Introduction to risk management

1. Introduction to risk management Jouni Tuomisto, Mikko Pohjola THL

2. Conventional perspectives to risk management

3. Contents • Introduction to (conventional) RM • Open risk management (ORM) • RM in the swine flu story

4. Introduction to (conventional) RM • Risk management (of what?) • Conventional paradigms of environment and health RM • Some related concepts • Interim conclusions

5. Risk management (of what?) • Google RM, what do you find? • Economical risk management • finance, project, investement, … • World bank social RM • Also a number of environment & health related • These are of our interest here

6. Conventional frameworks for environment and health RM • Several views to EH RM (conventional paradigms), e.g. • EHRM framework • NRC: Red book, Understanding risk, Science and decisions • IRGC risk governance framework • REACH • YVA - regulatory EIA in Finland • water management • LCA? • nuclear safety? • Considered in terms of e.g. • risk? • management; who, what, how? • interaction/participation?

7. EHRM

8. EHRM • Risk management is the process of identifying, evaluating, selecting, and implementing actions to reduce risk to human health and to ecosystems. The goal of risk management is scientifically sound, cost-effective, integrated actions that reduce or prevent risks while taking into account social, cultural, ethical, political, and legal considerations.

9. EHRM • Risk is defined as the probability that a substance or situation will produce harm under specified conditions. Risk is a combination of two factors: • The probability that an adverse event will occur (such as a specific disease or type of injury). • The consequences of the adverse event. • Risk encompasses impacts on public health and on the environment, and arises from exposure and hazard. Risk does not exist if exposure to a harmful substance or situation does not or will not occur. Hazard is determined by whether a particular substance or situation has the potential to cause harmful effects.

10. Risk assessment Risk management Observations Hazard identification Regulatory options Extrapolation Dose-response assessment Risk characterization Evaluation of options Measurements and population characteristics Exposure assessment Decisions and actions NRC: Red book

11. NRC: Red book • Regulatory actions are based on two distinct elements, risk assessment, the subject of this study, and risk management. • Risk assessment is the use of the factual base to define the health effects of exposure of individuals or populations to hazardous materials and situations. • Risk management is the process of weighing policy alternatives and selecting the most appropriate regulatory action, integrating the results of risk assessment with engineering data and with social, economic, and political concerns to reach a decision.

12. NRC: Red book • …the risk of cancer and other adverse health effects associated with exposure of humans to toxic substances. • Many decisions of federal agencies in regulating chronic health hazards have been bitterly controversial. The roots of the controversy lie in improvements in scientific and technologic capability to detect potentially hazardous chemicals, in changes in public expectations and concerns about health protection, and in the fact that the costs and benefits of regulatory policies fall unequally on different groups within American society.

13. Learning and feedback Implementation Evaluation Public officials Decision Problem formulation Process design Selecting options & outcomes Information gathering Synthesis Natural and social scientists Interested and affected parties Analysis and deliberation NRC: Understanding Risk (Orange book) • Role and importance of deliberation

14. NRC: Science and decisions (Silver book)

15. NRC: Science and decisions (Silver book) • How we deal with risk depends largely on how well we understand it. The process of risk assessment has been used to help us understand and address a wide variety of hazards… • U.S. Environmental Protection Agency (EPA), other federal and state agencies, industry, the academic community, and others in evaluating public-health and environmental concerns. From protecting air and water to ensuring the safety of food, drugs, and consumer products such as toys, risk assessment is an important public-policy tool for informing regulatory and technologic decisions, setting priorities among research needs, and developing approaches for considering the costs and benefits of regulatory policies.

16. Management sphere: Decision & implementation of actions Assessment sphere: Generation of knowledge Pre assessment ▪ Problem framing ▪ Early warning ▪ Screening ▪ Determination of scientific conventions Risk management Implementation ▪ Option realization ▪ Monitoring & control ▪ Feedback from risk management practice Decision making ▪ Option identification & generation ▪ Option assessment ▪ Option evaluation & selection Risk appraisal Risk assessment ▪ Hazard identification & estimation ▪ Exposure & vulnerability assessment ▪ Risk estimation Concern assessment ▪ Risk perceptions ▪ Social concerns ▪ Socio-economic impacts Communication Tolerability & acceptability judgement Risk evaluation ▪ Judging tolerability & acceptability ▪ Need for risk reduction measures Risk characterization ▪ Risk profile ▪ Judgment of the seriousness of risk ▪ Conclusions & risk reduction options IRGC

17. IRGC • Risk is an uncertain ( generally adverse ) consequence of an event or activity with respect to something that humans value. Risks are often accompanied by opportunities. • Systemic risks are embedded in the larger context of societal, financial and economic consequences and are at the intersection between natural events, economic, social and technological developments and policy-driven actions. Such risks are not confined to national borders; they cannot be managed through the actions of a single sector; they require a robust governance approach if they are to be adequately managed. The governance of systemic risks requires cohesion between countries and the inclusion within the process of governments, industry, academia and civil society.

18. IRGC • Governance refers to the actions, processes, traditions and institutions by which authority is exercised and decisions are taken and implemented. • Risk governance deals with the identification, assessment, management and communication of risks in a broad context. It includes the totality of actors, rules, conventions, processes and mechanisms and is concerned with how relevant risk information is collected, analysed and communicated, and how management decisions are taken. It applies the principles of good governance that include transparency, effectiveness and efficiency, accountability, strategic focus, sustainability, equity and fairness, respect for the rule of law and the need for the chosen solution to be politically and legally feasible as well as ethically and publicly acceptable. Risk accompanies change. It is a permanent and important part of life and the willingness and capacity to take and accept risk is crucial for achieving economic development and introducing new technologies. Many risks, and in particular those arising from emerging technologies, are accompanied by potential benefits and opportunities. • The challenge of better risk governance lies here: to enable societies to benefit from change while minimising the negative consequences of the associated risks.

19. IRGC

20. IRGC

21. Information: available vs. required/needed ▪ Substance intrinsic properties ▪ Manufacture, use, tonnage, exposure, risk management Hazard assessment ▪ Hazard identification ▪ Classification & labeling ▪ Derivation of threshold levels ▪ PBT/vPvB assessment Exposure assessment ▪ Exposure scenarios building ▪ Exposure estimation Iteration no Dangerous or PBT/vPvB yes Risk characterisation yes no Risk controlled Chemical safety report REACH

22. Phase 1 Phase 2 Evaluation program Statements of the ministry of employment and economy about the report Participation Opinions and statements about the program Opinions and statements about the report Participation Statements of the ministry of employment and economy about the evaluation Assessment Evaluation report YVA

23. YVA

24. Water resource management (integrated modeling approach)

25. Risk assessment Risk management Hazard identification Options generation Exposure assessment Dose-response assessment Options evaluation Policy effect evaluation Policy selection & implementation Risk characterization Risk analysis

26. Risk assessment Risk management Hazard identification Options generation Exposure assessment Dose-response assessment Options evaluation Policy effect evaluation Risk characterization Policy selection & implementation Risk communication Does risk analysis pay off? Million euro cycle Billion euro cycle

27. Some related concepts • RC, RP, RA, RCh • how do they relate to RM?

28. Interim conclusions • Similarities and differences? • Risk -> impact? • Sufficient? • DA in RM?

29. Open risk management (ORM) • Introduction to the concept(s) • Operationalization: ”discussion engine”

30. Six hours which topics • Risk management traditional views • Is there a theory for RM? • Context: you must understand this to be able to operate • Find a decision or decisions that are reasonable and relevant • Essential parts: context, research question, decision(s), objectives • RA-RM process

31. Introduction to risk management. What is managed, who is responsible, what is included? Traditional paradigm. • Look from decision-maker's point of view: needs, communication, and assessment all included. • Openness: RA, RM, RC are not totally separate. • Performance: Context about what we actually aim to achieve. How do we know if we succeeded? • Developing risk management options. • Development of risk assessment questions. • Science-policy interface. Why it does not exist. • Boundaries of RA and RM

32. There is no science-policy interface

33. Different roles in decision-making • Authority (has the decision-making power) • Policy-maker (develops policies to be decided) • NGO • Industry and other commercially interested parties • Other stakeholders • Citizens • Anyone

34. What is the point here?

35. Theory of open risk management • Incremental improvements • Everyone involved • The idea of justice as one basis • Decision analysis as one basis after we know what the decision is • Open assessment/trialogue as one basis as the method to reach shared understanding.

36. Concepts in the theory • Problem(s) identified (something wrong with the world) • Decisions (as responses to problems) • Partners/actors: • Decision maker of a particular decision (may be several decisions) • Those influenced in any way • Everyone else

37. * Risk • ** what risk(s)? • ** how about benefits (costs)? • ** whose risks / whose benefits? • * Management: • ** who manages? • ** manages what? • ** on what basis (→ role of knowledge/learning)? • ** manages how? • * → RM: from needs to knowledge, knowledge to action • ** is ''risk'' the right question? • ** are traditional RA, RM, RC approaches sufficient? • ** a societal knowledge process

38. What is managed, who is responsible, what is included? Traditional paradigm. • *Look from decision-maker's point of view: needs, communication, and assessment all included. • *Openness: RA, RM, RC are not totally separate. • *Performance: Context about what we actually aim to achieve. How do we know if we succeeded? • *Developing risk management options. • *Development of risk assessment questions. • *Science-policy interface. Why it does not exist. • *Boundaries of RA and RM

39. RM in the swine flu story • Independent exploration • Beginning of the Pandemic • Prepredness in Finland and elsewhere • Mini-presentations and discussions • Summary

40. Open risk management

41. Definitions of risk and related issues • Hazard, endanger, exposure to mischange or peril. (Oxford English Dictionary) • The chance of hazard or commercial loss. (Oxford English Dictionary) • As in Risk-Money, an allowance paid to a cashier to cover accidental deficits. (Oxford English Dictionary) • Risk = Probability ⊗ Severity (Wilson and Crouch) • Risk = S{Probability ⊗ Severity ⊗ Weight} (Wilson and Crouch) • ⇤1 However, sometimes risks are not truly multiplicative. (Tversky et al., 1990) • Risk: a characteristic of a situation or action wherein two or more outcomes are possible, the particular outcome that will occur is unknown, and at least one of the possibilities is undesired. (Covello and Merkhofer, 1993) • … and there is a need to improve the expectation of the outcome. (Tuomisto, 2006)

42. Societal role of RA • Risk assessment is collection, synthesis and interpretation of scientific information and value judgments for use of the society

43. Definition of risk 3 • In this course, we use the word risk in a loose/broad sense. • Risk = impact (good, bad) • The probability of risk may be low, high, or even 1. • Why? Because you treat favourable and harmful, likely and unlikely impacts all in the same way.

44. Questions in risk management • What is the problem? • Who is responsible for the problem? • What are the possible decisions/actions? • What are the objectives? • What are the outcomes to be monitored? • Who are influenced by the problem? • Who are influenced by the actions?

45. Risk management of bus traffic in Kuopio • What are the problems? • What are potential actions? • What are outcomes of interest? • Who decides? Who acts?

46. Is there a theory for RM? • Context: you must understand this to be able to operate • Find a decision or decisions that are reasonable and relevant • Essential parts: context, research question, decision(s), objectives • RA-RM process

47. Q R A Open risk management: overview

48. Risk management • Also, we could use the term ”impact management” instead of ”risk management”. • This is just a matter of tradition. • (But if we had called this course Open assessment and impact management, the professors hadn’t been interested in including the course in ToxEn MSc studies.)

49. Open risk management: context • All risks emerge in a society (or group). • The society observes the risks, valuates them, is afraid of them, suffers from them, manages them, and adapts to them.

50. Definition of open risk management • How can scientific information and value judgements be organised for improving societal situations by identifying potential decisions and relevant outcomes in a situation where open participation is allowed? • Emphasis: The decision situation should be clarified.