Risk Governance

Abstract

The term ‘governance’ has been used in political science to describe the multitude of actors and processes that lead to collective binding decisions. The term ‘risk governance’ involves the translation of the substance and core principles of governance to the context of risk‐related decision‐making. Does it involve a major change on how risks are conceptualized, managed, and communicated, or it is just a new fashion? In this paper, we aim to delineate the genesis and analytical scope of risk governance. In our view, risk governance pertains to the various ways in which many actors, individuals, and institutions, public and private, deal with risks surrounded by uncertainty, complexity, and/or ambiguity. It emphasizes that not all risks are simple; they cannot be calculated as a function of probability and effect. It is more than a descriptive shorthand for a complex, interacting network in which collective binding decisions are taken around a particular set of societal issues. The ambition is that risk governance provides a conceptual as well as normative basis for how to deal responsibly with uncertain, complex, and/or ambiguous risks in particular. We propose to synthesize the body of scholarly ideas and proposals on the governance of systemic risks in a set of principles: the communication and inclusion principle, the integration principle, and the reflection principle. This set of principles should be read as a synthesis of what needs to be seriously considered in organizing structures and processes to govern risks.

Full text

Draft 1 1
Risk Governance:
The importnace of the IRGC Framework for
Natural Hazard Management
International Disaster Reduction Conference
Davos, August 29, 2006
Ortwin Renn
DIALOGIK gGmbH and Stuttgart University

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Part 1
Characteristics of Natural
Hazards

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RECENT TRENDS (I/II)
Increase of population density and urbanization
Increase of catastrophic potential and decrease of
individual risk
Increase in uncertainty due to interconnectiveness and
fast global changes
Strong links between natural, technical, social and
economic risks
Increased uncertainty about natural hazard patterns and
frequencies due to global change
Part I: Characterisation of Risk – Challenges and Trends

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RECENT TRENDS (II/II)
Increase of vulnerability with respect to technological,
social and natural risks
Exponential increase in payments by insurance
companies for compensating victims of natural
catastrophes
High potential for social amplification and attenuation
Severe equity problems with respect to vulnerability
between and among nations
Part I: Characterisation of Risk – Challenges and Trends

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International Awareness
Natural hazards are often underestimated, technological
hazards overestimated
Perception of natural hazards as cyclical and not random
events
Suppression of vulnerability
Disaster relief mentality
Insufficient preparedness for protecting oneself against
natural hazards

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Understanding of risk in natural hazard context
General:
uncertain consequence of an event or a human action
with respect to something that humans value
Recognition of contingency
Presumption of agency (individual or collective)
Presumption of learning
Specific
Function of probability and harm (hazard times
vulnerability)
Uncertainty = statistical or modelled expected value
Harm = health, environment, infrastructure, capital
Vulnerability: propensity of risk absorbing system to react to
energy and stress

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Three components of risks
Ambiguity
- interpretative
- normative
Complexity
(Cause
–Intervening
varaiables-
Effect(s)
Uncertainty
Inter-agent
variability
Statistical error
and confidence
interval
Genuine stochastic
relationships
Ignorance

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Part II
Risk Governance:
Coping with
natural hazards

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IRGC RISK GOVERNANCE
Assessment Sphere:
Generation of Knowledge
Management Sphere:
Decision on & Implementation of Actions
Risk Characterisation
• Risk Profile
• Judgement of the
Seriousness of Risk
• Conclusions & Risk
Reduction Options
Risk Evaluation
• Judging the Tolera-
bility & Acceptability
• Need for Risk
Reduction Measures
Tolerability & Acceptability Judgement
Pre-Assessment:
• Problem Framing
• Early Warning
• Screening
• Determination of Scientific Conventions
Pre-Assessment
Risk Appraisal:
Risk Assessment
• Hazard Identification & Estimation
• Exposure & Vulnerability Assessment
• Risk Estimation
Concern Assessment
• Risk Perceptions
• Social Concerns
• Socio-Economic Impacts
Risk Appraisal
Risk Management
Implementation
• Option Realisation
• Monitoring & Control
• Feedback from Risk Mgmt. Practice
Decision Making
• Option Identification & Generation
• Option Assessment
• Option Evaluation & Selection
Risk Management
Communication

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COMPONENTS OF PRE-ASSESSMENT I
Monitoring in place
Communication system in
place
Emergency planning and
preparedness
Systematic search
for signals
2 Early warning
Perception of fate or
human agency
Recognition of
responsibility
choice of frame (nature,
God, society, individuals)
Different
perspectives of
how to
conceptualize the
issue
1 Problem
framing
Natural HazardsDefinitionPre-Assessment
Components

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COMPONENTS OF PRE-ASSESSMENT II
Validity of methods and
techniques for risk and
vulnerability assessments
Benchmarks for assuring
resilience
Establishing a
procedure for
screening hazards
and vulnerabilities
4 Scientific
conventions for
risk
assessment &
concern
assessment
screening in place?
Natural disaster
observatory
Assessment of vulnerability
Codes for improving
resilience
Establishing a
procedure for
screening hazards
and vulnerability
3 Screening
(risk
assessment
and concern
assessment
policy)
Natural HazardsDefinitionPre-Assessment
Components

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RISK APPRAISAL
Risk Assessment
Hazard identification and estimation
Vulnerability assessment
Risk estimation
Concern Assessment
Socio-economic value of vulnerable assets
Public perceptions of natural hazards
Public concerns (stakeholders and individuals)

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Risk Evaluation
Risk intolerable:
avoidance or drastic
reduction measures are
needed
Tolerable risk: emphasis on
resilience
Acceptable
risks
Extent of consequences
P
R
O
B
A
L
I
T
Y

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Risk Evaluation:
Classification of the German Global Change Council
Factors for evaluating (physical) risks:
Probability
Potential for harm
Vulnerability
Uncertainty (variability, statistical, genuine, ignorance)
Ubiquity (intra-generational equity)
Persistence (inter-generational equity)
Delayed Effects (“extra”-generational equity)
Equity
Social Mobilisation

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Deep Sea Drilling
Climatic Change
Hurricanes
Strong
Rain
Tsunami
Major
Earthsquakes
Accept.
Risk
Tolerable
Risk
Intolerable
Risk
System
Boundaries
Potential Harm
Risk Types Only scientific assumptions about consequences
Probability
Risk Evaluation

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PART III
Risk Management

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COMPONENTS OF RISK MANAGEMENT
effectiveness and efficiency
minimization of side effects
sustainability
fairness
legal and political
implementability
ethical acceptability
public acceptance
Investigations of impacts
of each option (economic,
technical, social, political,
cultural)
2 Option
assessment
Building codes
Zoning rules
Infra-Structure standards
Economic incentives
Relocation
insurance and liability
Information/education
Identification of potential
risk handling options, for
vulnerability reduction as
well as risk avoidance,
transfer and retention
1 Option
generation
IndicatorsDefinitionAssessment
Components

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COMPONENTS OF RISK MANAGEMENT
accountability
controlling
Realization of the most
preferred option
4 Option
implementa
tion
assignment of trade-offs
incorporation of
stakeholders & the public
Evaluation of options
(multi-criteria analysis)
3 Option
evaluation
and
selection
intended impacts
non-intended impacts
Performance under stress
Observation of
effects of imple-
mentation (link to
early warning)
Ex-post evaluation
5 Monitoring
and
feedback
IndicatorsDefinitionAssessment
Components

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Complexity
induced
Epistemological
Agency Staff
External Experts
Cognitive
Risk Problem
Type of Discourse
Actors
Conflict
Probabilistic Risk
Modelling
Remedy
Agency Staff
External Experts
Stakeholders
– Industry
– Directly affected
groups
Uncertainty &
resilience
induced
Reflective
Risk Problem
Type of Discourse
Actors
Cognitive
Evaluative
Conflict
Vulnerability
Analysis
+Probabilistic
Risk Modelling
Remedy
Agency Staff
External Experts
Stakeholders
– Industry
– Directly affected
groups
– General public
Ambiguity
induced
Participative
Risk Problem
Type of Discourse
Actors
Cognitive
Evaluative
Normative
Conflict
Risk Trade-off
Analysis & Delib-
eration necessary
+Vulnerability
+Probabilistic
Risk Modelling
Remedy
Simple
Instrumental
Risk Problem
Type of Discourse
Agency Staff
Actors
Statistical Risk
Analysis
Remedy
Function: Allocation of risks to one or several of the four routes
Type of Discourse: Design discourse
The Risk Management Escalator

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PART IV
Conclusions

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Conclusions I
Need for integrated risk governance model including
natural, technological and behavioral hazards
Increase of complexity, uncertainty, and ambiguity in
natural hazard management
Application of IRGC model possible and innovative for
coping with integrated risks
Extension of tradition risk models with pre-
assessment, concern assessment and evaluation
provides new valuable insights

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Conclusions 2
Risk management: emphasis on avoiding
vulnerabilities and increasing resilience
Management targets:
Complexity: Modelling and Monitoring
Uncertainty: Improving resilience, emergency preparedness
and capacity building
Ambiguity: Extended need for communication and
participation
Stakeholder participation in accordance with
complexity, uncertainty and ambiguity