RISK MANAGEMENTRISK MANAGEMENT

Parichart Visuthismajarn, Dr. phil., Asst.Prof.Parichart Visuthismajarn, Dr. phil., Asst.Prof.

Faculty of Environmental ManagementFaculty of Environmental Management

Prince of Songkla UniversityPrince of Songkla University

ENVIRONMENTAL RISK ASSESSMENTSession 8

ObjectivesObjectivesRisk management definitionRisk management definition

Approaches to risk managementApproaches to risk management

Aspects of risk managementAspects of risk management

Principles & challenges of risk managementPrinciples & challenges of risk management

Risk TradeoffsRisk Tradeoffs

Impact of perceptionImpact of perception

Urban air pollution Urban air pollution

Remedial action risk management processRemedial action risk management process

Use of risk management in the militaryUse of risk management in the military

Labeling systems for risk management (DOT, NFPA)Labeling systems for risk management (DOT, NFPA)

Management systems – ISO 14001Management systems – ISO 14001

Environmental audit processEnvironmental audit process

Qualitative risk management systems, several examplesQualitative risk management systems, several examples

Risk managementRisk management

Risk Management is reducing risks to an acceptable Risk Management is reducing risks to an acceptable level, which is?level, which is?– Zero risk? – no risk is acceptable – unrealisticZero risk? – no risk is acceptable – unrealistic– Acceptable risk? – who defines what is acceptableAcceptable risk? – who defines what is acceptable– De Minimus and De “Manifestis” RisksDe Minimus and De “Manifestis” Risks

de minimus, that is trivial risksde minimus, that is trivial risks– Often considered less than 1 in 1,000,000 riskOften considered less than 1 in 1,000,000 risk

de “manifestis” that is obnoxious riskde “manifestis” that is obnoxious risk– Controlled without regard to cost; risk greater than 1 in 1000Controlled without regard to cost; risk greater than 1 in 1000

Risk Assessment complicates management by exposingRisk Assessment complicates management by exposing– Uncertainty and variabilityUncertainty and variability– Differences in stakeholder understanding and perceptionsDifferences in stakeholder understanding and perceptions

multiple perspectives make consensus building difficult multiple perspectives make consensus building difficult

source: www.iupac.org/publications/ ci/2001/march/

How Risk Management fits into How Risk Management fits into the processthe process

: www.fao.org/WAICENT/faoinfo/economic/ esn/risk/risktext.htm

Environmental management Environmental management methodsmethods

Economic Economic InstrumentsInstruments

Indirect RegulationIndirect Regulation Direct Direct RegulationRegulation

Emissions tradingEmissions trading

Deposit-refundDeposit-refund

Consumption Consumption feesfees

Performance Performance bondsbonds

Grants, loansGrants, loans

Tax reliefTax relief

Subsidy RemovalSubsidy Removal

Government spendingGovernment spending

InformationInformation

Publicizing behaviorPublicizing behavior

Reporting Reporting performanceperformance

EducationEducation

StandardsStandards

RegulationsRegulations

InspectionsInspections

PenaltiesPenalties

Risk = Hazard x ExposureRisk = Hazard x Exposure

If this is true, then risk management is a If this is true, then risk management is a function of reducing or eliminating:function of reducing or eliminating:– HazardsHazards– ExposureExposure– Consequences (harm) of expsoureConsequences (harm) of expsoure

Risk management must be formulated in Risk management must be formulated in the context of the culturethe context of the culture– Socio-economicSocio-economic– Socio-politicalSocio-political

Risk ManagementRisk Management

Involves decision-making that Involves decision-making that incorporates:incorporates:– Prioritizing risksPrioritizing risks– Determining acceptable level of riskDetermining acceptable level of risk– Determining resources to reduce Determining resources to reduce

risks to an acceptable levelrisks to an acceptable level– Determining the greatest benefit for Determining the greatest benefit for

the resources to be expendedthe resources to be expended– PlanningPlanning– ImplementingImplementing– Monitoring and evaluating Monitoring and evaluating

effectivenesseffectiveness

Risk assessment & Risk assessment & management integrated management integrated

systems frameworksystems framework

Corporate Corporate objectivesobjectives

EHS EHS policiespolicies

Site Site specific specific goalsgoals

Driving Driving forcesforces

Analytical Analytical boundariesboundaries

Worker

Public

Ecological

Consumer

Financial

Likelihood

Magnitude

Eliminate

Reduce

Respond

Communicate

Threshold criteria

Benefit estimation

Cost estimation

Time sensitivity

Benefit to cost ratio

Resource allocation

Schedule milestones

Independent review

Continuous improvement

DefineObjectives

IdentifyResources,Assess Risk

Develop riskReduction &

Avoidance Alt.

PrioritizeOpportunities

Implement &Review Results

Adapted from Autenrieth

Use of Risk Management in the Use of Risk Management in the MilitaryMilitary

The use of risk The use of risk assessment methods assessment methods in the military varies in the military varies – Quantitative Health Quantitative Health

Risk Assessment Risk Assessment follows generally follows generally accepted principlesaccepted principles

– Qualitative methods Qualitative methods are also used for are also used for decision-makingdecision-making

Step 1Step 1– IDENTIFY HAZARDS DURING MISSION ANALYSISIDENTIFY HAZARDS DURING MISSION ANALYSIS

CONDITIONS THAT HAVE THE POTENTIAL OF CONDITIONS THAT HAVE THE POTENTIAL OF POLLUTING THE AIR, SOIL, WATER, OR DEGRADE POLLUTING THE AIR, SOIL, WATER, OR DEGRADE NATURAL CULTURAL RESOURCESNATURAL CULTURAL RESOURCES

Step 2Step 2– ASSESS THE PROBABILITY OF ENVIRONMENTAL DAMAGE ASSESS THE PROBABILITY OF ENVIRONMENTAL DAMAGE

AND VIOLATIONSAND VIOLATIONSENVIRONMENTAL RISK ASSESSMENT MATRICES ENVIRONMENTAL RISK ASSESSMENT MATRICES

Step 3Step 3– MAKE DECISIONS AND DEVELOP MEASURES TO REDUCE MAKE DECISIONS AND DEVELOP MEASURES TO REDUCE

HIGH RISKSHIGH RISKS

Six Steps of Risk Management Six Steps of Risk Management in Militaryin Military

http://155.217.58.58/cgi-bin/atdl.dll/gta/5-8-2/050802_top.htm

Step 4Step 4– BRIEF THE CHAIN OF COMMAND AND APPROPRIATE BRIEF THE CHAIN OF COMMAND AND APPROPRIATE

DECISION MAKERSDECISION MAKERSPROPOSED PLANS AND RESIDUAL RISKSPROPOSED PLANS AND RESIDUAL RISKS

Step 5Step 5– IMPLEMENT ENVIRONMENTAL MEASURESIMPLEMENT ENVIRONMENTAL MEASURES

INTEGRATE THEM INTO PLANS, ORDERS, SOPs, INTEGRATE THEM INTO PLANS, ORDERS, SOPs, TRAINING PERFORMANCE STANDARDS, AND TRAINING PERFORMANCE STANDARDS, AND REHEARSALSREHEARSALS

Step 6Step 6– SUPERVISE AND ENFORCE ENVIRONMENTAL STANDARDSSUPERVISE AND ENFORCE ENVIRONMENTAL STANDARDS

TRAIN TO THESE STANDARDSTRAIN TO THESE STANDARDS

Six Steps of Risk Management Six Steps of Risk Management in Militaryin Military

http://155.217.58.58/cgi-bin/atdl.dll/gta/5-8-2/050802_top.htm

Management Systems

Plan

Do

Check

Act

Environmental Management Environmental Management SystemSystem

4.2 Environmental

policy

4.3 Planning

4.4 Implementation and operation

4.6 Management

review

4.5Checking and

corrective action

Management Systems Development

Co

mp

lian

ce S

tatu

sCompliance & Management Systems

(adding context)

Good Performance But Not Sustainable

Ineffective Systems

Sustainable Zone

Weak Systems & Poor Performance

High

Low

Early Mature

Social Risk Management Framework:Social Risk Management Framework:Basic thrusts: Basic thrusts:

The poor are typically most exposed to diverse risksThe poor are typically most exposed to diverse risks– traditional and moderntraditional and modern

The poor least equipped to deal with these risksThe poor least equipped to deal with these risks– The poor are most vulnerable The poor are most vulnerable – High vulnerability makes them risk averse and thus unable or High vulnerability makes them risk averse and thus unable or

unwilling to engage in higher risk/high return activitiesunwilling to engage in higher risk/high return activitiesSRM seeks to account for multiple sources of risk and their SRM seeks to account for multiple sources of risk and their characteristics to address vulnerability characteristics to address vulnerability – Operates with multiple strategies (prevention, mitigation, coping) Operates with multiple strategies (prevention, mitigation, coping)

and arrangements (informal, market-based, public) to deal with and arrangements (informal, market-based, public) to deal with riskrisk

– Attempts to match the multiple suppliers of risk management Attempts to match the multiple suppliers of risk management instruments (such as households, communities, NGOs, and instruments (such as households, communities, NGOs, and governments) with key demand groups (formal, informal-urban governments) with key demand groups (formal, informal-urban and informal-rural workers)and informal-rural workers)

Adapted from Holzmann, 1998

Sources and Forms of Social RiskSources and Forms of Social Risk

MicroMicro MesoMeso MacroMacro(idiosyncratic)(idiosyncratic) (co-variant)(co-variant)

NaturalNatural RainfallRainfall EarthquakeEarthquakeLandslideLandslide FloodsFloodsVolcanic eruptionVolcanic eruption DroughtDrought

Strong windsStrong windsHealthHealth IllnessIllness EpidemicEpidemic

InjuryInjuryDisabilityDisability

Life-cycleLife-cycle BirthBirthOld-ageOld-ageDeathDeath

SocialSocial CrimeCrime TerrorismTerrorism Civil strifeCivil strifeDomestic violenceDomestic violence GangsGangs WarWar

EconomicEconomic UnemploymentUnemployment Resettlement Resettlement Output collapseOutput collapseHarvest failure Harvest failure FinancialFinancialBusiness failureBusiness failure or currency crisisor currency crisis

Technology Technology PoliticalPolitical Ethnic discriminationEthnic discrimination RiotsRiots Default on social prog.Default on social prog.EnvironmentalEnvironmental PollutionPollution

DeforestationDeforestationNuclear disasterNuclear disaster

Adapted from Holzmann, 1998

Risk Management StrategiesRisk Management Strategies

Prevention Strategies - to reduce the Prevention Strategies - to reduce the probability of down-side riskprobability of down-side risk

Mitigation Strategies - to decrease the Mitigation Strategies - to decrease the impact of a future down-side riskimpact of a future down-side risk– Portfolio diversificationPortfolio diversification

– InsuranceInsurance

– Hedging/Risk exchangeHedging/Risk exchange

Coping Strategies - to relieve the impact Coping Strategies - to relieve the impact once the risk (the event) has occurredonce the risk (the event) has occurred

Adapted from Holzmann, 1998

Risk Management ArrangementsRisk Management Arrangements

Informal arrangements, e.g.Informal arrangements, e.g.– marriage, real assets, mutual community supportmarriage, real assets, mutual community support

Market-based arrangements, e.g.Market-based arrangements, e.g.– cash, bank deposits, bonds and shares, cash, bank deposits, bonds and shares,

insurance contractsinsurance contracts

Publicly provided or mandated arrangementsPublicly provided or mandated arrangements– social insurance, transfers in cash and kind, social insurance, transfers in cash and kind,

subsidies and public workssubsidies and public works

Adapted from Holzmann, 1998

Arrangements/ Strategies

Informal/personal Formal/ financial market-based

Formal/publicly-mandated/provided

Risk reduction Less risky production Migration

Labor standards VET Labor market policies Disability policies

Risk mitigation

Portfolio Multiple jobs Investment in human, physical and real assets

Investment in multiple financial assets

Multi-pillar pension systems Social Funds

Insurance Marriage/family Community arrangements Share tenancy Tied labor

Old-age annuities Disability/Accident

Mandated/provided for unemployment, old-age, disability, survivorship, sickness, etc.

Hedging Extended family Some labor contracts

Risk coping Selling of physical and real assets Borrowing from neighbors Intra-community transfers/charity Sending children to work

Selling of financial assets Borrowing from banks

Transfers/Social assistance Subsidies Public works

Matrix of Social Risk Management (examples)

Adapted from Holzmann, 1998

Framework for studying vulnerable populations

Communityresources

PeopleTies betweenpeopleNeighborhoods

Source: Aday (1994)

Community

Individual

VulnerablePopulations

At-risk

Communityhealth Needs

PhysicalPsychologicalSocial

Statistical(aggregate)

lives

Common GoodReciprocityInterdependence

IndividualResources

Social statusSocial capitalhuman capital

VulnerableIndividuals

Susceptible to:harm or neglect

IndividualHealth Needs

PhysicalPsychologicalSocial

Individual(identifiable)

lives

Individual RightsAutonomyIndependence

Community andIndividual Well-

Being

Resourceavailability

(+)

Relativerisk(+)

Healthstatus

(+)

(+)

(-)

(-)(+)

Social and Community-oriented Medical care and Level Ethical normsPerspective economic policy health policy public health policy of analysis and values

Policy

Note: (+) indicates direct relationship (likelihood of outcome increases as predictor increases; (-) indicates inverserelationship (likelihood of outcome decreases as predictor increases)