Tolerable risk thresholds
Jun 2nd, 2021
Tolerable risk thresholds, aka risk tolerance are always project and owner-specific. They indicate the level of risk which has been deemed acceptable for a specific project or operation. Furthermore, tolerable risk thresholds and appetite for risk is quite different for various key stakeholders, for instance:
- Mine owner,
- Regulatory Bodies,
- Adjacent Communities, etc.
So how can one manage the sometimes divergent tolerable risk thresholds between stakeholders? Additionally, a topic that comes regularly in the mining world is diverging risk tolerance among joint venture participants. Because, for instance, a junior company may have much greater appetite for risk than a major company. Thus their respective risk tolerance may be completely different.
First of all practically, at the end of the day, satisfactory outcomes depend on effective communication and transparency in the evaluation approach also with demonstrated compliance with legislated acceptance criteria.
Now, in order to be concrete, we show below a series of concepts and “solutions” we implement when dealing with complex tolerance multi-stakeholders discussions.
Risk tolerance and appetites management concepts and solutions
Concept 1: various stakeholders will have different risk tolerances/appetite AND the risk assessment changes as the observer changes. So, for example, the risk assessment developed for an operation is NOT identical to the one for the inhabitants.
Solution 1: carefully perform the risk assessments for the various stakeholders, ensuring they are compatible.
Concept 2: the risk tolerance is not constant in time during the productive life of the operation. It will also change in the post-closure depending on what happens around the system, for example.
Solution 2: ensure timely updates of the risk assessment and the risk tolerance thresholds.
Concept 3: the key for opening a healthy debate will lie in the consequence metric, the consequences dimensions, and how they combine in the tolerance threshold, so that people end up talking the same language.
Solution 3: it is paramount to clearly define and develop consequence metric, consequences dimensions, system definition. That is before starting any risk management effort to avoid biases.
Concept 4: we see that very often people around a table do not even use the same language and the confusion is a killer especially for long term projects.
Solution 4: we keep publishing and updating our risk glossary which is compatible with ISO 31000, but way more detailed and technical.
Concept 5: legislated acceptance criteria are of course jurisdictional and constitute only one aspect of the complex issue of tolerance.
Solution 5: Today we see that “the public” is way more reactive than the regulators and ethical issues, “what people want” are becoming paramount. Hence we devote a full chapter in our new book on risk tolerance. the book is going to be on the shelves by end of July. We also have a full chapter on risk tolerance in our book on Tailings Management with detailed references.
Conclusion of tolerable risk thresholds management discussion
The tolerable risk thresholds management discussion call for the following closing remarks:
- Company/project specific risk tolerance thresholds should be developed and discussed with key personnel and stakeholders;
- the development of risk tolerance curves requires consensus, caution and continuous calibration;
- a group and not an individual should define them. It is indeed completely normal to have different tolerances at different levels of the organization. Because the tolerance at operation’s level is necessarily more stringent than at corporate level. This explains the importance of a reproducible and swift definition at all levels pertinent with the enterprise risk management.
Tagged with: intolerable risks, risk appetite, risk thresholds, risk tolerance, tolerable risks
Category: Consequences, Probabilities, Probability Impact Graphs, Risk analysis, Risk management, Tolerance/Acceptability, Uncategorized