Wiley risk analysis assessing uncertainties beyond expected values and probabilities jun 2008 ISBN 0470517360 pdf

Risk Analysis Risk Analysis: Assessing Uncertainties beyond Expected Values and Probabilities  2008 John Wiley & Sons, Ltd ISBN: 978-0-470-51736-9 T Aven Risk Analysis Assessing Uncertainties beyond Expected Values and Probabilities Terje Aven University of Stavanger, Norway Copyright  2008 John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England Telephone (+44) 1243 779777 Email (for orders and customer service enquiries): cs-books@wiley.co.uk Visit our Home Page on www.wileyeurope.com or www.wiley.com All Rights Reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1T 4LP, UK, without the permission in writing of the Publisher Requests to the Publisher should be addressed to the Permissions Department, John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England, or emailed to permreq@wiley.co.uk, or faxed to (+44) 1243 770620 This publication is designed to provide accurate and authoritative information in regard to the subject matter covered It is sold on the understanding that the Publisher is not engaged in rendering professional services If professional advice or other expert assistance is required, the services of a competent professional should be sought Other Wiley Editorial Offices John Wiley & Sons Inc., 111 River Street, Hoboken, NJ 07030, USA Jossey-Bass, 989 Market Street, San Francisco, CA 94103-1741, USA Wiley-VCH Verlag GmbH, Boschstr 12, D-69469 Weinheim, Germany John Wiley & Sons Australia Ltd, 42 McDougall Street, Milton, Queensland 4064, Australia John Wiley & Sons (Asia) Pte Ltd, Clementi Loop #02-01, Jin Xing Distripark, Singapore 129809 John Wiley & Sons Canada Ltd, 6045 Freemont Blvd, Mississauga, ONT, L5R 4J3 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 978-0-470-51736-9 Typeset in 10/12pt Times by Laserwords Private Limited, Chennai, India Printed and bound in Great Britain by TJ International, Padstow, Cornwall Contents Preface Part I ix Theory and methods 1 What is a risk analysis? 1.1 Why risk analysis? 1.2 Risk management 1.2.1 Decision-making under uncertainty 1.3 Examples: decision situations 1.3.1 Risk analysis for a tunnel 1.3.2 Risk analysis for an offshore installation 1.3.3 Risk analysis related to a cash depot 13 13 14 14 What is risk? 2.1 Vulnerability 2.2 How to describe risk quantitatively 2.2.1 Description of risk in a financial context 2.2.2 Description of risk in a safety context 17 21 22 24 25 The risk analysis process: planning 3.1 Problem definition 3.2 Selection of analysis method 3.2.1 Checklist-based approach 3.2.2 Risk-based approach 29 29 34 35 36 The risk analysis process: risk assessment 4.1 Identification of initiating events 4.2 Cause analysis 4.3 Consequence analysis 4.4 Probabilities and uncertainties 4.5 Risk picture: Risk presentation 4.5.1 Sensitivity and robustness analyses 4.5.2 Risk evaluation 39 39 40 41 43 44 48 49 vi CONTENTS The risk analysis process: risk treatment 5.1 Comparisons of alternatives 5.1.1 How to assess measures? 5.2 Management review and judgement 51 51 53 55 Risk 6.1 6.2 6.3 57 57 62 64 69 70 71 72 74 76 78 80 80 83 6.4 6.5 6.6 6.7 6.8 6.9 Part II analysis methods Coarse risk analysis Job safety analysis Failure modes and effects analysis 6.3.1 Strengths and weaknesses of Hazard and operability studies SWIFT Fault tree analysis 6.6.1 Qualitative analysis 6.6.2 Quantitative analysis Event tree analysis 6.7.1 Barrier block diagrams Bayesian networks Monte Carlo simulation an FMEA Examples of applications Safety measures for a road tunnel 7.1 Planning 7.1.1 Problem definition 7.1.2 Selection of analysis method 7.2 Risk assessment 7.2.1 Identification of initiating events 7.2.2 Cause analysis 7.2.3 Consequence analysis 7.2.4 Risk picture 7.3 Risk treatment 7.3.1 Comparison of alternatives 7.3.2 Management review and decision 85 87 87 87 88 88 88 90 90 94 95 95 95 Risk analysis process for an offshore installation 8.1 Planning 8.1.1 Problem definition 8.1.2 Selection of analysis method 8.2 Risk analysis 8.2.1 Hazard identification 8.2.2 Cause analysis 8.2.3 Consequence analysis 97 97 97 98 98 98 98 100 CONTENTS 8.3 8.4 vii Risk picture and comparison of alternatives 103 Management review and judgement 104 Production assurance 9.1 Planning 9.2 Risk analysis 9.2.1 Identification of failures 9.2.2 Cause analysis 9.2.3 Consequence analysis 9.3 Risk picture and comparison of alternatives 9.4 Management review and judgement Decision 105 105 105 105 106 106 108 109 10 Risk analysis process for a cash depot 10.1 Planning 10.1.1 Problem definition 10.1.2 Selection of analysis method 10.2 Risk analysis 10.2.1 Identification of hazards and threats 10.2.2 Cause analysis 10.2.3 Consequence analysis 10.3 Risk picture 10.4 Risk-reducing measures 10.4.1 Relocation of the NOKAS facility 10.4.2 Erection of a wall 10.5 Management review and judgment Decision 10.6 Discussion 111 111 111 112 113 113 113 116 118 120 120 121 121 122 11 Risk analysis process for municipalities 11.1 Planning 11.1.1 Problem definition 11.1.2 Selection of analysis method 11.2 Risk assessment 11.2.1 Hazard and threat identification 11.2.2 Cause and consequence analysis Risk 11.3 Risk treatment picture 123 123 123 124 124 124 125 128 131 131 131 132 132 132 135 137 138 12 Risk analysis process for the entire enterprise 12.1 Planning 12.1.1 Problem definition 12.1.2 Selection of analysis method 12.2 Risk analysis 12.2.1 Price risk 12.2.2 Operational risk 12.2.3 Health, Environment and Safety (HES) 12.2.4 Reputation risk viii CONTENTS 12.3 12.4 Overall risk picture 140 Risk treatment 141 13 Discussion 13.1 Risk analysis as a decision support tool 13.2 Risk is more than the calculated probabilities and expected values 13.3 Risk analysis has both strengths and weaknesses 13.3.1 Precision of a risk analysis: uncertainty and sensitivity analysis 13.3.2 Terminology 13.3.3 Risk acceptance criteria (tolerability limits) 13.4 Reflection on approaches, methods and results 13.5 Limitations of the causal chain approach 13.6 Risk perspectives 13.7 Scientific basis 13.8 The implications of the limitations of risk assessment 13.9 Critical systems and activities 13.10 Conclusions 145 147 149 152 152 154 157 159 161 166 A Probability calculus and statistics A.1 The meaning of a probability A.2 Probability calculus A.3 Probability distributions: expected value A.3.1 Binomial distribution A.4 Statistics (Bayesian statistics) 167 167 168 170 171 172 143 143 144 145 B Introduction to reliability analysis 173 B.1 Reliability of systems composed of components 173 B.2 Production system 175 B.3 Safety system 175 C Approach for selecting risk analysis C.1 Expected consequences C.2 Uncertainty factors C.3 Frame conditions C.4 Selection of a specific method methods 177 177 179 179 180 D Terminology 183 D.1 Risk management: relationships between key terms 186 Bibliography 187 Index 193 Preface This book is about risk analysis – basic ideas, principles and methods Both theory and practice are covered A number of books exist presenting the many risk analysis methods and tools, such as fault tree analysis, event tree analysis and Bayesian networks In this book we go one step back and discuss the role of the analyses in risk management How such analyses should be planned, executed and used, such that they meet the professional standards for risk analyses and at the same time are useful in a practical decision-making context In the book we review the common risk analysis methods, but the emphasis is placed on the context and applications By using examples from different areas, we highlight the various elements that are part of the planning, execution and use of the risk analysis method What are the main challenges we face? What type of methods should we choose? How can we avoid scientific mistakes? The examples used are taken from, among others, the transport sector, the petroleum industry and ICT (Information and Communication Technology) For each example we define a decision-making problem, and show how the analyses can be used to provide adequate decision support The book covers both safety (accidental events) and security (intentional acts) The book is based on the recommended approach to risk analysis described and discussed in Aven (2003, 2007a, 2008) The basic idea is that risk analysis should produce a broad risk picture, highlighting uncertainties beyond expected values and probabilities The aim of the risk analysis is to predict unknown physical quantities, such as the explosion pressure, the number of fatalities, costs and so on, and assess uncertainties A probability is not a perfect tool for expressing the uncertainties We have to acknowledge that the assigned probabilities are subjective probabilities conditional on a specific background knowledge The assigned probabilities could produce poor predictions The main component of risk is uncertainty, not probability Surprises relative to the assigned probabilities may occur and by just addressing probabilities such surprises may be overlooked It has been a goal to provide a simplified presentation of the material, without diminishing the requirement for precision and accuracy In the book, technicalities are reduced to a minimum, instead ideas and principles are highlighted Reading the book requires no special background, but for certain parts it would be beneficial to have a knowledge of basic probability theory and statistics It has, however, been a goal to reduce the dependency on extensive prior knowledge of probability theory and statistics The key statistical concepts are introduced and discussed thoroughly in the book Appendix A summarises some basic probability theory and x PREFACE statistical analysis This makes the book more self-contained, and it gives the book the required sharpness with respect to relevant concepts and tools We have also included a brief appendix covering basic reliability analysis, so that the reader can obtain the necessary background for calculating the reliability of a safety system This book is primarily about planning, execution and use of risk analyses, and it provides clear recommendations and guidance in this context However, it is not a recipe-book, telling you which risk analysis methods should be used in different situations What is covered is the general thinking process related to the planning, execution and use of risk analyses Examples are provided to illustrate this process The book is based on and relates to the research literature in the field of risk, risk analysis and risk management Some of the premises for the approach taken in the book as well as some areas of scientific dispute are looked into in a special “Discussion” chapter (Chapter 13) The issues addressed include the risk concept, the use of risk acceptance criteria and the definition of safety critical systems The target audience for the book is primarily professionals within the risk analysis and risk management fields, but others, in particular managers and decisionmakers, can also benefit from the book All those working with risk-related problems need to understand the fundamental principles of risk analysis This book is based on a Norwegian book on risk analysis (Aven et al 2008), with co-authors Willy Røed and Hermann S Wiencke The present version is, however, more advanced and includes topics that are not included in Aven et al (2008) The terminology used in the book is summarised in Appendix D It is to a large extent in line with the ISO standard on risk management terminology, ISO (2002) Our approach means a humble attitude to risk and the possession of the truth, and hopefully it will be more attractive also to social scientists and others, who have strongly criticised the prevalent thinking of risk analysis and evaluation in the engineering environment Our way of thinking, to a large extent, integrates technical and economic risk analyses and the social scientist perspectives on risk As a main component of risk is uncertainty about the world, risk perception has a role to play to guide decision-makers Professional risk analysts not have the exclusive right to describe risk Acknowledgements A number of individuals have provided helpful comments and suggestions to this book In particular, I would like to acknowledge my co-authors of Aven et al (2008), Willy Røed and Hermann S Wiencke Chapters and 11 are mainly due to Willy and Hermann; thanks to both I am also grateful to Eirik B Abrahamsen and Roger Flage for the great deal of time and effort they spent reading and preparing comments For financial support, thanks to the University of Stavanger, and the Research Council of Norway I also acknowledge the editing and production staff at John Wiley & Sons for their careful work Stavanger Terje Aven .. .Risk Analysis Risk Analysis: Assessing Uncertainties beyond Expected Values and Probabilities  2008 John Wiley & Sons, Ltd ISBN: 978-0-470-51736-9 T Aven Risk Analysis Assessing Uncertainties. .. Uncertainties beyond Expected Values and Probabilities  2008 John Wiley & Sons, Ltd ISBN: 978-0-470-51736-9 T Aven What is a risk analysis? The objective of a risk analysis is to describe risk, i.e... the calculated probabilities and expected values 13.3 Risk analysis has both strengths and weaknesses 13.3.1 Precision of a risk analysis: uncertainty and sensitivity analysis