“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Risk-Informed Decision Making Charles Yoe, PhD Institute for Water Resources 2010

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions In a Nutshell Decision making is going to change if we do risk assessment Making decisions under uncertainty Using the available information –Considering more than expected value

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Risk-Informed Decision Making Confluence of risk management and risk assessment –Assessors convey significance of uncertainty –Managers take it explicitly into account in decision making Develops and uses risk information to aid decisions made under uncertainty –Decision metrics and rules developed by decision makers –Use risk assessment approach to develop science-based values of risk metrics

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions The Job Success in risk management is defined by practical and useful solutions for dealing with uncertainty It is the risk assessors’ job to address the uncertainty and variability in inputs It is the risk managers’ job to address the uncertainty and variability in the decision criteria –And to manage risks that are not acceptable

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Key Focal Points Decision criteria/metrics Acceptability/tolerability Principles for choosing an option Uncertainty Strategies for managing risk

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Metrics Decision criteria will reflect –Risk metrics –Other risk management objectives These are the usual impacts of interest to decision makers –Costs, benefits, compliance with laws, budget impacts, capability, and so on

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Possible Risk Metrics Life safety risk –Number of lives at risk, social vulnerability Economic risk –Net economic benefits, financial risks Engineering risk and reliability –PUP Residual risk New, transformed and transferred risk New metrics like partitioned risk

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions First, Understand …assessors have to become more clever and help risk managers know what is possible …conditional probabilities can help –…given that something happens then how bad is it?

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Consider the Hydroeconomic Risk Model Existing Levee

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Expected Annual Damage $12,411,000 $2,151,000 Existing Risk Residual Risk

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Refining Residual Damage Existing flood risk (EAD) = $12,411,000 Residual flood risk (EAD) = $2,151,000 Flood risk reduction (EAD) = $10,260,000 What are the EAD given that a flow with an exceedence frequency of (.2 on left) or less occurs? This conditional probability requires a risk partition. Rescale the partition Integrate this rescaled partition and the expected damage is now $872,659,000. Given that a ‘bad’ flood occurs, it will be very bad.

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Extreme Event Conditional Expected Values With condition residual = $2,151,000 Benefits = $10,260,000 Partitioned residual = $872,659,000 A channel or nonstructural project could have lower benefits and a much reduced partitioned risk

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions What Kinds of Decisions Is the status quo acceptable? Can we accept this risk? If the existing risk is not acceptable, what level of risk is tolerable? What is the best way to achieve a tolerable level of risk?

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Two Important Ideas Acceptable Risk-A risk whose probability of occurrence is small, whose consequences are so slight, or whose benefits (perceived or real) are so great, that individuals or groups in society are willing to take or be subjected to the risk (or that the event might occur). Tolerable Risk-A tolerable risk is a non- negligible risk that has not yet been reduced to an acceptable level, but the risk is tolerated due to the inability to reduce it further, the cost of doing so or the magnitude of the benefits associated with the risky activity.

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Principles for Choosing Management Option Policy Zero Risk Weight-of-evidence Precautionary Principle ALARA Principle ALOP Principle Reasonable Relationship Safety Standards

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Policy Some decisions have been made for the risk manager, e.g., the national economic development plan Corps guidance often restricts what can be done Working with EPA means dealing with their policy restrictions and requirements International treaties and agreements may identify solutions or limit options

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions © Charles Yoe, Ph.D. Zero Risk The ban or taboo—any action that involves any risk at all is forbidden—ignorance made it possible to imagine 0 risk “De Minimis”—numerical value of risk too small to be bothered about 1-in-a-million has captured the imagination in some contexts –1-in-a-million annually is 70 or 80 times more than 1-in-a-million lifetime –“Practically” zero PMF, 100-year, 500-year have all been used by the Corps

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Weight-Of-Evidence We like once and for all resolution on the basis of compelling scientific evidence Risk managers assess credibility of conflicting evidence about hazards and risks in a systematic and objective manner Diverse group of scientists examine the evidence to reach consensus views Weight-of-evidence is an ongoing activity attempting to balance positive and negative evidence of harmful effects based on the best available evidence

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Precautionary Principle "When an activity raises threats of harm to human health or the environment, precautionary measures should be taken even if some cause and effect relationships are not fully established scientifically. In this context the proponent of an activity, rather than the public, should bear the burden of proof." Wingspread Statement In order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation. UNCED Rio Declaration Principle 15

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions © Charles Yoe, Ph.D. ALARA Principle As Low As Reasonably Achievable Minimize known risks, by keeping exposures as low as reasonably possible, taking into consideration costs, technology, benefits to public health and safety and other societal and economic concerns Similar to best available technology WHO Backgrounder WHO Backgrounder

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions © Charles Yoe, Ph.D. Appropriate Level of Protection Risk society is willing to accept or tolerate Statement of degree of protection that is to be achieved by the risk management option implemented Can be intentional choice Can be result of what is doable –Sometimes overlaps with ALARA

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Factors in Determining ALOP Technical feasibilityTechnical feasibility of prevention and control options RisksRisks that may arise from risk management interventions benefitsMagnitude of benefits of an activity and the availability of substitutes for that activity Cost of preventionCost of prevention and control versus effectiveness of risk reduction Public preferencesPublic risk reduction preferences, public values DistributionDistribution of risks and benefits Policy

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Reasonable Relationship Costs of risk management should bear “a reasonable relationship” to corresponding reductions in risks Not a true BCA but balance of benefits and costs should at least approximate each other

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Safety Standards Safety standards –Zero risk standards –Thresholds –Balancing standards Risk-Benefit Trade-Off: Greater benefit => Greater acceptable risk Comparative Risk Analysis: Rank risks for seriousness of threat posed Benefit-Cost Analysis: Economic efficiency

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions © Charles Yoe, Ph.D. Safety Standards Threshold standards –Non-zero level of risk stipulated as acceptable Tolerable level of risk Appropriate level of protection Procedural standards –Agreed upon process –Negotiation –Referendum

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Uncertainty Consider net NED benefits as a decision criterion Which is the best plan? Net BenefitsPlan 1: RedPlan 2: BluePlan 3: Green Mean$6,998,000$6,001,142$4,000,039 Decision making will becoming multi-dimensional. Can we handle that?

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Uncertainty P(Negative return) Which is the best plan now?

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Possible Rules for Making Decisions Under Uncertainty Maximax—appeals to gamblers (R, G, B) –Choose plan with best upside payoff Maximin—appeals to cautious (B,R,G) –Choose plan with best downside payoff Laplace—risk neutral (R,B,G) –Choose plan based on expected value payoff Hurwicz—neither neutral nor extreme (depends) –Choose plan based on assigned weights Regret-make wrong decision and regret it (Red) –Identify the maximum regret associated w/ each choice –Choose plan that minimizes this regret

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Regret States of the world MinMax Red $ (10,173,310) $ 23,635,943 Blue $ (4,114,583) $ 16,894,192 Green $ (15,726,346) $ 19,273,900 Regret Matrix Maximum Red $ 6,058,727 $ - $ 6,058,727 Blue $ - $ 6,741,751 Green $ 11,611,763 $ 4,362,043 $ 11,611,763 Minimax $ 6,058,727 If we choose red our regret will at most be $6.1 million

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Trade-Offs

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Sensitivity

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions General Risk Management Strategies Accept Mitigate –Avoidance –Reduce probability of event (prevent) –Reduce consequence of event (mitigate) –Insurance

“ Building Strong “ Delivering Integrated, Sustainable, Water Resources Solutions Charles Yoe, Ph.D. Questions?