Categorie archief: English

Uncertain safety

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WRR Scientific Council for Government Policy | 2008

In view of the vulnerability of humans, society and the natural environment, a proactive approach to uncertainties is required. A precautionary approach will create new responsibilities for the government, the private sector and consumers, as well as new activities. In its report Uncertain safety (Report no. 82, 2008), the WRR recommends inserting the new precautionary principle in the Constitution.

Not so much risks as uncertainties

The classical risk approach has limitations as a result of social developments (food safety, new technologies and climate change, for example) and progressive scientific insights. Society is not so much confronted with risks as with uncertainties. These uncertainties have to be addressed in an organised manner.

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Risk Governance: towards and integrative approach

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A framework by International Risk Governance Council

Ortwin Renn, with annexes by Peter Graham | 2005

In this comprehensive white paper Risk Governance: Towards an integrative approach – coordinated and edited by Professor Ortwin Renn – the International Risk Governance Council (IRGC) brought together: “an integrated analytic framework for risk governance which provides guidance for the development of comprehensive assessment and management strategies to cope with risks, in particular at the global level. The framework integrates scientific, economic, social and cultural aspects and includes the effective engagement of stakeholders.” 

In this article the headlines are summarized. In the light of history this framework is noteworthy and marks the next phase in thinking of the risk concepts. It focuses on “the improvement of risk governance strategies for risks with international implications and which have the potential to harm human health and safety, the economy, the environment, and/or the fabric of society at large.”

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Is the end of risk management near?

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A collective reconsideration

Marinus de Pooter | 2015

For those who listen in various sectors, the picture quickly emerges that risk management is not successful in practice. And that despite all the investments made and the energy that has been put into it in recent years. If risk management does indeed bring so much good (as is usually claimed), how is it possible that line managers do not flock to training and conferences? Why don’t they queue up to learn more about all those wonderful concepts and tools (including the many impressive software applications)? As a management system, has it sold so badly or can it simply not deliver what is promised? Perhaps it is a combination of both. It’s time for something better. As far as I am concerned, the end of conventional risk management is near. I refer to the instrumental approach from a separate staff function. The limited enthusiasm for this usual setup is due to several factors. I will mention a number of observations from the consultancy practice.

Marinus de Pooter

Usually, risk management is invested in a separate function or in different specialised functions such as Security, Quality and Safety, et cetera. This easily leads to responses from line managers along the lines of: “We hired you to take care of those (information security) risks!” Regulators have devised the creation of a separate Risk Management department (or even a separate CRO function) as a counterbalance to the overthrown ambitions of line managers. However, just because of the differences in personalities, its effectiveness can only be limited. If you do something about risk management, because your supervisor requires it or because the head office requires it from you, it will not easily be embedded in your day-to-day operations. If you use it as an accountability tool, it will at most help to give supervisors a sense of (false) security.

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Prospect Theory

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An analysis of decision under risk

Daniel Kahneman and Amos Tversky | 1979

This paper presents a critique of expected utility theory as a descriptive model of decision making under risk, and develops an alternative model, called prospect theory.

Choices among risky prospects exhibit several pervasive effects that are inconsistent with the basic tenets of utility theory. In particular, people underweight outcomes that are merely probable in comparison with outcomes that are obtained with certainty. This tendency, called the certainty effect, contributes to risk aversion in choices involving sure gains and to risk seeking in choices involving sure losses.

In addition, people generally discard components that are shared by all prospects under consideration. This tendency, called the isolation effect, leads to inconsistent preferences when the same choice is presented in different forms.

An alternative theory of choice is developed, in which value is assigned to gains and losses rather than to final assets and in which probabilities are replaced by decision weights.

The value function is normally concave for gains, commonly convex for losses, and is generally steeper for losses than for gains.

Decision weights are generally lower than the corresponding probabilities, except in the range of low probabilities. Overweighting of low probabilities may contribute to the attractiveness of both insurance and gambling.

Bibliography

Kahneman, D. and Tversky, A. (1979) ‘Prospect Theory: An Analysis of Decision Under Risk’. Econometrica, 47, 263-291.

Download essay.

AR6 Synthesis Report Climate Change 2023

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IPCC | 2023

Interlaken, Switzerland, March 20, 2023 —

This IPCC report focuses sharply on the losses and damages we are already experiencing and will continue to experience, especially those hitting the most vulnerable people and ecosystems. Taking the right action now could result in the transformational change essential for a sustainable, equitable world.

There are multiple, feasible and effective options to reduce greenhouse gas emissions and adapt to human-caused climate change, and they are available now, said scientists in the latest Intergovernmental Panel on Climate Change (IPCC) report released today.

“Mainstreaming effective and equitable climate action will not only reduce losses and damages for nature and people, it will also provide wider benefits,” said IPCC Chair Hoesung Lee. “This Synthesis Report underscores the urgency of taking more ambitious action and shows that, if we act now, we can still secure a liveable sustainable future for all.”

In 2018, IPCC highlighted the unprecedented scale of the challenge required to keep warming to 1.5°C. Five years later, that challenge has become even greater due to a continued increase in greenhouse gas emissions. The pace and scale of what has been done so far, and current plans, are insufficient to tackle climate change.

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Risk Culture

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Under the Microscope Guidance for Boards

The Institute of Risk Management | 2012

Richard Anderson, Chairman of The Institute of Risk Management: “For over 25 years, the Institute of Risk Management has provided leadership and guidance to the emerging risk management profession with a unique combination of academic excellence and practical relevance. The Institute’s profile continues to grow internationally with heightened interest in the management of risk across government, public, and business domains.“

This board guidance on risk culture is our latest contribution to thought leadership in the field. Although essential, the continuing parade of organisational catastrophes (and some notable successes) demonstrates that frameworks, processes and standards for risk management are insufficient to ensure that organisations reliably manage their risks and meet their strategic objectives. What is missing is the behavioural element: why do individuals, groups and organisations behave the way they do, and how does this affect all aspects of the management of risk?

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The new Danish guide on Risk Leadership

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Lars Løkke Rasmussen and Jesper Hjort | May 2007

In January 2007, PRIMO Danmark launched its national guide on (public) risk management, Risikoledelse – En Kommunal Opgave. The guide was endorsed by the Danish Minister of Interior, Lars Løkke Rasmussen, who wrote the first part of the preface to the guide.

Lars Løkke Rasmussen (source: Wikipedia)

Rasmussen: “Every day, local authority managers make decisions involving risks; that is, decisions involving significant uncertainty. It is important to note that these may be risks facing citizens, local communities or the local authority organisation itself.

Risk is simply a condition of life when the future is uncertain. To put it in another way: making important decisions on an uncertain foundation is also part of overall management. Executives can never be entirely certain about the foundations of their decisions. However, if entirely risk-proof decisions were possible, nothing would happen.

So, for executives, the whole secret is – in the words of Kierkegaard – to take upon one self this uncertainty. Executives in the public sector should, therefore, work systematically on minimizing the negative sides of risks and on maximising the positive sides.

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