A recently published JRC study examines whether technological accidents caused by natural hazards (Natech accidents) are real “Blacks Swans” (unpredictable and hence unpreventable events), identifies their possible causes and discusses effective strategies to manage extreme risks.
The study concludes that the Black Swan metaphor is overused for technological accidents in general and Natech accidents in particular, whose recurrence raises questions about the effectiveness of corporate oversight and the application of state-of-the-art knowledge in managing risks.
What are Natech accidents?
Natech accidents occur when the natural and technological worlds collide, wherever hazardous industry is located in areas prone to natural hazards. Past Natech accidents have often had significant impacts on public health, the natural and built environment, and the local, national or even global economy.
Major technological accidents considered unpreventable are occasionally called Black Swan events. Three features characterize a Black Swan:
- it must be an outlier with respect to normal expectations, making it unpredictable;
- it has to have a major impact;
- it can be explained in hindsight, making it appear predictable.
Inadequate risk management and organisational risk blindness
A closer look at past Natech accidents shows that the vast majority of these events, if not all, could have been foreseen and prevented using available information and knowledge prior to the disaster. They can therefore not be considered inevitable or Black Swans.
The JRC study provides a detailed analysis of the reasons for why Natech risks are often underestimated:
- Risk management traditions and the Act-of-God mindset - The focus for managing natural risks has traditionally been on the response side and hence on disaster management, rather than on prevention and risk management, whereas the technological-risk community has always focused on risk- rather than disaster management. Natech risk is sandwiched between these two worlds, and neither community feels very much at ease with taking ownership of the risk;
- Complexity of Natech risk scenarios - Natech risk analysis would need extensions to traditional risk-analysis methodologies in order to cover the multi-hazard nature of the risk and the multitude of possible simultaneous scenarios;
- Risk governance and risk management problems due to the multi-stakeholder and multi-hazard nature of Natech risks, and the multitude of possibly conflicting issues that are usually on a manager’s radar screen;
- Socio-economic context, including group interests and power, economic pressure, and public or media indifference; and
- Human fallacies and cognitive biases that can corrupt the experiences we draw on for estimating risks.
Managing extreme risks
Building organisational resilience is key to managing risks effectively, in particular in high-risk industry. The JRC study discusses possible strategies to reduce extreme risks, prepare better for their consequences, and make Black Swans more accessible:
- Risk-based versus precaution-based strategies
- Disaster incubation theory and warning signals
- Resilience engineering
- Scenario planning
- Red teaming
While the JRC study is centered on Natech risks, it is generally applicable to managing also other types of extreme or low-probability risks.