PSK/ACM in a nutshell

A rapid review of 3 categories of risk analysis:

• Technological risk management has benefited from the progress made in quality assurance (i.e. “looking for the reliability”). Efficient modelling of the industrial functional systems, new and innovating methodologies have been fostered by the progress made by the improvement of computer performances.
  All these factors have contributed to reach a good confidence level on results provided by technological risk assessment. We can recognize that this part of the risk assessment and management is nowadays the most advanced.
• Economic risk analysis for net profitability of a project is dependent on the quality of the input information (natural and technological risk assessments) on first observation. Secondly, if natural risks represents a catastrophic risk potential, the concept of risk transfer through insurance, financial vehicle, third party, or … can rapidly reach its limits.
  Imprescriptible contingent liabilities (e.g. “polluter pays” principle) and on the other hand, the value destruction of the project, can just blow up this strategy. In such setting, we can think that despite proven economical risk analysis methods, the uncertainty of the information weighting the natural risk induces inaccuracy for this risk analysis.
• Natural risk assessment and management, this issue is probably the area presenting the lowest methodological content. Conventional environmental risk analysis are mainly assessing the toxicity or the pollution sensitivity. Despite this, causal analysis can often demonstrate that critical natural conditions can be also conducive to accident (e.g. major oil spills). When studied, natural hazards are described (often with their full complexity), mapped, modelled and matched according to the local expertise. Natural risk assessment are rarely conducted with a methodology aimed at facilitating project risk management. Today, not many people are using risk management methodologies based on stress tests and on scenarios of the variation of the system fragility vs. threat levels. Also, in spite of the fact they are key factors for risk management, estimation of the threat deliverability and of the kinetic of the hazards are often overlooked.

Noteworthy objectives of the PSK/ACM methodology are:

• Give a systematic methodological framework in order to allow an easy natural risk assessment quality control or audit.
• Formally characterize the residual risk after the risk containment project.
• Be prepared to the residual risk mitigation, in order to allow the business continuity throughout the project life.

Also, by using this methodology, we believe that natural risks are better assessed if they are expressed by sound scenario (high, most likely and low), and not by probabilities resulting from complex combinatorial analysis difficult to work (and difficult to audit).

In short, in the PSK natural risk assessment:

• Risk Potentiality is discussed, quality controlled, calibrated and finally evaluated mainly by modelling
• Risk Severity is ranked with scenarios, according to the different levels of the threat effectively impacting, and the different levels of the fragility of the analyzed subject
• Risk Kinetic is considered even if it’s uncertain. Making the effort to put the risk on a scale time is a valuable exercise for any decision making process. This is also very beneficial for the preparation of the mitigation plan of the residual risk management

Prior to the project management, after having performed the PSK natural risk assessment, information should become of sufficient quality to make the best possible project management process decisions:

• Avoid implementing the project partly or totally, if the studied setting is considered too risky
• Contain natural risks with effective (cost and technical) solutions
• Mitigate residual risks according to the scenarios, to allow the sustainability of the project

Analyst’s main problem will probably be the gathering and the input of quality information. To help this search of relevant information, these studies will start probably after a natural hazard screening and identification.
The field of study would be preferably determined jointly by the risk analyst and the project holder. To do so, we can follow this simple advice: study carefully the “context of the causes” in order to predict with expertise the “context of the consequences”.

Besides the feasibility and the sustainability of the project, there are others operating risks. Enterprise Risk Management (ERM) and ISO 310xxx are standards focused on company defense, resilience and organization effectiveness (means, logistic, roles and responsibilities). Because efficient business risk management (= making the good decisions) is very dependent on good information and also, because impacts from environmental risks can have a lot of damaging consequences: we believe that PSK/ACM is a solution for the preparation of operational risks. Moreover PSK/ACM is systematic and auditable. Applying this methodology will be beneficial and complementary to conventional business risks management methods.

A good methodology is necessary, but it’s not the sufficient condition to guarantee the efficiency of a risk assessment. Beside skilled resources, the other main pitfall is the input information. We all know that information has a cost, however what is the point of performing a cheap and uncertain study, even with the best expertise? An uncertain risk analysis can just lead to bad decisions or eventually kill a good and worthwhile project. An analyst must be proficient not only for the analysis but also for the quality assessment of the information.