258
15 Risk-Informed Decision Making
15.10 Risk Informed Decision Making and Roadmap
What has been discussed up to this point offer firm support for risk-informed decision
making. RIDM is necessary to prioritize dams in order of urgency and decide which
mitigations to implement. If we go back to Sect. 1.1 where RBDM and RIDM were
defined, RBDM would be used to prioritize actions and select mitigations, but it
would not be sufficient to evaluate the effectiveness of the mitigative investment in
order to optimize it.
When it comes to mitigation, actions need to be:
• efficient, that is, work in a quick and organised way (covered by RBDM);
• efficacious, i.e., able to produce the intended results (covered by RBDM) and
finally,
• effective, meaning an action giving the desired results (within clear financial goals,
covered by RIDM).
The idea is to develop the implementation of effective risk reduction strategies using RIDM. Especially when it comes to comparing capital expenditures and long-term monitoring, risk-informed decision making requires
more sophisticated methods than the classic financial tools like Net Present
Value (NPV) or the mere “counting of risks” carried out using traditional matrix-based risk assessments, due to the inherent and insurmountable
limitations (https://www.riskope.com/2009/08/19/stop-procrastinating-npv-is-deaduse-risk-as-a-key-decision-parameter/) those approaches have (Robichek and Myers
1966). Our experience has shown that limitations can be overcome with economical (https://www.sapling.com/6708011/calculate-riskadjusted-npv) and sustainable
methodologies which can deliver a significant competitive edge to their users
(Espinoza 2015).
Leaving aside the details of the financial evaluations, the first step of RIDM is
to gain an understanding of which risks are operational, tactical and strategic, and
societally acceptable (see Sect. 15.9) and which levels of mitigation are dictated by
the negligence test (see Sect. 15.8). This classification is paramount in this phase; it
is an important result of a modern risk assessment, and not the result of an arbitrary
selection.
For the case study discussed in this chapter the synthesis of these evaluations is
displayed in Table 15.13, where we focus on the dams with intolerable or almost
intolerable risks (Fig. 15.9) and societally unacceptable dams (Fig. 15.14). Interestingly, Dam 2 by itself is fully tolerable, but when seen in the scenario of its being
interdependent on Dam 3, it is not.
From Table 15.13 we can distil the following roadmap, which would still require
a careful risk-adjusted cost analysis and evaluations of residual risks.
• First priority, Dam 4. Every effort must be made to reduce corporate, legal and
societal liability and exposure.
• Second priority, Dam 3. Although this dam is corporately tolerable, it sits right at
the threshold. Its negligence test has a significant yearly value and it is societally
15 Risk-Informed Decision Making
15.10 Risk Informed Decision Making and Roadmap
What has been discussed up to this point offer firm support for risk-informed decision
making. RIDM is necessary to prioritize dams in order of urgency and decide which
mitigations to implement. If we go back to Sect. 1.1 where RBDM and RIDM were
defined, RBDM would be used to prioritize actions and select mitigations, but it
would not be sufficient to evaluate the effectiveness of the mitigative investment in
order to optimize it.
When it comes to mitigation, actions need to be:
• efficient, that is, work in a quick and organised way (covered by RBDM);
• efficacious, i.e., able to produce the intended results (covered by RBDM) and
finally,
• effective, meaning an action giving the desired results (within clear financial goals,
covered by RIDM).
The idea is to develop the implementation of effective risk reduction strategies using RIDM. Especially when it comes to comparing capital expenditures and long-term monitoring, risk-informed decision making requires
more sophisticated methods than the classic financial tools like Net Present
Value (NPV) or the mere “counting of risks” carried out using traditional matrix-based risk assessments, due to the inherent and insurmountable
limitations (https://www.riskope.com/2009/08/19/stop-procrastinating-npv-is-deaduse-risk-as-a-key-decision-parameter/) those approaches have (Robichek and Myers
1966). Our experience has shown that limitations can be overcome with economical (https://www.sapling.com/6708011/calculate-riskadjusted-npv) and sustainable
methodologies which can deliver a significant competitive edge to their users
(Espinoza 2015).
Leaving aside the details of the financial evaluations, the first step of RIDM is
to gain an understanding of which risks are operational, tactical and strategic, and
societally acceptable (see Sect. 15.9) and which levels of mitigation are dictated by
the negligence test (see Sect. 15.8). This classification is paramount in this phase; it
is an important result of a modern risk assessment, and not the result of an arbitrary
selection.
For the case study discussed in this chapter the synthesis of these evaluations is
displayed in Table 15.13, where we focus on the dams with intolerable or almost
intolerable risks (Fig. 15.9) and societally unacceptable dams (Fig. 15.14). Interestingly, Dam 2 by itself is fully tolerable, but when seen in the scenario of its being
interdependent on Dam 3, it is not.
From Table 15.13 we can distil the following roadmap, which would still require
a careful risk-adjusted cost analysis and evaluations of residual risks.
• First priority, Dam 4. Every effort must be made to reduce corporate, legal and
societal liability and exposure.
• Second priority, Dam 3. Although this dam is corporately tolerable, it sits right at
the threshold. Its negligence test has a significant yearly value and it is societally