The limits to risk aversion: Part 1. The point of indiscriminate decision

The paper uses utility theory to investigate how much should be spent to avert all costs from an industrial accident apart from direct human harm. These “environmental costs” will include those of evacuation, clean-up and business disruption. Assuming the organisation responsible will need to pay such costs, the difference between its expected utility with and without an environmental protection system constitutes a rational decision variable for whether or not the scheme should be installed. The value of utility is dependent on the coefficient of relative risk aversion, “risk-aversion” for short. A model of an organisation's decision-making process has been developed using the ABCD model, linking the organisation's assets, A, the cost of the protection scheme, B, the cost of consequences, C, and the expected utility difference with and without the scheme, D. Increasing the organisation's risk-aversion parameter will tend to make it less reluctant to invest in a protection system, but can bring about such investment only when the scheme is relatively close to financial break-even. For such borderline schemes, the amount the organisation is prepared to spend on the protection system will rise as the risk-aversion increases. The ratio of this sum to the break-even cost is named the “Limiting Risk Multiplier”, the maximum value of which is governed by the maximum feasible value of risk-aversion. However, the mathematical model shows that increasing the risk-aversion will reduce the clarity of decision making generally. Although the reluctance to invest in a protection scheme may change sign and turn into a positive desire to invest as the risk-aversion increases, the absolute value of this parameter is a continuously decreasing function of risk-aversion, tending asymptotically to zero. As a result, discrimination will gradually diminish, being lost altogether at the “point of indiscriminate decision”. Here the decision maker will be able to distinguish neither advantage in installing the scheme nor disadvantage in installing its inverse. There is a close correspondence between this mathematically predicted state and that of panic, where an individual has become so fearful that his actions become random. The point of indiscriminate decision provides a natural upper bound for the value of risk-aversion. This bounds the Limiting Risk Multiplier in turn, and so sets an objective upper limit on the amount that it is rational to spend on an environmental protection system.     

Computing the limits of risk aversion

Utility theory can be used to model the decision process involved in evaluating the cost-effectiveness of systems that protect against a risk to assets. A key variable in the model is the coefficient of relative risk aversion (or simply “risk-aversion”) which reflects the decision maker's reluctance to invest in such safety systems. This reluctance to invest is the scaled difference in expected utility before and after installing the safety system and has a minimum at some given value of risk-aversion known as the “permission point”, and it has been argued that decisions to sanction safety systems would be made at this point. As the cost of implementing a safety system increases, this difference in utility will diminish. At some point, the “point of indiscriminate decision”, the decision maker will not be able to discern any benefit from installing the safety system. This point is used to calculate the maximum reasonable cost of a proposed safety system. The value of the utility difference at which the decision maker is unable to discern any difference is called the “discrimination limit”.By considering the full range of accident probabilities, costs of the safety system and potential loss of assets, an average risk-aversion can be calculated from the model. This paper presents the numerical and computational techniques employed in performing these calculations. Two independent approaches to the calculations have been taken, the first of which is the derivative-based secant method, an extension of the referred derivative method employed in previous papers. The second is the Golden Bisection Method, based on a Golden Section Search algorithm, which was found to be more robust but less efficient than the secant method. The average risk-aversion is a function of several key parameters: the organisation's assets, the probability and maximum cost of an incident, and the discrimination limit. An analysis of the sensitivity of the results to changes in these parameters is presented. An average risk-aversion of 0.8–1.0 is found for a wide range of parameters appropriate to individuals or small companies, while an average risk-aversion of 0.1 is found for large corporations. This reproduces the view that large corporations will be risk neutral until faced with risks that pose a threat to their viability.     

Extending the J-value framework for safety analysis to include the environmental costs of a large accident

A severe accident on an industrial plant has the potential to cause, in addition to human harm, general damage and hence expense, associated with ground contamination, evacuation of people and business disruption, for example. The total cost of damages, given the name “environmental costs” in this paper, may be comparable with or larger than the cost of direct health consequences, as assessed objectively by the J-value approach. While the low probability of the accident may mean that the expectation of monetary loss is small, the paper develops a utility-based approach to determine how much should be spent on protection systems to protect against both environmental costs and human harm. The behaviour of the fair decision maker in an organisation facing possible environmental costs is represented by an Atkinson Utility function, which is dependent on the organisation's assets and on the elasticity of marginal utility or, equivalently, the coefficient of relative risk aversion, “risk-aversion” for short. A Second Judgment Value, J₂, may be derived from the spend on the protection system after subtracting the amount sanctioned to prevent direct human harm. This net, environmental expenditure is divided by the most that it is reasonable to spend to avert environmental costs at the highest, rational risk-aversion. The denominator in this ratio is found by first calculating the maximum, sensible spend at a risk-aversion of zero, and then multiplying this figure by a Risk Multiplier to give the maximum, fair amount to avert environmental costs. The Risk Multiplier incorporates a risk-aversion that is as large as it can be without rendering the organisation's safety decisions indiscriminate and hence random. An overall, Total Judgment Value, the J_T-value, may also be calculated, which takes into account the reduction in both human harm and environmental cost brought about by the protection system. The new J_T-value will show similar behaviour to the original J-value, in that J_T-values up to unity will indicate reasonable value for money, while J_T-values greater than unity will indicate a prima facie overspend on protection that will need to be justified by further argument. While the analysis is phrased in terms of environmental costs, the treatment is sufficiently general for all costs, including onsite damages, loss of capability etc. to be included. The new, J_T-value method provides for a full and objective evaluation of the worth of any industrial protection system. A worked example is given.     

Pitfalls in the application of utility functions to the valuation of human life

Safety strategies in the process and other industries depend ultimately on how much the owners and operators decide should be spent on protection systems to protect workers and the public from potential plant hazards. An important input to decisions of this sort is the value of life, which needs to be assessed in a valid manner so that safety decisions can be made properly. A key reference point for decisions on safety investment decisions in the UK is a 1999 study on the “value of a prevented fatality” (VPF), which employs a two-injury chained model that has been shown previously by the present authors to possess internal inconsistencies. The 1999 study made extensive use of utility functions to interpret survey data, and it is this feature that is explored in this paper. It will be explained here how different forms of utility function of the Exponential family can produce the same figure for an intermediate parameter in the calculation of the VPF from the two-injury chained model. Exponential utility functions are, however, unlikely to provide a realistic representation if their calculated risk-aversions need to be negative or zero in order to match survey data, which would imply an incautious attitude amongst those taking decisions on safety. The use of an incompletely specified wealth threshold in the utility modelling is explored in the light of a proposal by the authors of the 1999 study that a second utility function can be used to determine the individual's utility when his wealth lies below the threshold, which constitutes the lower limit of validity of the first utility function. The proposition is shown to be untenable. The results presented in this paper raise further concerns about the lack of validity of the 1999 study on which the UK VPF is based and hence on the safety decisions that have been made in consequence.     

Testing the validity of the “value of a prevented fatality” (VPF) used to assess UK safety measures

The “value of a prevented fatality” (VPF), the maximum amount that it is notionally reasonable to pay for a safety measure that will reduce by one the expected number of preventable premature deaths in a large population, is published by the UK Department for Transport (DfT). The figure, updated for changes in GDP per head, is used by the DfT, the Health and Safety Executive and other UK regulatory bodies as well as very widely in the process, nuclear and other industries as the standard by which to judge how much to spend to reduce harm to humans. The paper tests the validity of the 1999 study on which the VPF is based and finds that that study fails numerous tests of its validity. It is concluded that there is no evidential base for the VPF that has been used for many years in the UK and is still in standard use today. Given the difficulties evident in the interpretation of survey results, an urgent re-appraisal is needed of alternative statistical methodologies that can allow robust regulatory and industry safety decision making and, vitally, give adequate protection to the UK public and to those working in the UK's transport, process, nuclear and other industries.     

Classifying the cases

This paper provides a classification and discussion of the empirical cases presented in this special issue. The cases are classified according to the dimensions “proximity to hazard” and “level of authority”. The majority of cases concern decision-making at the blunt end, i.e. removed in space and causal distance from the sources of hazard. The papers show that many decision processes at the blunt end are characterized by various forms of bounded rationality, but there is one notable exception. Normative evaluations of the goodness of the observed decisions processes are absent in several papers. This suggests that there may be a need to clarify the normative basis for research-based advice on decision-making.     

综合安全评价(FSA)方法

为提高国际海运安全管理的决策水平,国际海事组织(IMO)接受并倡导由英国海运界提出的综合安全评价(FSA)方法,笔者对FSA方法作了本质性分析和应用性研究。阐述了FSA的由来,5个组成步骤及相互关系和流程,揭示了FSA与风险管理和安全系统工程的渊源;介绍了危险识别的7种工具;对步骤二“风险评估”重点引入了半定量分析方法和定量分析方法,并用集合论观点讨论了事故频率和后果严重度的计算方法;介绍了风险控制方案的“成本与效益评估”的数学模型;归纳了FSA方法的优缺点。指出FSA是一种集风险评价和成本/效益评估于一体,兼顾技术性与经济性,可广泛兼容具体评价方法和普遍适用各类风险评价的框架性方法,但具体应用需要有效整合适用的定性和定量方法。     

J-value analysis of different regulatory limits for workers and the public

The J-value technique allows an objective determination to be made of the resources that should be applied cost effectively to improve heath and safety. This is essential if capabilities are to be employed optimally and risks reduced in a way that reflects their severity. Although other considerations such as good practice and socio-political influences may affect a final decision on the resources to be sanctioned, the incorporation of these additional factors should be made transparent if the decision is no longer to be based on cost effectiveness. The J-value provides an objective criterion by which to judge when “reasonable practicability” has been achieved in committing resources for safety improvement, which is the legal requirement under health and safety law in the UK.Moreover, the J-value methodology also allows other related issues to be addressed objectively. Regulatory bodies apply different limits for workers and the general public, with higher risks being permitted for workers. Although a factor of about 10 has been used in several contexts, no objective rationale has been developed for this particular figure until now. However, it is shown that application of the J-value analysis can provide a justification for a ratio of workers’ risk to public risk of approximately this size if certain reasonable assumptions are made. Thus the paper provides the first quantitative explanation for the different levels of protection demanded by regulators nationally and internationally for workers and public.     

Environmental conditions for safety work – Theoretical foundations

This paper reviews literature on environmental conditions for safety work. By “environmental conditions for safety work”, we refer to conditions that influence the opportunities an organisation, organisational unit, group, or individual has to control the risk of major accidents and working environment risk. The purpose of the review was to document how international safety science literature uses “environmental conditions” or synonymous concepts, to help build a common conceptualisation of environmental conditions for safety work, and to link environmental conditions to safety work and risks.We did not find a uniform and systematic approach to environmental conditions for safety work in the literature. We therefore turned to a broader range of organisational research literature, where we found a diversity of complementary answers to our research question aimed at investigating the ways in which environmental conditions may constrain or facilitate safety work and thus influence risks. Due to the diversity of these theoretical resources, we have refrained from trying to reduce them to a single model.Our conceptualisation of environmental conditions includes definitions, the “sender–receiver” metaphor, and a selection of theoretical resources. The “sender–receiver” metaphor may be used as a starting point for exploring the ways in which some actors influence the environmental conditions of other actors, and how actors may resist, co-create or re-create the environmental conditions for their own safety work.     

Design of electrical equipment for areas containing combustible dust: Why dust standards cannot be extensively harmonised with gas standards

Over recent years, the idea has emerged within the IEC (International Electrotechnical Commission), as well as within the standardisation system of the European Union, that it may be beneficial to harmonise design concepts for electrical equipment for areas containing combustible dusts, with those for areas containing combustible gases and vapours. The harmonisation idea has been encouraged by the European Union “ATEX 100a” Directive, which suffers from insufficient differentiation between combustible dusts, combustible mists, and combustible gases/vapours. This deficiency probably originates from focusing on the extensive similarity of combustible dust clouds, mist clouds and gas/vapour clouds when it comes to ignition and burning properties. However, these similarities are of little significance unless there is an explosible cloud in the first place. And this is where dusts, mists and gases/vapours differ substantially, as discussed in detail in the present paper. It is suggested, therefore, that the idea of extensive harmonisation of design concepts for dusts with those established for gases/vapours be put aside (e.g. IEC Committee draft standards for “Ex i” and “Ex p” for dusts, as well as a proposal for a new “Ex m” dust standard). Instead, the safe design of electrical equipment for areas containing combustible dusts should mainly be based on two simple concepts, use of enclosures that keep the dust out to the required extent, and measures that keep the temperature of any surface in contact with dust clouds or layers sufficiently low to effectively prevent ignition. This is in full accordance with the current philosophy in European standardisation as expressed clearly in EN 50281-1-1 and -2: “The ignition protection is based on the limitation of the maximum surface temperature of the enclosure, and on the restriction of dust ingress into the enclosure by the use of “dust tight” or “dust protected” enclosures”. The same philosophy has been prevailing in USA for quite some time. It is indeed to be hoped that Europe will also maintain this sensible approach, and revise the “ATEX 100a” directive accordingly.     

Risk information in decision-making: definitions,requirements and various functions

Inappropriate decisions are often regarded as causes of major accidents in the process industries. To improve the quality of decisions, it is important to make the right information available at the right time. The objective of this work is to investigate what types of risk information is needed for risk-related decisions in various decision-making processes. A framework is proposed to facilitate future research for easing information deficiency. In this paper, risk information is examined through common decision-making processes, and is identified serving to 1) detect and characterize risk-related decision problems, 2) indicate the severity and urgency of decisions, 3) state requirements and constraints of workable solutions, 4) represent attributes for comparing and evaluating solutions, and 5) act as rules to maintain safety or control risk. These usages of risk information in different decision problems imply the large diversity in information needs for decision-making. An adaptive information support is thus suggested to provide targeted risk information to specific decision-makers for effective and efficient decision-making in accident prevention in the process industries.     

Decision on oil and gas exploration in an Arctic area: Case study from the Norwegian Barents Sea

This paper addresses how risks to the environment in the Arctic are handled in decisions regarding the exploration for petroleum resources. An exploration well in the Norwegian Barents Sea is used as a case to demonstrate how environmental risks are assessed together with technical and economic considerations in the Oil Company’s decisions to enter into a new area and drill a well. The paper outlines environmental challenges in petroleum activities in the Arctic, the different roles of the Authorities and Oil Companies in decisions about petroleum activities, and the Oil Company’s tools and decision criteria used in addressing risks in the decision making.It is concluded that environmental and associated reputation risks are not a major issue at the strategic level in the Oil Company, since the most controversial areas in the Norwegian Arctic offshore have already been kept out of the exploration acreage by the authorities. Risks and uncertainties penetrate every aspect of the exploration of petroleum resources, and environmental risks are not unique in this sense. The Oil Company has established technical and economic tools and decision criteria to address them, and the mitigation of environmental risks becomes an element in the technical and economic analyses that affect detailed design and operational procedures. Mitigation measures such as the minimization of discharges to the sea (the so-called “zero-discharge” policy) and oil spill contingency planning are dimensioned to meet authority requirements and expectations rather than on strict risk acceptance considerations. A significant concern is to avoid delays in the permit granting process.     

Changing careers: the effects of social context

This paper investigates the social context in which career decisions are made. Results show that beyond individual‐level factors such as demographics and work history, individuals' decisions to change careers are socially embedded. Findings suggest that the greater the diversity of an individual's network of advisors, the greater the likelihood that an individual will change careers. In addition, this paper explores the mechanisms through which different subsets of advice relationships — instrumental versus psychosocial — affect the decision to change careers. Results show that the greater the diversity of an individual's set of instrumental relations, the greater the number of offers he or she receives during the job search process and, further, that the number of offers received is positively related to the likelihood of changing careers. The diversity of an individual's set of psychosocial relations was related to his or her confidence to overcome career obstacles. However, confidence was not, in turn, related to career change, counter to expectations. Copyright © 2001 John Wiley & Sons, Ltd.     

对烟花爆竹监管工作的几点思考

结合河南烟花爆竹企业的特点,贯彻落实国务院《烟花爆竹安全管理条例》,提出理顺体制,落实责任,规范准入标准和行政许可;明确省、市、县三级安监职责;新设立生产企业必须达到一定的规模标准;严格执行“三同时”制度,规范经营许可制度,外供烟花爆竹备案制度等。狠抓专项整治,深入开展安全检查,推行安全标准化活动,使企业达到“工厂设计标准化,生产工艺标准化,安全操作标准化,安全管理标准化”,增强企业防范事故能力。联合执法是安全执法的重要形式,由政府组织安监、公安、工商、环保、电力等部门联合行动,建立联席会议制度,定期互通情况,联合查处案件,对非法生产经营的窝点和地下小作坊等,采取严打、取缔行动,确保烟花爆竹安全生产。     

Self‐protective reactions to peer abusive supervision: The moderating role of prevention focus and the mediating role of performance instrumentality

Across 3 studies, we apply a self‐protection perspective of observed mistreatment to examine a moderated mediation model on “when” and “why” third parties are motivated by peer abusive supervision. We hypothesize that prevention‐focused third parties will increase their performance effort as a response to peer abusive supervision, and this effect is mediated by performance instrumentality. In a field study of working adults (Study 1) and an experimental study that manipulated peer abusive supervision (Study 2), we found that peer abusive supervision interacted with third parties' prevention focus to predict their performance effort such that peer abuse was positively related to third parties' performance effort only for those high on prevention focus. Results were replicated in a second field study of working adults (Study 3). Further, we found support for the mediating effect of performance instrumentality. The theoretical and practical implications of our results are discussed.     

Risk-based maintenance (RBM): a quantitative approach for maintenance/inspection scheduling and planning

The overall objective of the maintenance process is to increase the profitability of the operation and optimize the total life cycle cost without compromising safety or environmental issues. Risk assessment integrates reliability with safety and environmental issues and therefore can be used as a decision tool for preventive maintenance planning. Maintenance planning based on risk analysis minimizes the probability of system failure and its consequences (related to safety, economic, and environment). It helps management in making correct decisions concerning investment in maintenance or related field. This will, in turn, result in better asset and capital utilization.

This paper presents a new methodology for risk-based maintenance. The proposed methodology is comprehensive and quantitative. It comprises three main modules: risk estimation module, risk evaluation module, and maintenance planning module. Details of the three modules are given. A case study, which exemplifies the use of methodology to a heating, ventilation and air-conditioning (HVAC) system, is also discussed.     

Learning lessons from incidents: A paradigm shift is overdue

Drawing on historical data we show that the international community of process engineers has not been good at learning lessons from their past accidents. We call for a paradigm change in the way we approach this and the creation of a single new, multi-national, multilingual accident database that is free at the point of use and that includes immediate and underlying causes as well as “lessons learned”. It must be user-friendly and provide links to key source documents. The purpose of this paper is to challenge those in authority, and with the power to do so, to make this happen. We give some preliminary views on what may be required. In countries that so choose this could include an element of compulsion to consult the database in specific circumstances and a sign-off procedure to verify that this has been done.     

情景-应对模式下考虑软时间窗的高铁应急资源调度优化

为提升高速铁路应急处置水平,考虑突发事件发生后应急资源需求的不确定性,通过对事故情景集的分析和计算,采用"情景-应对"模式,获取事故点的资源需求量;通过引入"软时间窗"概念,建立以超时惩罚成本、资源运输成本和救援点固定出动成本3者之和最小化为优化目标的应急资源调度模型,利用遗传算法进行求解,并基于实际事故案例验证方法和...     

A contingency model of decision-making involving risk of accidental loss

Decision-making involving risk of accidental loss occurs in a variety of settings. The constraints of the decision settings have a strong impact on decision-making. Different decision settings may thus call for different approaches to decision support. The purpose of this paper is to propose a contingency model of decision-making involving risk of accidental loss. Based on two dimensions, (a) proximity to hazard and (b) level of authority, I identify five types of decision settings: (1) operations, (2) business management, (3) administrative and technical support functions, (4) political arenas, and (5) crisis handling. Each setting is characterised in terms of dominant constraints, dominant decision criteria, and representative decision modes.Decision-making is constrained and influenced by previous decisions, and decisions may interact in the way they influence the risk of accidental loss. The following set of concepts may help us identify ways in which safety may be affected by interactions between decisions: (1) distributed decision-making and local optimization, (2) meta-decisions, (3) absorption of uncertainty, and (4) normalization of deviance.Advice for improving decision-making can be derived from the proposed model by identifying possible problems related to each type of decision setting and each pattern of interaction between decisions. The possible problems may be used as a basis for identifying relevant functions of decision aids and to propose specific decision aids. A similar analysis may be performed with regard to the ways in which decisions may interact in their impact on safety.