Introduction to risk management

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

2. Contents • Conventional perspectives to risk management • Open risk management (ORM) • RM in the swine flu case • Beginning of the pandemic • Preparedness in Finland and elsewhere

3. Conventional perspectives to risk management Mikko Pohjola, THL

4. Risk management (of what?) • Google ”risk management”, what do you find? • Finance, project, legal, credit, accident, disaster, terrorism, … • What we want to find, is environment and health risk management • Also several perspectives to this! • Somewhat related to E&H RM are: • Workplace health and safety RM • Engineering safety RM (e.g. nuclear safety) • World Bank’s social RM (SRM)

5. Definitions of RM • Wikipedia: • Risk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives, whether positive or negative) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events, or to maximize the realization of opportunities.

6. Definitions of RM • BusinessDictionary.com: • Policies, procedures, and practices involved in identification, analysis, assessment, control, and avoidance of unacceptable risks. A firm may use risk assumption, risk avoidance, risk retention, risk transfer, or anu other strategy (or combination of strategies) in proper management of future events.

7. RM strategies • Wikipedia (RM): • Avoidance • eliminate, withdraw from or not become involved • Reduction • optimize - mitigate • Sharing • transfer - outsource or insure • Retention • accept and budget • Wikipedia (SRM): • Prevention • Mitigation • Coping

8. RM strategies • STTV (National Product Control Agency for Welfare and Health): • Non-acceptance / substitution • Design of packaging (child resistant fastening) • Classification & labeling • Limit of the product volume • Modification of a physical state • Limiting the marketing or use • Instructions, information, warnings • Technical measure (closed system, exhaust ventilation, …) • Training • Medical surveillances • Personal protective equipment (gloves, filters, covers,…) Presentation by J. Räisänen, STTV. 8.11.2006. Introduction to environmental risk assessment. Kuopio.

9. Conventional frameworks for E&H RM • Several perspectives exist, e.g.: • EHRM framework • NRC • Red book RA, Understanding risk, Science and decisions • IRGC risk governance framework • REACH • YVA - regulatory EIA in Finland • Water resources management (integrated modelling) • Ecological RA/RM • Risk analysis

10. EHRM framework The Presidential / Congressional comission on Risk Assessment and Risk Management: Final Report Volume 1, 1997.

11. EHRM framework • 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.

12. EHRM framework • 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.

13. 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 NRC 1983. Risk Assessment in the Federal Government: Managing the Progress. The National Research Council. National Academy Press, Washington D.C.

14. NRC: Red book • Regulatory actions are based on two distinct elements, risk assessment 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.

15. 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… …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...

16. 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 • Risk characterization as the link between assessment and management NRC 1996. Understanding Risk: Informing Decisions in a Democratic Society. The National Research Council. National Academy Press, Washington D.C.

17. NRC: Science and decisions (Silver book) NRC 2009. Science and Decisions: Advancing Risk Assessment. The National Research Council. National Academy Press, Washington D.C.

18. 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.

19. 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 – Risk governance IRGC 2005. Risk governance – towards an integrative approach. International Risk Governance Council. Geneva.

20. 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.

21. 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.

22. IRGC

23. IRGC

24. 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 – EU Chemical safety ECHA 2008. Guidance on Information Requirements and Chemical Safety Assessment. Guidance for the Implementation of REACH.

25. 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 - regulatory EIA in Finland Pohjola et al. State of the art in benefit-risk analysis: Environmental health. Manuscript.

26. YVA Jantunen & Hokkanen 2010. YVA-lainsäädännön toimivuusarviointi – Ympäristövaikutusten arviointimenettelyn toimivuus ja kehittämistarpeet. Ympäristöministeriö. Helsinki.

27. Water resource management (integrated modeling approach) Liu et al. 2008. Linking science with environmental decision making: Experiences from an integrated modelling approach to supporting sustainable water resources management. Environmental Modelling and Software, 23:846-858.

28. Ecological RA/RM Ecological risk assessment. Book. ???

29. Risk analysis

30. 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 Lessons from the KTL Centre of excellence in environmental health risk analysis

31. 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

32. Some RM related concepts • Risk communication (RC) • WHO: Risk communication is an interactive process of exchange of information and opinion on risk among risk assessors, risk managers, and other interested parties. • Risk perception (RP) • Wikipedia: the subjective judgment that people make about the characteristics and severity of risks. • Risk assessment (RA) • Risk characterisation • Risk analysis

33. Discussion points • Similarities and differences between perspectives? • Clear? Solid? Unambiguous? • In comparison e.g. to the theory of DA • Sufficient?

34. 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

35. Questions to ask about RM • Risk • what risk(s)? • how about benefits (costs)? • whose risks / whose benefits? • Management: • who manages? • manages what? • manages how? • on what basis?

36. Interim conclusions • RM: from needs to knowledge, knowledge to action • a societal knowledge/learning process • Confused? Don’t worry, we’ll get back to these issues on the later part of the course…

37. Open risk management Jouni Tuomisto, THL

38. 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

39. 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.

40. 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

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.