Risk Management Methods 1431 Approaches to Risk Management

As noted in Chapter 1, environmental risk management refers to the broad process of balancing risks, costs, and social values. The risk assessment provides estimates of risk. Economic analysis provides costs of various alternative actions. Social values can be provided by risk communication and stakeholder involvement. Risk management balances these inputs and chooses a particular alternative for action. Although an agency or decision maker responsible for taking action might decide the matter and announce the decision without stating the rationale behind it, such a practice is seldom used for environmental decisions having significant public impact and is generally prohibited by law. Instead, a two-stage approach to decision making is generally used (Morgan and Henrion 1990). The first stage involves development and articulation of strategies or criteria for decision making. The second involves the use of a mechanistic (mathematical) process to select a preferred alternative based on the stated criteria and inputs from risk assessment and stakeholder involvement. This approach avoids the invidious practice (or at least its appearance) of making a decision and then assembling a rationale to support it.

There are many criteria for decision making. Some criteria are mandated by law while others are developed by decision makers, frequently with stakeholder involvement. Morgan and Henrion (1990) identify four broad classes of decision criteria:

1. Utility-based criteria are those that involve some measure of the value or utility of the outcome. Utility-based criteria are frequently used for decisions where the outcome is described by a single variable, such as cost or the ratio of benefit to cost. However, utility-based criteria find substantial use for decisions where the outcome is described by multiple attributes, which are factors (cost, human health risk, ecological risk, worker risk, aesthetics, etc.) important to the decision maker. A key element of multiattribute utility analysis is the expression of the decision maker's preferences by mapping values of each attribute to a cardinal numerical scale. Utility-based criteria are appealing because they can be expressed quantitatively. Examples of such criteria are: (1) minimize the cost; (2) maximize the benefit/cost ratio; and (3) maximize the multiattribute utility. This permits a succinct, unequivocal statement of the decision-making criterion and the use of powerful, well-established quantitative decision analysis tools. However, as explained in the next section, conversion of qualitative or quantitative attributes into utility requires value judgments expressed as preferences, about which there may be significant disagreement. This may be particularly evident for environmental decisions with significant stakeholder participation. Processes and decision methods for resolving these disagreements have been and continue to be the focus of considerable study.

2. Rights-based criteria stress natural rights over supposedly objective measures of collective utility, so are less concerned with the value of an outcome. Such criteria include zero risk or bounded risk, approval with compensation, and due process. Zero risk (or "zero discharge") means the complete elimination of any chance of harm from an activity, either by eliminating it or by preventing its introduction. Although this is sometimes possible with threshold contaminants, the complications introduced by nonthreshold contaminants (for which there is no level of exposure which carries no risk) and by the analysis of substitution risks (the risks imposed by the alternatives to the risk currently being addressed) make this criterion difficult to achieve in practice. This approach is often modified to the concept of bounded risk, in which a risk level is determined to be negligible and not actionable under certain regulatory standards. These negligible risk levels are sometimes termed "de minimis" levels, from the Latin phrase, "de minimis non curat lex" (the law does not concern itself with trifles). Zero risk and bounded risk are widely applied in U.S. legislation dealing with environmental hazards. For example, the Delaney clause of the Food Additives Amendment Act of 1958 [P.L. 85-929] required, in part: "No additive shall be deemed to be safe if it is found to induce cancer when ingested by man or laboratory animals." This zero risk requirement has since been modified [P.L. 104-170] so that de minimis levels based on human health risk are permitted. Approval with compensation is also a rights-based criterion, differing from zero risk in that it allocates the right of refusal to certain risks but allows negotiation and choice among a broader set of defined risks. Risks may only be imposed on a person or population on a voluntary basis, but such voluntary risk acceptance may be sought by offering compensation or mitigation of impacts.

3. Technology-based criteria are based on the idea of resolving the decision process by simply doing the best job currently possible and are used in several regulatory programs. Use of best available technology simplifies the decision process for managers of environmental risk. However, this approach may decrease incentives for innovation. As with other decision-making criteria, identifying the best available technology may be difficult and controversial, since generally the determination must consider the cost and availability of the technology as well as the efficiency with which it can reduce risks.

4. Hybrid criteria combine approaches for different magnitudes of risk. For example, rights-based criteria may be used to set an upper limit on risk, but utility-based criteria are used to optimize risks below the limit. For example, federal regulations limit the annual radiation dose to workers to 0.05 Sv at licensed facilities using radioactive material; however, the ALARA principle (i.e., that dose should be as low as reasonably achievable) is used to reduce doses below the annual limit in a cost-effective manner.

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