.1IdentifyinghazardsandrisksSomeof theriskswefaceareobvious; forexam-ple, living near natural hazards (e.g. on a majorfaultline,onanunstablecliff,orclosetoanactivevolcano) or when our work or leisure involvesdangerous activities. We may know that thesehazards exist, but if we have not experiencedshocks associatedwith them,wemay underesti-mate or consciously downplay the danger.Scientific study can tell us about the nature andextent of the potential risk, and natural hazardmonitoring can identify changes that may signalimpending harm, bringing the risk to our atten-


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tion.Forexample,sciencewarnsofan increasingfrequency and intensity of weather-associatednatural disasters in the Asia-Pacific region overthe next several decades due to climate change,andthefactorsexacerbatingthem,includingpoorurban planning and increased urbanization andpoor land management. (APEC EmergencyPreparednessWorkingGroup,2015)Other risks are essentially undetectable withoutscientific investigation, particularly those withpotentialimpactsthatarenotclearlytiedtotheirpointoforigin(e.g.solarflare,radiationandsomechemical exposures),or forwhich there is a longtimebetweenexposureandeffect(e.g.excessivesun-tanning and exposure to asbestos bothincrease the risk of developing cancer somedecades later).Stillotherrisks, likethoserelatingto new technologies or problems specific to ourmodern world, require forward thinking toimagine possible scenarios for which history hasnorecord.

There aremany different types of potential risks(e.g. health-related, social, economic,reputational, environmental) to which internaland external factors both contribute, andvariability ineithercanaffecttheir likelihoodandconsequence (for example the risk of a flooddamaging your property may depend on thecombinedeffectoftheweather,thestateoffloodbanksandondecisionsmadebyadammanagerupstream, and whether you have heededforecastsandsand-baggedyourpropertyornot).Theworkofidentifyingandlabellingsomethingasa hazard can be a matter of judgment, thoughscientificmethodscanprovideguidanceformanycategoriesof risk.However it isnotsimplybasedonmathematicalassessments,butaprocessthatinvolves human values. Despite the intendedobjectivityofstatistical riskcalculations, theycanstill be contested because judgement and valuesareinevitablyinvolvedintheunderlyingestimates(seeBox6).

Box6MappingcoastalhazardszonesNewZealandershavealwayshadstrongemotional, spiritual, cultural, economic,andprofessional connectionstothecoast.Butwhetherornotwehaverecognisedit,ourcoastlinehasalwaysbeenunderadegreeofthreat.Earlycoastalsettlementswerelocatedtooclosetotheseatoallowfornaturalenvironmentalchangessuchaserosionandcoastal inundation that result fromsevereweather, tsunamis,and extreme tidal events.HumanactivityhasalsochangedthecoastaldynamicsalongmuchoftheNewZealandseashore.(Blackettetal.,2010)Climatechangeandrisingsealevelshaveaddedasignificantdimensiontotherisk.Recently,effortshavebeenmadetoreducetherisk of natural disasters and erosion by scientific evaluation andmapping coastal hazard zones. (Ramsey et al.,2012)Butdesignatingsafetymarginsandsettingrestrictionsondevelopmenthasmetoppositionfromhomeown-ers and local communities, who view the exercise as potentially decreasing their property values. The questionbecomesoneofsafetyandsustainabilityversusthevaluesofprivatepropertyandtheprotectionofindividualandcommunityinterests.Faced with a receding coastline, the options are to intervene and ‘protect’ the coast, accept or adapt to thechanges,ormanageacommunityretreatfromthehazardzones.Whenassetsarethreatened(e.g.privateproper-ty, popular beaches, community assets) the community demands action from local government to defend theirinterests,suchasbuildingseawallsorreinstatingsandonbeaches-a‘holdthe line,’protection-basedapproach.But there is still a matter of risk, cost and benefit: Who will benefit by building structures to protect coastalproperties? The property owners themselves will, but beachgoers will gradually sea their natural beach erodedevenmorequicklybecauseof the seawall.Andwhy shouldother ratepayerspaywhen theywill getnoobviousbenefit?Themapped hazard zones will thus become contested between individual and broader interests. The questionbecomeswhetherthevalueofthedefended infrastructureorpropertyoutweighsthe costof itsdefence.Eitherway,itisamatterofvalues,andtheyarelikelytobeinconflict.


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4.1.2LikelihoodestimationsOncehazardshavebeendefined,riskassessmentinvolvesanevaluationofthelikelihood(probabil-ity) of the hazard event occurring, and of theirpotentialimpact(theseverityofconsequencestolife and health, property and infrastructure, andthe environment). Interpreted in the statisticalsense,probabilitymeasures the relative frequen-cy of an event, usually assessed from historicaldata, to produce an estimate of the underlyinglikelihood. Where historical data are unavailableor incomplete, scenarios, judgment, modelsand/or simulationsareoftenused toproduceanestimate of likelihood. Qualitative expert judg-ment isappliedusingastandardisedterminologyforcommunicatinglikelihoods,rangingfrom‘rare’(or ‘exceptionallyunlikely’) to ‘almostcertain’ (or‘virtually certain’). In formal risk analyses thesebecome defined terms relating to the predictedfrequencyofoccurrenceorcalculatedprobability.ProbabilitytranslationtablessuchasthoseshownintheAppendixprovidealinkbetweennumericalprobabilities and verbal descriptors of thoseprobabilities. The translation of numericalprobabilityrangestoqualitativetermsismeanttoreflect most people’s perception of what thetermsmean(seeAppendixTablesA1,A2,A3).**

4.1.3Impact/consequenceanalysisTheotherpartof the riskequation is theassess-ment of the impact or consequences resultingfroma shock.Consequencescanbeexpressed interms of economic, environmental, or socialcriteria,andareassessedonanimpactscalefrominsignificant through to extreme. In some casesthe impact can be estimated quantitatively byeventmodeling or using past data,measured in,for example, numbers of fatalities/injuries,monetary cost, or extent of area affected.Othersituations require qualitative descriptors corre-sponding to levels of impact on other types ofassets (e.g. emotional costs, cultural costs,reputational damage etc). The formal impactcriteriadefinitionsarealsooutlinedintheAppen-dix(TableA4).An overall risk score can then be derived as anestimateofrelativeriskbycombiningthepredict-edseverityoftheconsequencesofahazardevent

** These terms correspond to numerical scores for input into the ‘risk = likelihood × consequence’ equation.

with an estimate of its likelihood. Inmaking thiscalculationitisnecessarytoconsiderthemultiplepossible consequences and varying degrees ofseverityofeach.

4.2AcknowledginguncertaintyWhere there is sufficient experience with aparticular hazard to estimate probabilities, aquantitative approach to risk assessment is thecommonly accepted way to deal with thesituation.Suchquantitativeassessmentsareveryuseful, but they can also suggest a level ofaccuracy that can be misleading. (Royall, 2000)Theproblemisthatprovidingnumericalestimatesconveysa levelofprecision,whiletheconceptofriskitselfnecessarilyimpliesinherentuncertainty.Further,thelanguageusedcanalsomisleadifnotcarefully applied. Words such as ‘negligible’ and‘unlikely’haveconnotationsineverydaylanguagethatcanbeinterpretedvariably,sotheseneedtobe used carefully when attempting to conveyobjective scientific criteria. Although thediscussion above (and in the Appendix) showshow these terms can be related to numericconsequence and likelihood scores, thesemeaningsanduncertaintiesneedtobeaddressedasexplicitlyaspossibleinriskcommunication.The quantification of risk may be based onavailable data or calculated via amodel, both ofwhich may contain uncertainties, inaccuracies,and limitations that must be acknowledged andreduced as much as possible. The amount ofuncertainty regarding a specific risk variesdepending on the type of hazard, and on ourhistorical knowledge of its frequency ofoccurrence and potential impact. This maydepend on the quality of the available scientificevidence, and estimates may change as greaterknowledge emerges. The likelihood of someeventscanbeestimatedinadvancebasedontheobservationoftrends,whileothers,includingveryrare but severe disasters are only minimallypredictable.‘Blackswan’events(seeBox7)arebynature improbable and incalculable – butconsequencesmaybesoseverethattheyeclipsemoreprobableevents–andif ignored, itmaybeatourperil.Asforrisksassociatedwithnewtechnologies,wehave little or no experience of the possibleoutcomes, and need forward-looking approaches


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that consider plausible future developments(simulations, probabilistic calculations,projections,andscenarios).Theuncertaintiesmaybe numerous and extensive, but scientificmethods can help reduce them. Innovation issimply not possible without accepting somedegreeofuncertainty–ifnorisksareacceptedorif there is excessive precaution, then noinnovation can occur. (Government Office forScience,2014)There are always uncertainties surroundingformal riskestimates. In therealworld,probabil-ity data can be ambiguous and/or incomplete,affecting the reliability of the risk information.Statistical logic is not the whole story – somesubjectivity inassigningprobabilities isunavoida-ble. Because of this, indications of the degree ofconfidence in the estimate are important (seesection4.2.4–Confidencemeasures).

4.2.1ComplexrisksanduncertaintyThediscussionthusfarhasfocusedonidentifyingand comparing individual risks, so that they canbe prioritised for management. But we arebecoming increasingly aware that there can beunprecedented consequences of single events,relating to the interconnectedness of systems. Ablackswaneventisonethatcannotbepredicted(see Box 7). Such events may have a singularcause(forexampleanasteroidimpact),butmoreoftentheseeminglyunimaginableoccursbecausea less severe initial event triggers an unforeseencascadeoffailuresthatleadstocrisis.

Catastrophic events often arise from intercon-nected risk factors rather than from a singlecause. Each risk factor alone might not provokemajor disaster but in combination they canbecome critical. This compounding of factors isoften seen in major transport disasters such asplane crashes. The 2011 Fukushima disaster inJapan exemplifies the concept of complex riskfactorsandcascadingimpacts(seeBox8)Events such as Fukushima and even the Christ-churchearthquakeshavehighlightedtheneedtogobeyondlinearapproachestoriskmanagement.Preparing for and building resilience to knowndisaster risks may overlook harder to predict,cascading effects. They can result from hiddeninterdependencies in the complex systems thatconnect lifeline utilities, communications, andcommunity and government activities. Forexample,asimpletransformerfailurecanleadtoa power failure, which causes an air trafficproblemwhenabackupsystemfails.Failureofapart of the system can thus escalate into cata-strophic, multi-system failure. This addeduncertainty affects the processes, policies, andplans that form the framework of preparednessandresponse.Thepotentialforcascadingimpactsis inherently difficult to deal with, and scientificclaims in these situations need to acknowledgethatwecannotknowallpossibleconsequences–predictionscanbeerroneousorincomplete.

Box7BlackSwansBlackswansareacommonsightonNewZealand lakes,butatonetimeEuropeansdidnotthinktheyexisted. In1697, the surprising discovery by Dutch explorers of large numbers of black swans inWestern Australia defiedpreviousassumptions(derivedfromadistinctlyNorthernHemisphereperspective)thatallswanswerewhite.Theterm“BlackSwanevent”thusreferstoaneventorphenomenonthatisunprecedentedorunexpected inhumanhistoryat the time itoccurs. It is something thatwedon’t see coming,becausenothing inourpast experiencesuggeststhepossibilityofitsoccurrence.“BlackSwanTheory”was introducedbyNassimNicholas Taleb inhis2007book ‘The BlackSwan’, (Taleb,2007)about rare but high-impact events. Such a catastrophic event is unpredictable because there is no previoushistoricalrecordtogoby.Likeamillion-to-onechance,itmaybethoughtofasimpossible,butitcanhappen–andwhenitdoes,wemaybeveryunprepared.TheSeptember11th,2001terroristattacks intheUSfitthebill.Manyseetheglobalfinancialcrisisof2008asaBlackSwanevent.


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4.2.2Notalluncertaintyiscreatedequal

Somethingswedon’tknowUncertaintyisinherentinriskassessments.Therewill often be incomplete or insufficientscientificunderstandingof thehazard and risk scenarios –in other words, situations where we don’t knowthe most likely outcome – this is also known asepistemic uncertainty. (Spiegelhalter & Riesch,2011) This can include uncertainty about theprobability,consequences,and/ormagnitudeofahazardevent;datauncertaintydue to limitationsintheaccuracyandprecisionofmeasurement;orinsufficienthistoricaldataforcalculatingprobabil-ities.Thistypeofuncertaintycanbereduced,butnoteliminated,byfurtherstudy.Evenso,science

canplayanimportantroleinestablishingthelevelofpreparednessthatisneededbyusingprobabil-ityestimatestodealwiththeseuncertainties.Uncertainty does not become an excuse forinaction. We can view climate change in thiscontext. While anthropogenic climate change isclearlyuponus,therateofriseinsealevelsandinglobal temperatures, and the impacts on localclimate are still highly uncertain. The climatesystemisinherentlycomplexandawidevarietyoffactors,eachwiththeirownuncertainties,havetobe considered. Some factors (e.g. the effects ofclouds) are less understood thanothers (e.g. theriseinatmosphericcarbondioxide).Furtherthereisno clarityas tohoweffectiveglobalmitigationeffortswillbe.Butthisdoesnotmeanthatthereisnotascientificconsensusabouttherisksahead,

Box8TheEastJapandisasterOnthe11thofMarch2011,theunthinkablehappened.Despitethehazardandassociatedrisksbeingknownabout,amagnitude9.0earthquakestruckofftheeastcoastofJapan,leadingtoacascadeofcomplexproblemsthatshookthenationtoitscoreandreverberatedaroundtheworld.Thesubmarineearthquaketriggeredamassivetsunamithatcompletelywipedoutcoastalcommunities–despitewell-developedcoastaldefenses–claimingthelivesofmorethan15,000people.Theforcefulseismictremorsalsodamagedstructuresandtransmissionlines,cuttingoffpower,andthetsunamifloodedanddestroyedemergencypower generators at the nearby Fukushima Daiichi Nuclear Power station. This power failure extinguished thecooling capacityof the reactorsand theoverheating causedwidespread radioactive fallout. The radiation threatcompoundedtheuncertaintyofthealreadychaoticsituationandamplifiedpublicanxiety,increasingtheclimateoffear.TheofficialreportoftheFukushimaNuclearAccidentIndependentInvestigationCommission(TheNationalDietofJapan, 2012) concluded that the nuclear disaster, though triggered by natural events, wasmanmade and couldhavebeenavoided–thatitwasaconsequenceofnegligence,culturalissues,andflawedpolicies.Uptothatpoint,Japanhadreliedheavilyonitsnuclearindustry,whichproducednearlyonethirdofthenation’spower.Infacttheindustryhadbeenviewedasamarkoftechnologicalprogressandasourceofnationalpride.Thereactiontotheaccidentwastoshutdownallnuclearpowerplantstoconduct‘stresstests’,andthecountrywasforcedtorelyonimportedfossilfuels–athighcostbothfinanciallyandintermsofincreasedgreenhousegasemissions. One reactor in Sendai was reopened in August 2015 despitewidespread public anxiety. All said anddone,havingbeenassuredthatanuclearaccidentcouldn’thappen ithad,andpublicconfidencewasprofoundlyshaken.Althoughanumberof countries includingtheUnitedStates,France,theUnitedKingdom,China, IndiaandSouthKoreahavecontinuedtopursuenuclearpower,theeventsatFukushima leadtorapiddecisions inGermanyandSwitzerland to phase it out, and public opposition in Italy quashed plans to build newnuclear power plants togenerate a quarter of the nation’s electricity. Such choices leave these countries with substantial challenges inprovidingaffordablepowerand inmeetingtheircarbonemissionsreductiongoals.Therisks,andthechoicesthatdifferentcountriesmake,areindeedcomplex.


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andpolicymakersaroundtheworldarerespond-ingaccordingly.

Somethingswecan’tknowAnother type of uncertainty is statistical (orobjective) uncertainty, which arises out of thenatural variability of the hazard, or the differinginherent sensitivities (vulnerabilities) to thehazardwithin thepopulation.Forexample, thereisaninherentrandomnessinvolcanicactivity,andmultiplefactorsinfluencewhenaperiodofunrestwillresultineruption,makingpredictionoffutureevents subject to considerable statistical uncer-tainty.Similarly,themovementoftectonicplatesis not regular, and while scientists can measurethe strain in the rock, they can only forecastgeneral probabilities with regard to earthquakeprediction.Because theuncertainty is intrinsic tothe hazard, it may not be reduced simply byfurtherstudy;ratheritcanonlyberepresentedbyastatisticalrangeofpossiblevalues.Regarding sensitivities (vulnerabilities), effects ofdifferent levels of exposure to a chemical or amedicine,forexample,canbeestimatedbasedonaverageresponseswithinapopulation,buttherewill be inter-individual variations that mean theprobableeffectmustbeexpressedasarange,andthere may be outliers who are very sensitive tolower exposures, or rather insensitive to higherones. This type of unavoidable unpredictabilitymeans that we can’t know the outcome withcompletecertainty.(Spiegelhalter&Riesch,2011)

4.2.3Atriskofbeingwrong:ProbabilisticuncertaintyandtypesoferrorBecause complete certainty is unattainable inscientificriskassessment,itwillalwayscarrysomepossibility of error. When basing decisions onoutcomesof statistical risk calculations,weneedtobeawareof twopossibleanddistinct typesoferror–falsepositivesandfalsenegatives.In medical testing, a false positive error occurswhenatesterroneouslyindicatesthepresenceofa diseaseor conditionwhennoneexists – this isalso called a ‘false alarm’.A falsenegative is theopposite – the test erroneously indicates theabsence of a disease when one actually exists.Most medical diagnostics have, by their verynature,bothfalsenegativeandfalsepositiveratesand both doctors and their patients need to

understand these when tests are interpreted.Indeedthisisonereasonwhyitisoftenimportantto repeat a test, as technical issues can be onereasonforafalseresultineitherdirection.††In risk evaluations, false-positive associationsconveytheimpressionthattheriskishigherthanit actually is, which tends to promote undulycautious behavior. In informing policy, therefore,false positives lead to erroneous action to avoidrisk, and this is not without consequences. Inhealth screening programmes, a high false-positive error rate can be costly if it results inunnecessary preventive interventions when nodiseasewouldhavedeveloped,andinsomecasesthismayactuallycauseharm(seeBox9).Ontheotherhand,ahighfalse-negativeratecangreatlydiminish thediagnostic valueof the testandcanleadtoseriousdiseasebeingmissed.Falsepositiveerrorsinriskassessmentcanleadtoover-cautious behaviour that prevents thebenefits that might flow from taking a risk (e.g.leading to overly stringent regulation or prohibi-tion of an activity or technology that mightotherwise be very beneficial). In short, thecomplexitiesof suchsituationscanendup in thedevelopment of policies that are not necessary,basedonthesizeoftherisk.False negatives, on the other hand, can lead toerroneous inaction,orthefailureto implementapolicy that would reduce the consequences orensureavoidanceofa real risk.Theyconveythatriskislowwhenitisnot;forexample,whenearlywarningsof a technical issueare treatedas falsealarms rather than signals of impending danger(seeBox10).

†† In terms of formal statistical approaches, these errors can be thought of as acceptance of a false hypothesis (in the case of a false positive error) or rejection of a true hypothesis (a false negative).


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The traditional methods of scientific inquiry arefocusedmoreonavoidingfalsepositiveerrorthanonavoiding falsenegativeerror,becauseaccept-ing a false positive result is equivalent toaccepting a false scientific hypothesis. Thisasymmetrical and conservative academic ap-proach does not always fit with real-world riskdecisions for which there can be consequencesboth for taking unnecessary action or for takingnoaction.(Parascandola,2010)Becausestatisticaltests by their very nature are designed to mini-mizeoneoranothertypeoferror(andnotboth),thechoiceoftestusedisinfluencedbysubjectivejudgment of which type of error is less costly interms of potential harm. In other words, riskevaluatorsmust choose theoption forwhich therisk of beingwrong (signaling incorrect action orincorrectinaction)istheleastdamaging.

4.2.4ConfidencemeasuresThere are various points at which uncertaintyenters into risk calculations and where expertjudgmentmustbeused.Asinglenumericalscorederived through traditional methods of riskassessment does not optimally convey thereliability status of the overall risk estimation,which can lead to flawed decision-making.(Hassenzahl, 2006; Royall, 2000) Establishing a

standardisedqualitativescaleofconfidencelevels– from very low to very high confidence – is auseful way of demonstrating how reliable thelikelihoodandconsequencedataare,andconvey-inghowmuchuncertainty surrounds aparticularriskassessment(seeAppendix,tableA5).Communicating uncertainty and levels of confi-dence in risk assessment is important, though ithighlights the extent to which judgments mustinevitably be made, even by experts, whencalculating risk levels. It is easy to see howacknowledging the presence of uncertainty andsubjectivevaluescancreateskepticismandmaketheuseofriskassessmentparticularlychallengingin the policy context, where unlike in science,there may be less comfort with the realities ofuncertainty.(Saner,2003)We have seen elements of this globally in the‘debate’ around climate change. Because ofdifferentworldviewsandperceptionsofcostandbenefit,somestakeholdershavemanufacturedaneven greater sense of uncertainty by exploitingandinflatingambiguitiesindataanddownplayingconsistent trends that lead to a widespread andstrongscientificconsensus.

Box9TheimpactoffalsepositivesAgoalofmuchmodernpublichealth istoshiftthefocusfromtreatmentofestablisheddiseasetowardspreven-tion, early detection, and modification of risk factors. Part of this effort involves programmes that screenasymptomaticpeopletoassesstheprobabilitythattheyhavesub-clinicaldiseaseratherthanwaitingforappear-anceofdiseasesymptoms,whenitmaybetoolateforeffectivetreatment.Demonstrationthatearlydetectioncanbebeneficial for somediseaseshas given rise to the expectation that this shouldbedone forothers.However,screeningcomeswithcosts,andrisks.WiththeintroductionofscreeningprogrammesforprostatecancerusingtheProstate-SpecificAntigen(PSA)test,medicine hasmoved from late diagnosis – where the disease was not recognised until it had progressed to anadvancedandaggressivestate–toover-diagnosis,andover-treatmentofdiseasethat inmanycases is inconse-quential.Thisisbecauseprostatecanceriscomplex;insomecasesitisveryaggressiveandinothersitiseffectivelybenign,andbothformscangivepositivePSAtestresults.Thiseffectivelymeansthatthetestgeneratesahighrateof false-positive results (suggestingseverediseasewhennoneexists).Among1000menscreenedforPSA,only1wouldavoidaprematuredeathduetoprostatecancerbecauseofthescreening,and5wouldexperienceaseriouscomplication from the surgical procedures thatmight follow from a false-positive test. Overstating the insightsgained, and thus the health benefits of a particular test, is a risk not to be taken lightly. Efforts to find betterscreeningtestsortoredefinehowtousethePSAtestarethereforeongoing.


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Nevertheless, though themethodsof sciencearedesignedtolimittheinfluenceofpersonalvalues,it is clear that judgments still need to bemade.Forbothscientistsandpolicymakers,judgmentisneeded when deciding whether there is enoughappropriate evidence on which to base anassessment, while considering the possibleimpactsofbeingwrong.(Douglas,2009)A key background principle is that science by itsvery nature can absolutely disprovemany thingsbut in general, science is not able to absolutelyprove most things. The processes of science aredesignedonthisbasis.Thefindingofablackswandisproved the conclusion of the 17th centuryEuropean that all swans were white. There wasthenandstillisnowaytodesignanexperimenttoprove that all swans are black or white – thepotential for there to be swans of other colourscannotbe formallyexcludedunless youcouldbecertain every swan on the planet had beensighted. Similarly, a drug can be proved to beunsafe but no drug can ever be proved to betotally safe. Theremust alwaysbe thepossibilityofaveryraresideeffect–onethatcouldconceiv-ably affect only one individual on the planet. Atsomepointtheweightofevidencecanbejudgedsufficient to allow a conclusion to bemade - ondrug safety, on swan colours, or another issue

under scientific scrutiny. The expression ofconfidence in thatconclusionwilldependon justhowweightytheevidenceis.

5.TranslatingsciencetocommunicateriskRiskcommunicationisanexchangeofinformationaimedatequippingpeopletoactappropriatelyinresponse to an identified risk. It should encom-pass the probability of the risk occurring, theimportanceoftheadverseeventbeingdescribed,and the effect of the event on the individual orsociety. Ineffective risk communication can leadtoeitherunderestimatingoroverestimatingrisks.Good risk communication provides a balancedevidence-based summaryof risksandharms,butin reality there is no value-freewayof framingarisk issue. As this series of papers highlights,actuarial risk assessment and public risk percep-tion are not always aligned on the level of riskassociatedwithaspecifichazard.Thiscangener-ate controversy if risk communication andmanagement decisions do not take public con-cerns into account. The elements of good riskcommunication will be expanded upon in thethirdpaperinthisseries.

Box10Falsenegativeerrors–unheededwarningsIn2004,theU.S.automobilecompanyGeneralMotors(GM)releasedtheChevroletCobalt-arelativelylow-budgetcar that was produced on slimmargins. Even before its release - as early as 2002 - it was recognised that theignition switch in the Cobalt was problematic, occasionally being jostled out of the ‘run’ position, causing theengine to shutoffwhile the carwasbeingdriven.By2004 the companyhad receivedmany reportsof enginesstallingwhilethecarwasmoving,butGMengineersconsidered itmoreofaninconveniencetocustomersthanamatterofsafety,andthecircumstancesunderwhichitwouldoccurwereperceivedtoberare.Theyhadfailedtorealisethatiftheswitchwasnotinthe‘run’position,theairbagswouldalsobedisabled,leavingthedriverwithnoairbagprotectionintheeventofacrash.Thisdiagnosticerrorwasrecognised in2007byoutsideinvestigators,whoidentifiedaclearlinkbetween ignitionswitchfailureandairbagnon-deployment.This shouldhavebeenconsidereda real riskbythe carmanufacturer,andearliercomplacencyshouldhavebeenacknowledgedforwhatitwas–afalse-negativeerror.CostconsiderationsatGMslowedeffortstocorrecttheproblem.Itwasnotuntil2014,afteratleast54accidentsand13deathshadoccurred,thatavehiclerecallwasissued.Hadtheriskbeenfullyappreciatedandattentionbeenpaid to the faulty ignition switches earlyon, the costs to repair itwouldhavebeen insignificant comparedwiththosethatwereultimately incurredfromthe recallandcompensation,nottomentionthehumancosts incurredandreputationaldamagetothecompany.(Valukas,2014)


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5.1ConveyingtechnicalinformationForriskstobeproperlyunderstood,statisticalandscientific knowledge needs to be put in contextand translated into a common language that isreadily graspedby anon-technical audience. Thescales described above (sections 4.1.2, 4.1.3 and4.2.4)anddetailedintheAppendixapplyqualita-tive descriptors to levels of risk in terms oflikelihood, consequence, and confidence in thedata.Suchscalesareusednotonlyinriskassess-ments but are also often applied in riskcommunication. The scales and descriptors arenotmeanttoinstructpeopleandorganisationsonhow to react to risk, but to provide informationforthemtomaketheirowndecisions.Caremust be taken in how risks are framed andprobabilitiespresented.Forexample,statingthatacertain levelofexposure toasubstanceresultsin a doubling of the risk of developing a diseasesounds on its surface like a cause for seriousconcern.But if theabsolute riskof thedisease isextremely small, the increase resulting from theexposure will be insignificant. The media oftenignores this basic fact. If the baseline risk ofdeveloping a rare cancer is 1 in amillion, and achemical exposure increases that risk to 1 in500,000, it is less informative to talk about adoubling of risk than to point out that the riskremains minimal. On the other hand if thebaseline risk was 1 in a 100 and chemical expo-sureincreasedtheriskto1in10,clearlytherearegroundsforbanningthechemical.Thepointisitisalwaysimportanttouseabsolutenumbersandtofocusondegreesofsafetyratherthantocharac-teriseexposuresassafeordangerous–riskisnotblackandwhite.Werecognisethatmostactivitiesanddecisions involvesomerisk,howeversmall itmay be, and that individuals and societies mustdecidehowmuchrisktheyarewillingtotolerate.

5.2StatisticalmisunderstandingsThere are numerous ways in which probabilityinformationcanbemisinterpreted.Thenumericalformat used for expressing a risk likelihoodinfluences how the brain processes the infor-mation, and thus can affect a person’sunderstanding of the magnitude of the risk inquestion.(Cuiteetal.,2008;Schapiraetal.,2001)Forexample,peopleoftenbelievethatthechanceofsomethinghappeningishigherifitisexpressedasanabsolutenumber (e.g.10timesoutof100;

known as a ‘frequency format’) than if it isexpressed as a percentage (10% chance - a‘probabilityformat’)eventhosetheseareexactlythesame.However,frequencyformatscanresultinerrorsinriskcomparisonsbecauseofatenden-cy to think about thenumeratorof theequation(e.g. the 10 in the ‘10 times out of 100’) as theabsolute number of people affected. This canlead, forexample, toperceivinga frequencyof4in100asbeinghigherthan1in20whenofcourseit is lower. (Slovic, et al., 2004) However, somemay question the reliability of data if a lowdenominatorisused,erroneouslybelievingthatitisrepresentativeofasmallsamplesize.(Schapiraetal.,2001)Similarly, the framing of a probability can affecthow its magnitude is interpreted, and thereforethechoicesmade.Forexample,beingtoldthereisa“70%chanceofsuccess”(apositiveframing)willoftenprovokeadifferentaction tohearing thereisa“30%chanceoffailure”(negativeframing).These errors in interpretation of numerical datareflectunconsciousbiasesinourperceptionsthatoccur when we think and react quickly to asituation or risk. In general, people judge proba-bilities by their plausibility,which is biasedbyorwhether or not they can envisage the outcome.Our thinking tends tobebiased towardsperceiv-ingariskishighiftheoutcomeisplausibletous,andconverselywetendtoperceiverisksaslowifwe find them hard to imagine. With frequencyformats expressing absolute numbers (e.g. 1 in10), people are sometimes prone to ‘optimisticbias’ (“itcan’thappentome”),attributingrisktoothersandconsidering themselvesmore likely tobe among the unaffected group. Biases affectingriskperceptionwill bediscussed in furtherdetailinthenextpaperofthisseries.

6.Decidingwhenriskis‘acceptable’Risk is part of our everyday lives; some riskswewant to take, somewetolerateandsomewedoourbest toavoid.Howdowedecidewhich risksareacceptable?Ourviewsontheacceptabilityofrisk depend on how much we value what is atstake.


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Forvoluntary risks–thosethatweundertakebychoice (e.g. driving a car, flying in an airplane,surfing, motorcycle riding, alpine skiing, rockclimbing, eating certain foods etc) - we use ourown judgmentstodecide if therisk isacceptableby considering whether we value the reward(benefit)enoughtotakeontheriskofharm(seeBox4).If a risk is involuntary, people tend to expect amuch higher perceived benefit for the risk to bedeemed acceptable. One way to consider theacceptabilityofrisk istousecost-benefitanalysisto assign monetary value to the possible conse-quences,‡‡butclearlywecannotassignmonetaryvaluestoalltypesofcostsandoutcomes,orputanumerical value on all the potential positive andnegativeconsequencesoftakingarisk.Whendealingwithhazards, thegoal is to reducethe magnitude of impact and the likelihood ofeventsoccurring,to lowertherisktoanaccepta-ble level. We do not attempt to remove allhazards from daily life; to enjoy benefits (forexample,oflivinginabeautifulsettingthatmightalsobeprone tonatural hazards, or usingX-raysformedical imaging, or exposing ourselves to X-Rays aswhenwe take a long distance flight)wemustlivewiththemanddowhatwecantolowertherisk.Itisimpossibletoreducerisktozero-wemust decide on a level that we can tolerate inordertoguideourrisk-takingdecisions.Acommonaimistoreducerisktolevelsthatare‘as low as reasonably practicable’ (ALARP). TheALARP principle is essentially a trade-off (or‘balancingact’)betweenthecostassociatedwiththepotentialconsequencesofariskandthecostofmitigatingagainstthem.Itaimstoreducerisksasfaraspossible“withoutcostexpenditurethatisdisproportionate to thebenefit gained, orwherethesolution is impractical to implement.” (Jones-Lee & Aven, 2011) This approach is meant toensure that mitigation activities are apportionedaccording to the level of risk. From this perspec-tive,ariskwouldbeconsideredacceptable if thecost of reducing it would far exceed the costs ‡‡ An influential 1969 study on societal benefit and technological risk [19] claimed that the acceptability of an involuntary risk requires about 1,000 times the economic benefit associated with a voluntary risk

saved (or the benefits gained) by doing so. TheALARP principle is often used by regulators andpolicymakers to decide on acceptable risk levels,but can also be viewed from an individual per-spective. The ‘cost’of risk reduction is generallybroaderthanitsmonetaryvalue–itcouldbetheexpense of effort, relative priority, or a compro-mise to personal values, freedoms, or otherfactors(seeBox11).Regardless of how risks and acceptability criteriaarecalibrated, it isclearthatwhatconstitutesanacceptable risk varies between individuals andacross communities and different sectors ofsocietyandacrosssocieties.Thismakesitdifficulttoaggregateriskpreferencesandassign levelsofrisk that are unanimously acceptable for policydecisions. The concept of acceptable risk is alsodynamic - opinions do and should change inresponse to new challenges and evolvingknowledge.Theperceivedriskofflyinginaplanein1915wasverydifferenttothatofgettingonaplanein2016.Perceptionandactionsalsochangein response to experiencing hazardous events –for example if you have had a relative or friendwhowasinplanecrash.Yet for all the difficulties, we still need tomakedecisions and find ways to establish trust in therisk assessment processes. For particularlycontested issues such as adopting some newtechnologies, it is necessary to understand whatmakesindividualsandgroupsviewrisksdifferent-ly in the firstplace.This isessential if there is tobeprogress towardsaconvergenceofviewsthatwillallowadvancestobemadeforthebenefitofsocietyasawhole.Thisemphasises theneed forrisk communication as a multi-way exchange ofinformation, knowledge, and values that helpsindividuals and communities to identify, prepareand respond to uncertain outcomes from thehazardsandriskswefaceinourlives.


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7.Precautionanddecision-makinginthepolicysettingPolicymakers must frequently make decisionsabout accepting risk,managing it, or avoiding it,andoftenwithout the luxuryofwaiting forallofthe answers, even if they were attainable.Furthermore, their frame of reference includesadditional factors in their consideration of themultipledimensionsand impactsofanydecision.Politicians will inevitably consider that somedecisions they make involve tradeoffs betweendifferent sectoral interests and thus can haveelectoralconsequences.Forthemriskintheballotbox is real – it is thedriving forceofdemocracy.Yetunderademocraticsystemtheyareaccount-able for balancing many different objectives,including economic growth, humanhealth, socialvalues and environmental protection. These

issues of complex decision making will be dis-cussedfurtherinthethirdpaperinthisseries.We can sometimes reliably identify possibleoutcomes and likelihood from quantitative riskassessment (section 4.1), but as we have dis-cussed,thereisoftenuncertaintyaroundlevelsofimpact, and/or the assignment of probabilities.This is particular true for complexenvironmentalrisks, or those posed by new technologies forwhichexperience is insufficient for us tobe veryconfidentaboutpossiblefutureeffectsorscenar-ios. In such cases the issue of what level ofprecaution is desirable in decision-makingbecomesrelevant.The Precautionary Principle arose as a policyguideline to deal with uncertainty inenvironmental risk assessment and decision-making. In general, the principle providesguidance in responding to uncertainty, allowingaction to be taken to avert risk of irreversible

Box11Riskreduction-howfarcanyougo?AsLowasReasonablyPracticable(ALARP)Thereisnosuchthingaszerorisk.Buttheinevitabilityofriskinourlivesdoesnotmeanthatnothingcanbedone.Whenhazardsareidentifiedandtheirassociatedrisksareknown,itmakessensetodowhatwecantoreducethepossiblenegativeimpacts.Emilyboughtahouseinwhatshebelievedwasarelativelysafeneighbourhood.Therewasanalarmsysteminthehousebutshehadneverused itbecausethepreviousownerdidnot leaveherthealarmcodeandsheassumedthatitwasnotinworkingorder.AlthoughEmilyalwayslockedthedoorswhensheleftthehouse,shedidn’tthinkmuchaboutthepossibilityofaburglary…untilithappenedtoher.FortunatelyEmilyhadhomeowner’s insurance, forwhich shepaidahigherpremiumbecauseherhousewasnotprotectedbyanalarm.Theinsurancecompanypaidtoreplacehercomputerandotheritems,butthatdidn’ttakeawayEmily’sworryandapprehension-shewasawarenowthatthiscouldhappenagain.Whatshouldshedotoreduceherrisk?Forastart,shedecideditwastimetogetthealarmfixed.Shenolongerleftthedownstairswindowscrackedopenusingthe’safety’catches,becauseitwasclearthatthesecouldbejimmiedopen,asthatishowtheburglarshadgainedentrytoherhouse.Shewasmorecarefulaboutnotleavingvaluableitemseasilyvisiblethroughthewindows.Shouldshehavegonefurther?Shecould installbarsonherwindowsandextra locksonherdoors.Perhapsshecoulderectahighfencethatwouldbedifficulttoclimb.Shecouldpayforsecurity servicetomonitorherhomewhen she isaway.Thesemeasureswouldbe costly,not just intermsofmonetaryexpense,butwouldaffecttheaesthetics of her property and make her feel somewhat imprisoned in her own home. Although she has notreducedherrisktozero,inEmily’sview,theriskreductionmeasuresshehasalreadyundertakenhavereducedtheriskto‘aslowasreasonablypracticable’forher.


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harm to environment or health in absence ofscientificcertaintyabouttherisk.Itismeanttobeaformofactivemanagementofuncertainty,suchthat appropriatemeasuresmight beput in placeuntil greater knowledge allows these to betightened or loosened. But it has also beenmisused toprevent someactivities (including theuseof new technologies) until absolute safetyoftheactivitiescanbeproven,whichisactuallyandscientifically impossible. Here the call forimplementationofthePrecautionaryPrinciplecanreflect a distrust in the ability of regulators toapplytheALARPprincipletoreducerisks.Whileinmanycasesitislogicalandreasonabletoapply action to anticipate and avert harm inadvanceorwithout cleardemonstration that theaction is necessary, making an automatic linkbetweenanypossibleandremote(butuncertain)source of harm and specific managementresponses (e.g. totallybanninganactivityornewtechnology) is not always justified onprecautionary grounds. Shifting the balancetowards prudent and informed foresight is,however,arationalgoal.Several versions of the Precautionary Principlehave been promoted, varying from weakrecommendations enablingor authorising action,tostronglywordeddoctrinedemandingnoactionuntil there is absolute certainty of outcome(which is impossible).Among these there iswidelatitudeforitsinterpretation.(Fosteretal.,2000)ThisissuewillbeelaboratedfurtherinPart2andPart3 inthisseries,whichdeepenthediscussionabouthowpolicydecisionscanbemadewhenthechoiceisbetweenstrategiesthateachcarryrisks,and how we think about trading off competingvalueswhensciencecan’tprovidealltheanswers.

8.ConclusionThe concepts of risk and uncertainty can bedefined and understood in both technical andnon-technical terms. No matter how they aredescribed, their meanings resonate differentlydependingonthebackground,experience,cultureand values of the individual or group. Likewise,scientific methods can be applied to the assess-ment of specific hazards and risks, but their‘acceptability’ will be weighed on more thanscientific evidence alone. These factors must beconsidered when decisions aremade tomanagerisksandacceptnewopportunities.Parts2and3ofthisserieswilldelvefurtherintotheseconceptsandwhattheymeanforNewZealand.


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Appendix:FormalriskanalysisRiskassessmententailsthecombinatorialanalysisofthe likelihood(probability)oftheoccurrenceofahazardevent,andof thepotential impact (the severityofconsequences)onexposedassets.Toconvey theprobabilityofanevent,standardisedqualitative terminology is used to relate anumeric likelihood range to aqualitative classification term.Differentriskanalysesmayusedifferentcategories,asshownintablesA1andA2butallanalysesmust includetheirdefinitionoftermsused.Thequalitativeterminologyusedtodescribelevelsofimpact(severity)isshownintableA4.

LikelihoodterminologyTable A1. Classification of likelihood (as used by New Zealand Government for risk assessment). Classifications arebasedonPublicSafetyCanada’sAllhazardsriskassessment:Methodologyguidelines2012-2013[21]

Classification Likelihood

Rare Mayoccuronlyinexceptionalcircumstances;Onceevery1000ormoreyears.

Unlikely Is not expected to occur; and/or no recorded incidents or anecdotal evidence; and/or very fewincidentsincomparableorganisationsworldwide;and/orlittleopportunity,reasonormeanstooccur.Mayoccuronceevery100-1000years.

Possible May occur at some time; few, infrequent, random recorded incidents or little anecdotal evidence;some incidents in associated or comparable organisations worldwide; some opportunity, reason ormeanstooccur;mayoccuronceper10-50years.

Likely Likely to ormay occur; regular recorded incidents and strong anecdotal evidence andwill probablyoccuronceper1-9years.

Almostcertain

Verylikelytooccur.Basedonhighlevelofrecordedincidentsand/orstronganecdotalevidence.Willprobablyoccurannually.

Anotherexampleof aqualitative scaleused to conveyprobabilistically-quantified likelihoods is thatof the Intergov-ernmental Panel onClimateChange (IPCC), (IPCC, 2013)which ranks probability from “exceptionally unlikely” (0-1%probability) to virtually certain (99-100%probability), as shown in tableA2. In their reports, the IPCC clearlydistin-guishes these qualitative descriptors of likelihood (frequentist probability) from descriptors indicating the level ofconfidenceintheinformation(thedegreeofunderstanding/consensusamongexperts;seetableA5).


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TableA2.StandardtermsusedtodefinelikelihoodintheIPCCFifthAssessmentReport.(IPCC,2013)

Term Likelihoodofoutcome

Virtuallycertain >99%probability

Extremelylikely >95%probability

Verylikely >90%probability

Likely >66%probability

Morelikelythannot >50%probability

Aboutaslikelyasnot 33to66%probability

Unlikely <33%probability

Extremelyunlikely <5%probability

Exceptionallyunlikely <1%probabilitySinceSeptember2015,GeoNetandGNSSciencehaveintroducedaprobabilitytablesimilartothatoftheIPCC,TableA3.GeoNetProbabilityTranslationTable,v.2.0,usedfrom1September2015.(Doyle&Potter,2015)

Verballikelihoodterm Probabilityofoutcome

Extremelylikely Greaterthan99%

Verylikely 80%to99%

Likely 60%to80%

Aboutaslikelyasnot 40%to60%

Unlikely 15%to40%

Veryunlikely 1%to15%

Extremelyunlikely Lessthan1%


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ConsequenceterminologyTableA4.Classificationofimpact(asusedinNewZealandgovernmentforriskassessment).ClassificationsarebasedonPublicSafetyCanada’sAllhazardsriskassessment:Methodologyguidelines2012-2013[21]

Classification Impact

Insignificant Noimpactorsomelocal,generalresponserequired,butnospecialisedresponse.Noinjuries,littledamage,lowfinancial

Minor Somelocal,specialisedresponse,andsurveillanceandmonitoringfromregionalauthorities.Firstaidtreatment,minorbuildingdamage.

Moderate Significantlocal,specialisedresponse,andmulti-regionalgeneralresponse,andnotificationfromnationalauthorities.Medicaltreatment,moderatebuildingdamage

Major Multi-functional,multi-regionalspecialisedresponseandmobilisationfromnationalauthoritiesandnotificationfrominternationalauthorities.Extensiveinjuries,highlevelofbuilding/infrastructuredamage

Extreme Multi-functional,nationalandinternational,specialisedresponse.Deaths,large-scalestructuraldamageandinfrastructurefailure

ConfidencemeasuresTableA5.IPCCratinglevelsusedtoindicatethedegreeofconfidence(reflectingthedegreeofunderstand-ing/consensusamongexperts)intheinformationbeingprovidedinriskassessment(PublicSafetyCanada,2012)

Confidencemeasure

Description

A Veryhighconfidence in judgmentbasedonthoroughknowledgeof thehazard,theverylargequantityandqualityoftherelevantdataandconsistentrelevant

B High confidence in judgment based on a very large body of knowledge on thehazard, the large quantity and quality of relevant data and very consistentrelevantassessments

C Moderate confidence in judgment basedon a considerable body of knowledgeon the hazard, the considerable quantity and quality of relevant data andconsistentrelevantassessments

D Lowconfidence in the judgmentbasedona relativelysmallbodyofknowledgeon the hazard, the relatively small quantity and quality of relevant data andsomewhatconsistentrelevantassessments

E Very low confidence in judgment based on small to insignificant body ofknowledge on the hazard, quantity and quality of relevant data and/or incon-sistentrelevantassessments

TheIPCCalsousesasimilarqualitativescaletodescribelevelsofconfidencebasedonthequalityandquantityoftheavailableevidenceandthelevelofagreement(consistency)ofthatevidence,asshowninfigureA1.


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FigureA1.Confidencelevelsdepictedasacombinationofevidenceandagreement.Thefivelevelsofconfidence(indicatedbydifferentcolours)roughlycorrespondtotheconfidencemeasuresshownintableA4.(from(AustralianGovernment,2013))


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TermsanddefinitionsThissectioncontainsdefinitionsandexplanationsofthekeytermsandconcepts

Consequence/impactThe outcome of an event that may result from a hazard. Impact may be expressed quantitatively (e.g.monetaryvalue),bycategory (e.g.high,medium, low)ordescriptively in termsofhuman,environmental,andpolitical/socialimpacts.

Decisionsunderrisk/decisionsunderuncertaintyThesetwotermsareusedinsomesectors:‘decisionsunderrisk’assumesthattheprobabilitiesofoutcomesare knowable to some extent, whereas ‘decisions under uncertainty’ occur when the probabilities, andpossiblytheoutcomesthemselves,areunknowable.

ExposurePeople,property,systems,orotherassetspresent inhazardzonesorexposedtohazardsthataretherebysubjecttopotentiallosses.

HazardAnintrinsiccapacitytocauseharm.Ahazardcanbeanevent,entity,phenomenonorhumanactivity,andcanbesingle,sequentialorcombinedwithotherhazardsinitsoriginandeffects.Eachhazardischaracterisedbyitstiming,location,intensityandprobability.Theoriginofhazardscanbenatural(geological,hydro-meteorologicalandbiological)orinducedbyhumanactivity(environmentaldegradationandtechnologicalhazards),andincludelatentconditionsortrendsthatmayrepresentfuturethreats.(UNInternationalStrategyforDisasterReduction(ISDR),2005)

LifelineutilitiesCompaniesandpubliclyownedentitiesdeliveringinfrastructureservicesinenergy,telecommunications,transportandwater/sewerage.

Probability(Likelihood)Probabilityisdefinedasthelikelihoodofahazardoccurringorthechanceofahazardhappening.Probabilityisusuallydescribedquantitativelyasaratio(e.g.1 in10),percentage(e.g.10%)orvaluebetween0and1(e.g.0.1),orqualitativelyusingdefinedandagreedtermssuchasunlikely,almostcertain,possibleetc.

RiskRisk isdefinedasthe likelihoodandconsequencesofahazard.Riskcanalsobedescribedas theeffectofuncertaintyonobjectives(RiskManagementStandardISO31000

RiskreductionRiskreductionreferstoeffortstodecreaseinriskthroughriskavoidance,riskcontrol,orrisktransfer–canbeaccomplishedbyreducingvulnerabilityand/orconsequences(RiskSteeringCommittee,2010)

ResidualriskTheriskthatremainsafterrisktreatmenthasbeenappliedtoreducethepotentialconsequences.


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ResilienceResiliencemeansbeingshock-ready,andhavingtheabilitytoresist,survive,adaptand/oreventhriveinresponsetoshocksandstresses.Resiliencecanbedefinedintermsofsocietal,economic,infrastructure,environmental,culturalcapital,socialcapital,and/orgovernancecomponents.

ShockThe term ‘shock’ is used (in theNRR) to denote a sudden, disruptive eventwith an important and oftennegativeimpactonasystem/sanditsassets.

StressA stress is a long term, chronic issuewith an important andoftennegative impact on a system/s and itsparts.

SystemA system is defined as set of thingsworking together as parts of an interconnecting network; a complexwhole e.g. society (individual, community, nation), the environment and physical entities (e.g. infrastruc-ture).

SystemTrendsSystemtrendsarelong-termfactorsthatindirectly,positivelyornegativelyinfluencerisks(e.g.demographicchangesthatmayinfluencevulnerability).

ThreatA threat is a potentially damaging physical event, phenomenon or activity of an intentional/maliciouscharacter. It is a man-made occurrence, individual, entity, or action that has the potential to harm life,information,operations,theenvironment,and/orproperty(RiskSteeringCommittee,2010)

VulnerabilityThecharacteristicsandcircumstancesofanasset(populations,systems,communities,thebuiltdomain,thenatural domain, economic activities and services, trust and reputation) that make it susceptible to, orprotectedfrom,theimpactsofahazard

WorldviewTheoverallperspectivefromwhichoneseesandinterpretstheworld.Aparticularphilosophy(collectionofbeliefs)onlifeheldbyanindividualoragroup.