Uncertainties in risk assessments

Uncertainties in risk assessments

Jun 17th, 2020

Uncertainties in risk assessments derive from data, model and system uncertainties. In addition, these mix with soft issues like language and cultural barriers. There are for example languages where the term “risk” simply does not exist, like in Japanese. The closest word Japanese have in their language is 危険 (kiken). It means danger, risk, hazard, peril, jeopardy, pitfall all in one. Thus it fails to grasp the specific concept of risk and generates confusion. This is the reason they had to borrow the termリスク (risku) from another language.  

Uncertainties in risk assessments

Explicitly considering and evaluating data uncertainties helps explaining how one obtains risk estimates. Furthermore it appeases risk communication difficulties. Enhancing the transparency of uncertainties in risk assessments is of course paramount in this line of thought. One cannot reach this goal if, for example, one selects arbitrary limits  for boiler plate risk matrices. Oftentimes the coloring scheme in those matrices does not bear any resemblance to public (or corporate) risk tolerance . Thus risk assessment reduces to a binning exercise of “magic single numbers” like, say likelihood=3 * impact=5, thus risk= 15!

Incompetent approaches are dangerous, may increase risks!

Incompetent approaches like the one above are unfortunately the cause of claims that risk management is not sufficient. In addition sometimes critical overexposures arise from their use. We have read rash statements that COVID-19 was “the proof” that risk management does not work. However,  countries and corporations sporting serious risk management approaches had the case covered, like they had SARS and other calamities considered.

Yet, the same people love these oversimplified and misleading approaches as they look simple and do not require any learning. These people also oftentimes forget that the multitude of uncertainties, hazards, and their consequences on nowadays systems is complicated. Thus, it cannot be grasped by oversimplified approaches.

Avoiding misleading statements, openly exposing uncertainties, abolishing arbitrary selections are all actions leading to demystifying the risk assessment process. They are there for every party’s benefit even if they seem complicated.

The public (and management) will indeed be in a better position if they understand why risk estimates are fraught with inevitable uncertainties even if they are based on the best available data and unbiased interpretation.  That type of understanding does not come from nice colored matrices.

Acknowledging uncertainties in risk assessments

Acknowledging uncertainties in risk assessment is very different than asserting “unpredictability” or declaring ignorance. People oftentimes use unpredictability as an alibi to avoid difficult discussions, especially when dealing with long term projects.

At the other end of the spectrum, ignoring uncertainty and posturing more certainty than data or experience may justify is a sure way to lose credibility.

The spectrum is not binary, not “black or white”, nil or one. It is indeed a continuum from very high confidence to “guess work” where both extreme statements are certainly not true.

Competing attitudes facing uncertainties in risk assessments

At the end of the day, no matter the efforts, some people within the public will remain dissatisfied. Indeed, the demand for certainty is a human trait since the time of Oracles, especially in times of crises.

When asked with this type of conundrum by clients requesting support in their tactical and strategic planning, we give probabilistic answers which include:

  • lessons learned from the past,
  • explicit uncertainties considerations and finally
  • varying degrees of mathematical modelling, compatible with the available data, budget and time.

This approach has served well our clients in the past and will do in the future. Just do not ever expect a “magic one number” back from Riskope.

 Closing remarks

Taking public’s suggestions, general knowledge, thick data, and other unconventional sources of information seriously into consideration will help reassure and give comfort with the additional benefit of perhaps shedding light on particular aspects of uncertainties.

What remains paramount is:

  • not offering things that cannot be done or achieved, or, again,
  • mislead the public with simplistic assessments that will give fuel to distrusting behaviors and finally,
  • take bets for prestige or other conflictual interests.

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Category: Mitigations, Risk analysis, Risk management

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