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- Integrated and convergent risk approaches need some discussion. Are they so different? And what about the good old Enterprise Risk…
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Resilience cannot be based on instinctual decision-making. Instead it should rely on forward looking risk assessments to avoid squandering private and public money in useless Capex.
The Canadian government pledged a budget of 40M$ over five years to integrate climate resilience into building design, guides and codes.
It’s certainly a wise move as codes customarily rely on statistics, business like usual, and experience. None of those approaches is robust enough to cope with climate changes and their unusual (unknown?) set of new parameters.
Think about the good-old 200yrs rain event engineers use to design all sort of hydraulic infrastructures. Thinks about snow loading on roofs, service temperature extremes and many other classic “engineering” thresholds.
Just to prove the point, we have lately seen:
because of climate (temperature) anomalies.
As we have discussed in earlier posts, contractual Force Majeure and the notion of negligence will “shift” because of climate change. Reportedly public officers see challenges on whether they should have foreseen catastrophic events, or even hazardous events on public roads. We have acted as expert witnesses in civil and criminal courts within this frame. CEOs and CxOs will follow, of course.
Insurance companies seem to react by denying some of their long term insurees renewal, based on “excessive risk” arguments.
Like for cyber attacks, actuaries are in trouble. For their science is based on a “rear-view mirror” approach and not a “forward looking” one.
Clearly, designers have to come in:
Thanks to modern risk assessment methodologies it is possible to guide attention in a rational way toward areas that require “resilience” enhancements. We cannot base resilience on instinctual decision-making, We need to shore it by carefully crafted forward looking risk assessments.
Twenty years ago we convinced a famous producer of hazelnut products to move their electrical rooms away from the cellars and put them in the attic. The idea was to increase resilience in case of a flood. Our risk assessment had proven that was the best “bang for the buck”. They had previously raised the whole unit, at great cost, by 1.5m, building a sort of artificial island in case of flooding. However the cellar remained “under water”. A total waste of capex in the name of “resilience” instinctual decision-making.
Another industrialist, also exposed to flooding, had built, at great expense, a “China wall” around his operation. It had automatic flood water-resistant gates. By doing so, he had actually reduced by 30% the hydraulic section of the valley in which his operation was located. We explained he may have saved the factory from waters, but was ready for social turmoil and a class-action.
Resilience does not pair well with instinctual decision-making. Instead we should shore it by carefully crafted forward looking risk assessments like those produced using ORE.