Risk Analysis

Responding to the Unexpected

Harold Denton, Marija Ilic, Peter Juro, Frederick Krimgold, Art Lerner-Lam, Jeryl

Mumpower Dick Larson, coordinator

NSF

February 28, 2002

R = P C• R = Risk

• P = Probability of the crisis event

• C = Cost related to event

• Design and build systems in anticipation of largest risks and to mitigate them (deterrence, prevention, mitigation)

• Ultimate outcome of our work is a set of decisions d that relate to this problem

• Then R(d) = P(d) C(d)

Substantial Research Needed

• Not consulting

• Not operations

• Identify a small set of big research topics

• Standard risk analysis is a large industry, hundreds of millions of dollars annually

• NSF should focus on new potential high impact methods

P estimate C and its mitigation

Natural disasters

Terrorists

No Yes

YesYes

NSF's Interests

Include causal mechanismsthat give rise to P

C = Cost(BLUE - RESEARCH TOPIC)

• It's a vector

• Who bears it? How do you calculate it, especially long term societal effects?

• How do you minimize it dynamically in a state dependent manner as the response unfolds.

P = Probability

• Well-known how to estimate this for recurring natural disasters.

• Much less known for emerging terrorist threats --- need for Bayesian research

• Scenario analysis• Role playing• Demystify perpetrators, so you know their

constraints and dynamics

Recognize need for distributional vector time-dependent definition

of risks.R = P C

Expected value has its limitations

Risk Analysis Research

• Need a taxonomy of Risk Analysis• Anticipatory mitigation may use game theory and

randomized or mixed strategies. 9/11 was possible by a intervention in a deterministic system.

• Bayesian time-dependent risk assessment methods needed.

• Role playing for identification of huge risks when no time series is available. Vulnerabilty assessment

Risk Analysis Research - con't.

• Relationships between regulatory structure and risks, both P and C, and – their distribution across segments of the population– scientific basis for standards

• Dis-aggregate 'terrorism.' Create a detailed causal goals-oriented taxonomy.

• Data analysis should focus on rigorous decision theoretic approaches

Risk Analysis Research - con't.

• Methodology needed: cascading causal mechanisms leading to escalating disasters, as a means to identify vulnerabilities and to manage responses– Agriculture– Business symbol (McDonalds)– Bioterror

• Research on non-events (null states)

Prevention and Deterrence

• Early warning systems, both technological and human– Inter-relationships between analytical models and

data mining

• Game theory (randomized) approaches,for mitigation and response

• High school kids national contests for vulnerability identification (real or on the computer?)

Response

• Consider all the social-economic-political aspects of response strategies

• Decentralized decision making -- its stability and its effective implementation

• Stochastic dynamic decision making in a noisy pressured environment

Time Sequence of Events

Event commences

Event first detected

Event verified

First (local) response

Regional response

Time t

t0 t1 t2 t3 t4

EstimatedRisks of

EventContinually

Updated