Risikovurdering, når svanen skifter farge

NY ARTIKKEL FRA VÅR KURSLEDER AYSE NORDAL

De aller fleste av oss har enten erfart eller hørt om effektene og skadene av de ekstreme værforholdene de siste ukene. Mange kommuner, bedrifter og husholdninger har planlagt og gjennomført tiltak. Når ekstremregn, ekstremvarme, flom eller jordras skjer, tenker de fleste av oss at disse er sjeldne hendelser med meget lav sannsynlighet. Vi vet likevel ikke om de skjer, når de skjer eller om de påvirker oss. Slike hendelser har hittil blitt kalt «grå svaner» i risiko-litteraturen.

I sin nye LinkedIn artikkel setter vår kursleder Ayse Nordal spørsmålstegn ved denne tankegangen. Hun spør:

• Burde vi heller tenke NÅR disse hendelsene skal skje istedenfor OM de skal skje?  Hun viser til statistikk som dokumenterer at disse hendelsene ikke er så sjeldne som de fleste tror.
• Kan vi fortsatt benytte den historiske hendelseshyppigheten for å estimere den fremtidige hyppigheten av disse hendelsene?
• Kan vi benytte noen av metodene i NS-IEC 31010:2019 for å studere disse hendelsene? Som kjent blir disse metodene diskutert i vårt kurs om Metoder og Teknikker for risikovurdering.

Hun mener at vi burde forholde oss til de ekstreme værforhold-relaterte hendelsene som sannsynlige hendelser og utarbeide vel planlagte tiltak for å håndtere dem.

Foreningen synes at artikkelen representerer en spennende og relevant tilnærming og vi velger defor å dele den med våre medlemmer.

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HOW SHOULD WE REACT WHEN THE SWAN CHANGES ITS COLOUR?

Ayse Nordal, owner Nordal Visjon

Background

Nassim Nicholas Taleb introduced the concept of black swans in 2007. (1) These were unpredictable events that did not happen before, but their possibility called for our attention since they could have serious consequences.

In 2012 PwC, UK published Black Swans Turn Grey. (2) Risk managers began to define grey swans as events with very low likelihood and very high impact. In contrast with black swans, we could recognize these events and we could define them, but we were not able to predict if they may happen and whether they may affect us. In quantitative analyses, we have placed them at the tail of our probability distributions. Contingency plans and business continuity plans are used to treat these risks, among others extreme weather conditions such as drought, extreme temperature, flood, glacial lake outburst, landslide, storm, and wildfire.

Recent data and observations provide evidence that the above-mentioned events are no longer grey swans. The risk manager’s approach to these should take “when”, not “if” as a starting point for the treatment of these risks.

What do we know about the change of colour?

In August 2021 the World Meteorological Organization (WMO) announced that “…A disaster related to a weather, climate or water hazard occurred every day on average over the past 50 years – killing 115 people and causing US$ 202 million in losses daily…”(3) According to the WMO, in the period of 1970 – 2019, there were more than 11 000 reported disasters attributed to these hazards globally, with just over 2 million deaths and US$ 3.64 trillion in losses. The same organization reports that the global average temperature for July 2023 is confirmed to be the highest on record for any month. The month is estimated to have been around 1.5°C warmer than the average for 1850-1900.

Extreme weather conditions are no longer grey swans. They are white swans, i.e., daily risks which should appear on the risk register of every organization. However, most organizations still treat them as “rare” incidents with very low probability.

Research on risk management had an increasing focus on extreme weather risks in recent years. A quick glance at ResearchGate will evidence that we have better knowledge and documentation on many aspects of these risks, such as the perception of extreme weather risks, their impact on other risks, methods to analyze them, as well as policies to treat these risks. We must put these results to use when we include extreme weather risks on the risk registers.

Relevant considerations

Taking the above-mentioned risks into consideration necessitates a new mindset and new thinking attached to every stage of our risk management process. The following are examples of questions to consider:

• How will extreme weather risks affect our daily operations, given our location, the technical condition of our premises, the value chain and dependencies, facilities, storage routines, and processes?
• Risk management textbooks suggest the use of historical frequency data for the estimation likelihood of an event. However, the probability of extreme weather events is accelerating over time. How can we estimate the expected future frequencies of extreme weather events?
• Which methods can we use to be able to analyze these risks? ISO-IEC  31010 suggests dose-response assessment for toxicological risk assessments (4). Can we use a similar method? We have also other studies that attempt to predict and quantify these risks (5,6). Can we use them remembering that it is important to evaluate the strengths and weaknesses of the methods we use?
• Assessing these risks will involve many actors, both inside and outside of the organization. Who should participate in a risk assessment workshop? Whose contribution would be relevant?
• Who will have the authority and accountability for the treatment of extreme weather risks? What are the roles and responsibilities of the Board and the management?
  

Conclusion

Many organizations use the same taxonomies, risk registers, and risk matrices year after year, without a critical evaluation of the content of these and the nature of these risks. Extreme weather risks affect the day-to-day operations of every organization, everywhere in the world. Organizations must identify, analyze, evaluate, and treat these risks independent of their sector, size, or location. They should be treated as an important component of the total business risk portfolio.

References

• Taleb Nassim Nicholas, The Black Swan. The Impact of the Highly Improbable, New York Random Hause 2007
• PwC, UK, Black Swans Turn Grey, The Transformation of Risk, 2012
• https://public.wmo.int/en/media/press-release/weather-related-disasters-increase-over-past- 50-years-causing-more-damage-fewer
• ISO IEC 31010:2019 Risk Management- Risk Assessment Techniques, pp:89-90
• Webster, Peter J & Jian Jun, Environmental Prediction, Risk Assessment, and Extreme Events: Adaptation Strategies for the Developing World, Philos Trans A Math Phys Eng Sci. 2011 Dec 13; 369(1956): 4768–4797
• Harrington, Luke J& Schleussner, Carl-Friedrich & Otto, Friederike E.L, Quantifying Uncertainty in Aggregated Climate Change Risk Assessments, Nature Communications, December 2021