Naec 29 9-2014 helm

Department of the Prime Minister & Cabinet, New Zealand 1

OECD Risk and Resilience Seminar

Paris, 29 September 2014

Risk and Resilience:

A Systems Approach to National Security

Patrick Helm Department of the Prime Minister & Cabinet

Department of the Prime Minister & Cabinet, New Zealand

Outline

1. Issues affecting security

2. New Zealand experience

3. Implications for management


Purpose: Safety and Stability

“Living with Risks”

(not eliminating them)

(nor even ‘managing’ them)

(but, living with unknowns and uncertainties)


Main Theme

Greater allowance for uncertainty


and for . . .

ambiguity

unknowns

complexity

misunderstandings

wrong assumptions

ignorance, arrogance, naivety, etc


Cost- Benefit Relationship

6

Cost $

Be

ne

fit

Proactive


Log scale

System Complexity

Be

ne

fit fo

r S

ecu

rity

L

og s

ca

le

low

hig

h

low (single system)

high (multiple systems)

Trade-offs: Risk Management, Resilience, and Adaptive Management

Benefits of

managing risks

through mitigation

decline with

complexity

Benefits of

resilience in

community increase

relatively with

complexity

Adaptive management can

further multiply the

benefits of resilience


Recent Global Events . . .

Typhoons: Bopha, Southern Philippines; Haiyan, Philippines/Vietnam (>5000 dead)

Health: Cholera, Democratic Republic of the Congo; H7N9 virus in China

Displacement: Syria, > 4 million displaced

Earthquakes: Balochistan, Pakistan; Bohol, Philippines; Lushan, China

Buildings: fire in Brazil nightclub; clothing factory collapse, Bangladesh (1129 dead)

Shipwrecks: 24 major maritime incidents; ferry sinkings; migrant vessels

Aircraft Accidents: >20 crashes

Train derailments: high speed train crash in Spain

Terrorism: >200 incidents; >6000 deaths

Floods: many

Infrastructure failures:

Industrial accidents:

Chemical spills: etc


Characteristics of Recent Events

1. Significant crises

2. Unusual sources

3. Surprises

4. Repeats

5. Inadequate mitigation

6. Disproportionate impacts

7. Urgency

8. Rationalization


Lessons from Recent Crises in NZ

• Pike River Mine explosion: 19 November 2010

• Container ship Rena grounding : 5 October 2011

• Christchurch Earthquakes: Mag 7.1 on 4 Sept 2010

Mag 6.3 on 22 Feb 2011

. . . and > 14,000 since


Lessons from Recent Crises in NZ

• Pike River Mine explosion: 19 November 2010

• Container ship Rena grounding : 5 October 2011

• Christchurch Earthquakes: Mag 7.1 on 4 Sept 2010

Mag 6.3 on 22 Feb 2011

. . and > 14,000 since

Each event was subsequently reviewed

(formal processes; many lessons; revised procedures)


Pike River Coal Mine Explosion

29 men died


.

•


Container Ship

“Rena” grounded on Reef


.

•


Earthquakes in NZ


Wellington Fault ------


Christchurch, New Zealand . . . .

• series of earthquakes started in Canterbury

on 4 September 2010

• strong vertical upwards shock under city of Christchurch on 22 February 2011

• over 14,000 earthquakes in the past four years


Christchurch at the moment of 6.3 earthquake, 12.51 pm 22 February 2011


185 deaths

$50 billion (>20% GDP)

Massive societal disruption


Napier Earthquake 1931

Magnitude 7.8

256 deaths

Led to new building standards, which became a major factor in limiting the deaths injuries and destruction in Christchurch.

Led to the establishment of a national earthquake fund


Lessons from Christchurch Earthquake


Lessons: People

Population losses can create a Vicious Cycle (so, minimize evacuations)

Over-reaction to the primary event can cause a “second disaster”

Business Continuity Planning must take account of human behaviour

Trust and empowerment are essential, and matter more than ‘heroes’

Support the private sector in managing supply chain issues

Resilient organisations survived best, and then contributed to recovery

Disasters create opportunities to transform businesses; winners and losers


Lessons: Communities

The success of the emergency response was due to the resilience of

communities in Christchurch

Most rescues were made by people close by. (Help for those in need was

mostly provided by neighbours, existing community groups such as

churches, or by voluntary organisations. Emergency management needs to

be community-centred.)

Individuals, organisations and communities have to own and be responsible

for their own preparedness.

Social capital is more important for response and recovery than financial capital, and depends mainly on the ethos and culture of organisations


Lessons: Infrastructure

Resilient infrastructure is vital - particularly underground services

Prior planning is crucial to building resilience in life-lines

The costs of seismic risk reduction and readiness in Christchurch have been repaid many times over

The three main elements that contributed most to resilience: – Asset awareness and risk reduction

– Readiness

– Perseverance

New Zealand’s building codes and standards came out well.


Lessons: Risk Transfer

Risk transfer can help, but insurance can only work as part of a wider set of measures to manage risk and strengthen resilience

The Christchurch experience has brought about a shift in thinking in the insurance industry:

– from funding people to recover from loss, to helping them manage their risks

There needs to be a more sophisticated understanding of insurance's role in overall risk management in society

For the future the role of insurance in New Zealand’s overall risk management, and the balance between the responsibilities of central government, local authorities, and home-owners, will depend critically on reducing uncertainties in the twin issues of Pricing and Underwriting


Lessons: Strategic

Limits to knowledge about hazards or threats can create huge surprises The cumulative problem can be much greater than, and manifestly differently from, the sum of the individual impacts

Systemic interactions can cause totally unexpected effects

There can be diminishing returns from planning, past a certain point

Innovation, flexibility and adaptive management were critical, and so there must be a willingness within organisations to reset policies quickly

Disaster planning needs fundamental new thinking to address inherent limitations in both knowledge and methodologies


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Implications

Recent experiences have reaffirmed for NZ the importance of managing security issues in a structured way:

• taking a systems approach to managing risks, reducing vulnerabilities and building resilience within the same framework

• having comprehensive analysis of hazards/threats and vectors of harm

• using formal integrated risk management strategies, eg, 4Rs (or PPRR)

• acknowledging vast uncertainties in dynamic and stochastic behaviours

• building resilience to deal with complex or unanticipated situations

• having prior arrangements for adaptive management in crises.


Systems Planning

As a general strategy for dealing with new, complex, or unanticipated issues:

1. Manage the system as a whole

2. Mitigate discrete risks

3. Build system resilience

4. Adaptive management in response


Resilience Building

Adaptive Management

Risk Management

Manage as a System


Manage the System as a Whole

• Take a systems perspective of all parts, including agents of hazard/threat and vectors, through to the community (social/environmental/economic consequences)

• Aim to understand interactions between the main elements, causal chains, etc

• Analyse linear and non-linear interactions – including over long periods

• Frame the issues in social terms, not as events or agents of harm

• Orient to outcomes: ie, security, stability, and safety for the society or nation


Mitigate Discrete Risks

• Manage known risks, individually and collectively, where practicable

• Pay attention to systemic risks, and to low probability – high consequence risks

• Analyse initiating agents (threats & hazards) and vectors of harm, pathways, etc

• Undertake sensitivity analysis, and aim for quantitative measures where possible

• Mitigate (ie, treat or control) risks using cost-benefit analysis

• Take account of uncertainty, acknowledging intrinsic limits of risk management


Build System Resilience

• Assess known vulnerabilities, then ameliorate

• Take account of exposure, susceptibility, and sensitivity, etc

• Enhance resilience throughout total system

• Consider social context, organisations, infrastructure, environment, & economy

• Plan for unknown risks, generic shocks, and long-term adverse trends

• Continually build social capital, and raise awareness


Adaptive Management in

Response

• Pre-plan decision-making arrangements for crises or complex situations

• Build capacity for well-coordinated, flexible, collective responses

• Work to principles, including subsidiarity and clear devolution of responsibilities

• Encourage evidence-based decision-making and creative solutions

• Be aware of risks of using SOPs and normal command & control management

• Facilitate spontaneous self-organising groups of volunteers

• Review & improve, incorporate lessons, and develop security/safety culture


Summary

• Distinguish exceptional from routine

• Allow more for uncertainty and complexity

• Pre-agreed governance arrangements

• Principles & guidelines (not rules or SOPs)

• Balance between proactive and reactive investment

• Risk management and resilience

Naec 29 9-2014 helm

Economy & Finance

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