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Risk – can we predict the unpredictable? Should we?

RiskInfrastructure underpins national economies. Businesses, industries and communities all intrinsically rely on power, water or telecommunications networks as their lifeblood for operation. They all rely on road and rail networks to facilitate the movement of goods and people – movement in our modern day trading world is as good as money.

Most businesses and communities take these underlying systems for granted. They will always be there, won’t they? Is ‘always’ a dangerous assumption? Tasmania, an idyllic island which is home to over 500 000 people, might answer: Yes.

Over the last century, Tasmania has been largely reliant on its own hydroelectrical generation. When Basslink, an undersea cable connecting the Tasmanian grid to the Australian mainland, failed on 22 December 2015, it led to a power outage from which Tasmania still hasn’t recovered. At the same time, Tasmania was suffering from a major drought, which meant that its capacity for generating hydroelectrical power was greatly diminished.

Tasmania’s engineering systems, on which the entire State relied, would have been designed for a certain level of resilience. In engineering speak: a 1:100 year event. But what happens when these rare events happen cumulatively? One of these ‘one in a hundred year’ events puts a massive strain on an area’s infrastructure and systems, but two simultaneous and interconnected events is disastrous. In their case, their systems came to a grinding halt.

Our obligation is not only to develop design inputs that create better contingency, but also have the potential to stay one step ahead of an uncertain future.

Rethinking “this will never happen to us”
A more pertinent question to pose might be: are these major events happening more frequently as a result of human influence? And if they are, do businesses need to rethink their “this will never happen to us” plans?

Tasmania is not alone…The January 2011 Brisbane floods were some of the most devastating in Australian history: beginning with bad state-wide flooding in December, the situation escalated dramatically when a monsoon arrived on Christmas Eve from the Coral Sea, culminating in the Brisbane River’s banks bursting on 11 January. This rapid sequence of disastrous events caused 35 fatalities, affected over 200 000 people throughout Queensland and caused damage of around AUD2.4 billion.

As both natural hazards and human-induced disasters occur more and more frequently, it’s imperative that we get better at harnessing emerging digital technologies to foresee and fend them off. Is a risk management strategy possible for the unpredictable nature of disasters – and if it is, how might we integrate it into both our operations and designs?

Making peace with uncertainty
Modern day risk analyst, statistician and essayist Nassim Nicholas Taleb, believes that in today’s evolving world, uncertainty is on the rise with increasing severity . Because rare events are impossible to predict, he argues that we need to make peace with this uncertainty and to reduce our negative exposure.

What would this acceptance mean to business owners, governments, insurance agencies and the general public? Should we recalibrate our design criteria on the basis that the world is shifting and ‘one in a hundred year events’ are now happening once a decade?

Architecting risk buoyancy
We must strive for a world in which unknowns can be identified, assessed, evaluated and this information then utilised to improve the end product. Managing risk is about leveraging predictive capabilities that extend to the unknown , so that uncertainty is replaced with expectancy. This, in essence, is called ‘risk buoyancy’.

Designing for the unexpected
Imagine a world where buildings can regularly withstand the blows of a big-scale disaster, because the design accounted for a typical one in a hundred year event to wreak havoc every decade. Although not, as of yet, commonplace, more and more examples are in evidence:

San Francisco’s multibillion dollar Seismic Retrofit Program allows the region’s lifeline infrastructure and housing stock to rebound more quickly from future seismic activity. Five years after the earthquake, Christchurch has concentrated on rebuilding a resilient city focused on low damage design which can, quite literally, ‘bounce back’ faster after any major incident. Japan has similarly prepared for future earthquakes; New Orleans’ USD14.5 billion network of levees, floodwalls and pumps guarantee to ward off destruction from another event similar to Hurricane Katrina; Copenhagen is building parks that turn into ponds during extreme rainfall events.

In our journey of predicting the unpredictable, we must seek out these examples of robust or anti-fragile architecting as examples of positive risk mitigation. Future risk-based thinking needs to consider the multiscalar and multidimensional attributes that, in combination, create uncertainty.

In an ever-changing world, radically underscored by uncertainty, is it possible to eliminate all unpredictability by determining our unknowns? One thing we can be sure of is that we will never know the answer. But we do know that we want to create an environment where unforeseen factors can be integrated into the creative process to provide end users with an asset that is risk buoyant.

Perhaps we should change our traditional design approach to consider the 1:100 year event to be a dice with a hundred sides that is thrown every year. Every time, there is a 1% chance of the event occurring. Every time, it reminds us there is a risk of it happening more than once in a hundred years. That way, not even a ‘one in a hundred year event’ will catch us off guard. We would already have anticipated it and, more importantly, put in place mechanisms of thriving beyond its potential devastation.

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3 replies »

  1. It’s important to note, there is a move away from describing events as 1/100 years or a 100 year rate of return, because what we really mean is that in any 1 year it has a 1% chance of happening.

    We regularly mitigate against much lower risks than this. Most of us wear seatbelts when driving, yet the risk of a serious accident these days is probably less than 1%. We travel in aircraft that are strictly maintained and designed to mitigate against a risk of failure that is way lower than 1%.

    But there is another side to risk that is not talked about and that is consequence. A 1% chance of occurrence might be acceptable if all that happens is some people get inconvenienced a bit. When lives are at stake we set the bar much higher.

    • Very true, Ross. However, I would like to say that in the industrial sector, particularly in mining and oil & gas industries, the severity of th consequences is given weightage in deciding the risk mitigation strategy.

  2. Hi Ross, absolutely agreed.

    The notable trait to monitor is Very Low Likelihood with Very High Consequence. These events have the ability to cause major impacts to business operability and efficiency (not to mention livelihoods). The thought that we are considering with this piece is related to the recurrence of high impact events more often than what we are geared to manage (by design).

    By way of example, the Tōhoku Earthquake which occurred in Japan on Friday, 11 March 2011, was a magnitude 9.0 (Mw) undersea megathrust earthquake yielding a destructive tsunami which decimated the area resulting in around 4.4 million households without electricity and 1.5 million without water not to mention the impact to infrastructure (roads, rail, dams etc.). We consider these events as “Known – Unknowns” since we know it can occur, but the scale remains ‘uncertain’. Taking that a step further, what is the likelihood (probability) it can occur again? Christchurch is a good example of multiple earthquake impacts over time, so its all about risk buoyancy (our ability to be agile and resilient).

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