Transcript Distribution of top 5 topics for FSnet Jan 1/96 to Mar 31

Risk Management - A Definition
The process of weighing policy alternatives in
the light of the results of risk assessment and, if
required, selecting and implementing appropriate
control options, including regulatory measures.
Risk Management
• weighing policy alternatives and selecting the most
appropriate regulatory action, integrating the results
of risk assessment with engineering data and with
social, economic and political concerns to reach a
decision
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whom should we protect
against what harms
at what cost
and by foregoing what other opportunities
Societal risk management
• a definable (measurable) phenomenon called
risk
• concerned with minimizing probability and/or
magnitude of undesired consequences without
incurring excessive costs
• how safe is safe enough?
– how fair is safe enough means debates based on
social conflicts of trust and equity rather than
probability and magnitude of uncertain events
Cost-benefit analysis
Cost if the vehicle is changed
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The manufacturer could expect to sell 400,000 compact cars at $4,250 each.
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Making the change to the vehicle would cost $11 per car, bringing the price of the
vehicle to $4,261.
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Therefore, the total cost to consumers for making the change to the vehicle
would be 400,000 X $11 = $4.4 million
Cost-benefit analysis
Benefit if the vehicle is changed
• Each year, 500 people die from accidents associated with driving
or riding in compact cars
• There are about 49 million drivers and passengers of compact
cars in the U.S
• The chances of an individual being fatally injured in an accident
while driving or riding in a compact car are: 1 chance in 98,000
(probability of 0.0000102).
• Changing the vehicle would reduce the chances of a driver or
passenger being fatally injured to 1 chance in 99,000 (or a
probability of 0.0000101). This represents a change of about 1
chance in 10 million.
Cost-benefit analysis
Benefit if the vehicle is changed (cont’d)
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Change in fatalities:
– predicted fatalities if the car is not changed: 0.0000102 X 49 million users = 500 fatalities
– predicted fatalities if the car is changed: 0.0000101 X 49 million users = 494 fatalities
– changing the vehicle results in a difference of six fatalities
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The costs per fatality were estimated to be: $400,000 per fatality.
Therefore, the total benefit of changing the vehicle would be: 6 fatalities X $400,000
= 2.4 million.
Decision-making approaches
what’s required
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a perception of the quality of a method’s logic and reasoning
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a perception of a method’s sensitivity to moral and ethical concerns
– expected value risk analysis was rated the most acceptable
– standard practices was rated the least acceptable
– methods that were judged better reasoned and more complete were also
judged more acceptable, as were methods judged to have greater sensitivity
to ethical and moral concerns
– People’s acceptance of risks may be determined, to a significant extent, by
the way in which decisions about risks are made
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acceptable risk from an acceptable decision-making process?
What do people care about?
• is the procedure by which collective consent obtained for a
course of action acceptable to those who must bear its
consequences?
• is the principle that will be used to apportion liabilities for an
undesired consequence acceptable to those affected?
• are the institutions that make the decisions that manage and
regulate the technology worthy of fiduciary trust?
Steps in decision analysis
• identifying decision alternatives and structuring the decision
problem
• defining the decision objectives
• defining performance measures or variables for quantifying
decision objectives
• identifying critical uncertain variables
• assessing probabilities
• specifying value judgments, preferences and trade-offs
• evaluating alternative actions or policies
• conducting sensitivity analyses and value of information analyses
Decision analysis vs. cost-benefit
Similarities
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represent a formalization of common sense for decisions that are too complex for the
informal use of common sense
seek a rational, logical, orderly, systematic framework for choosing among alternative
actions or policies when the consequences of these alternatives are uncertain
attempt to describe, quantify and clarify trade-offs among the relative advantages and
disadvantages of alternative actions and policies
decompose complex decision problems into their component, and more manageable,
parts
synthesize information produced by the analysis into a single number reflecting the
overall value of a proposed action or policy
Decision analysis vs. cost-benefit
Differences
• which alternative course will maximize expected value of utility, not just net
benefits
• considers a multiplicity of objectives, economic efficiency being only one
• considers all consequences judged important, regardless of whether that
can be measured in economic terms
• treats uncertainties comprehensively and explicitly
• values consequences on preferences of decision-makers, rather than simple
willingness-to-pay measures
Decision analysis vs. cost-benefit
Differences (cont’d)
• paysattention to decision-maker’s attitude toward risk
• interprets probabilities according to the Bayesian view
• work closely with experts and decision-makers in
interactive, collaborative setting
• translate all consequences into a single measure of
value (rather than money) or utility -- the value, worth or
desirability of something
• equity is more than economics, treated as one among
several consequences that need to be examined
empirically
Decision analysis -- other features
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an emphasis on the distinction between a good decision and a good outcome
a focus on the economic value of collecting additional data
an emphasis on being clear and explicit about decision alternatives
a focus on the decision-making perspective of a single decision-maker or a
small group of decision-makers
• an emphasis on the use of graphic diagrams, such as flow charts, influence
diagrams and decision trees for representing decision problems
Problem is with the managers
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regulators have adopted a short-term perspective, taking action quickly rather than
investing in research needed to improve understanding of future hazards
a narrow view of the risks they regulate
sometimes attempts to reduce one risk (burns from flammable children’s pajamas)
have created others (the increased chance of cancer from fireproofing chemicals)
ignored large risks while attacking small ones with vigour (Bruce Ames and food)
lack of institutions for learning from experience in government
magic bullets rather than multiple solutions
lack of citizen involvement in decision-making
Risk Management Framework
Elements of Risk Management
• Risk Evaluation
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Identification of a food safety problem.
Establishment of a risk profile.
Ranking of the hazard for risk assessment and risk management
priority.
Establishment of risk assessment policy for conduct of risk
assessment.
– Commissioning of risk assessment.
– Consideration of risk assessment result.
[I]
Risk Management Framework
(cont’d)
• Risk Management Option Assessment
– Identification of available management options.
– Selection of preferred management option, including
consideration of an appropriate safety standard.
– Final management decision.
[ II ]
Risk Management Framework
(cont’d)
• Implementation of management decision
• Monitoring and review
– Assessment of effectiveness of measures taken.
– Review risk management and/or assessment as necessary.
[ III ]
General Principles of Food Safety
Risk Managment
• Risk management should follow a structured
approach
• Protection of human health should be the primary
consideration in risk management decisions
• Risk management decisions and practices should
be transparent
• Determination of risk assessment policy should be
included as a specific component of risk
management
[I]
General Principles of Food Safety Risk
Management (cont’d)
• Risk management should ensure the scientific
integrity of the risk assessment process by
maintaining the functional separation of risk
management and risk assessment
• Risk management decisions should take into
account the uncertainty in the output of the risk
assessment
[ II ]
General Principles of Food Safety Risk
Management (cont’d)
• Risk management should include clear, interactive
communication with consumers and other
interested parties in all aspects of the process
• Risk management should be a continuing process
that takes into account all newly generated data in
the evaluation and review of risk management
decisions
[ III ]
References
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Bradbury, J.A. 1989. The policy implications of differing concepts of risk. Sci., Tech. and
Human Values 14: 380-399.
Covello, V.T. 1987. Decision analysis and risk management decision making: issues and
methods. Risk Anal 7: 131-139.
Haimes, Y.Y., Barry, T., and Lambert, J.H. 1994. When and how can you specify a
probability distribution when you don’t know much? Risk Analysis 14: 661-703.
Jasanoff, S. 1993, Bridging the two cultures of risk analysis, Risk Analysis, 13: 123-129.
MacGregor, D. and Slovic, P. 1986. Perceived acceptability of risk analysis as a
decision-making approach. Risk Analysis 6: 245-256.
Morgan, M.G. 1993. Risk analysis and management. Sci. Am. July: 32-41.
Rayner, S. and Cantor, R. 1987. How fair is safe enough? The cultural approach to
societal technology choice. Risk Analysis 7: 3-9.
Starr, C. 1969. Social benefit versus technological risk, Science 165: 1232-1238.
Cost-effectiveness Ratios for Selected
Lifesaving Measures (1995 $)
[Harvard Centre for Risk Analysis, Feb. 1999]
Intervention
Comparator
Lap/Shoulder belts No Restraints
(50% use)
Daytime Running Lights
Target Population Cost per QALY
Saved*
Drivers of Passenger Cars
Nighttime Lights
Only
All Motor Vehicles
<0
<0
Promote Condom Use
No Program
to prevent HIV Transmission
Self-Identified Gay Men
<0
Restriction of Cigarette
Sales to Minors
Children Less than Age 18
<0
No Restrictions
Adjuvant Tamoxifen No Such
Women, Age 45, with
Chemotherapy
Therapy
Early stage Breast Cancer
Coronary Angioplasty
No Revascularization
Patients w/Severe Angina
And One Vessel Disease
$950
$10,000
Cost-effectiveness Ratios for Selected
Lifesaving Measures (1995 $)
[Harvard Centre for Risk Analysis, Feb. 1999]
Intervention
Comparator
Target Population Cost per QALY
Saved*
Pap Smear Every 4 yrs
No Screening
Women Ages 20-75
Annual Colorectal
Screening
No Screening
Frontal Airbag System
with Manual Belts
People Ages 50-75
Manual Belts
(50% usage)
$16,000
$18,000
Drivers of Passenger Cars
Rodan Mitigation in No Testing or
Home Residents w/Radon
Homes
Mitigation Levels above 20pCi/L
Dual Passenger
Airbags
Driver-Only
Airbags
Front-Right Passengers
Autologous Bone
Marrow transplantation
Std. Chemotherapy
Women, Age 45, w/
metastatic Breast Cancer
$24,000
$57,000
$61,000
$110,000
Cost-effectiveness Ratios for Selected
Lifesaving Measures (1995 $)
[Harvard Centre for Risk Analysis, Feb. 1999]
Intervention
Comparator
Target Population
Cost per QALY
Saved*
Coronary Angioplasty
No Revascularization
Patients w/Severe Angina
And One Vessel Disease
$10,000
Annual Mammography
Annual Clinical
Breast Exam
Women Ages 55-65
$150,000
Methylene Chloride
Limit of 500 ppm Workers Exposed to
Exposure Limit of 25 ppm
Methylene Chloride
$190,000
Annual Mammography
Annual Clinical
Breast Exam
Women Ages 40-50
$240,000
Solvent-Detergent to
Eliminate AIDS Virus or
Other Infectious Disease
No SolventDetergent
Patients Undergoing PlasmaTransfusion
$310,000
Cost-effectiveness Ratios for Selected
Lifesaving Measures (1995 $)
[Harvard Centre for Risk Analysis, Feb. 1999]
Intervention
Comparator
Target Population
Screening to Prevent
HIV transmission to
Patients
Universal
Precautions
Health Care Workers in
Acute Care Setting
Annual Pap Smear
Pap Smear
Women Ages 20-75
Every Two Years
$ 1,600,000
Lap/Shoulder Belts
(9% use)
No Restraints
Rear-Center Seats of
Passenger Cars
$ 2,400,000
Screening and Treatment No Screeing
to Prevent HIV
Transmissions
Surgeons Every 10 Years
$ 4,100,000
Prophylactic Intravenous
Immunoglobulin
Patients w/Chronic
Lymphocytic-Leukemia
$ 7,400,000
No Prophylaxis
Cost per QALY
Saved*
$ 449,000
INTRODUCTION TO RISK
ANALYSIS
CHAPTER 3
REGULATION
The regulatory process (1)
• Why have regulations at all? To show us how we
should behave in socially desirable ways
• The U.S. regulatory process is complex and
fragmented.
• In our representative democracy, Congress has
regulatory authority and delegates it to the
Executive Branch, which creates agencies.
The regulatory process (2)
• Congress passes legislation, and some
agencies have responsibility for several of
these statutes.
• Congress responds to public wishes but is illequipped to create regulations and set or
enforce standards.
• Regulatory agencies provide scientific data,
technical expertise, and policy making skills.
The regulatory process (3)
• Check out the U.S. Code—our nation’s laws.
• The Congressional Record captures much of what
happens in floor debate on legislation.
• Congress provides oversight and budgets.
• Some legal constraints: FOIA, APA, FACA
• Informal rulemaking; advanced notice, proposed
rule, public comments, final regulations, law suits—
often take years—but get voluntary compliance.
The regulatory process (4)
• Three periods of environmental activism: (1)
Theodore Roosevelt and natural resource
conservation, (2) New Deal and conservation
projects such as TVA, CCC, PWA and SCS,
(3) Nixon era: EPA and NEPA
• Volume of environmental regulations has
spawned environmental auditing.
The regulatory process (5)
• Command-and-control regulation
• Code of Federal Regulations and the Federal
Register
• U.S. has controlled most major visible sources of
pollution.
• Now moving to more difficult risks to regulate:
genetic engineering, radon, indoor air, acid rain,
stratospheric ozone, nuclear power, and
cryptosporidium.
The regulatory process (6)
• New regulatory approaches: pollution
prevention, pollution trading, pollution
bubbles, carbon taxes, pollution credits, and
tax incentives
• Trying to balance federal, state and local
statutes
• Worker, drug, food, and consumer
regulations have their own histories.
Agencies have constituencies.
Why have regulatory agencies?
(1)
• Three branches of government: legislative
delegates responsibilities through laws to executive,
and judicial referees inevitable political and policy
conflicts.
• Criminal offense is violation of someone’s
obligations to society. Tort law relates to the civil
obligations of one party to another.
• Enforcement and penalties
Why have regulatory agencies?
(2)
• Regulatory agencies can issue positive or
negative lists
• Negative list: substances not allowed above a
given standard, e.g., EPA list of drinking
water standards
• Positive list: can’t use substance, if not on list
- e.g., FDA list of food additives
• Licenses and permits
Food safety (1)
• U.S. food supply is “safe” due to interlocking
monitoring system for food production and
distribution—local, statewide, national. and
international/
• Inspectors, microbiologists, epidemiologists,
food scientists.
• Laws, guidelines, customs, contracts and
other directives dictate duties.
Food safety (2)
• Some agencies monitor one kind of food,
others work in geographic areas, some on
imports and exports, others for restaurants,
meat-packing plants, …
• Under tort law anyone can obtain
compensation for bad food by suing—
adulterated, contaminated
• Fragmented authority for food regulation
Food safety (3)
• 1938 Federal Food Drug and Cosmetic Act,
amended in 1954 for tolerances for pesticides
and in 1958 for food additives
• The standard is ‘a reasonable certainty of no
harm’—not an absence of risk.
• In the U.S., food safety requires extensive
coordination.
Food safety (4)
• EPA registers pesticides, FDA regulates bottled
water, some wines, residues of animal drugs in
meats, animal feeds, milk, shellfish, retail foods,
ATF is responsible for alcohol, EPA for drinking
water, USDA for meat or poultry and processed egg
products, HHS for food-borne disease outbreaks,
NOAA for inspections of fishing vessels and
seafood processing, Customs regulates all foods
entering and exiting the country,
Food safety (5)
• Justice prosecutes violations, the Trade
Commission for deceptive advertising, CPSC
enforces the Poison Prevention Packaging Act, the
FBI enforces Federal Anti-Tampering Act and the
Postal Service laws relating to mail fraud involving
foods
• In the U.S., the National Governors Association,
state and local governments, and private
organizations are involved.
Ethics (1)
• In a representative democracy like the U.S., one
problem is the lurching, erratic attention brought to
regulation.
• Usually some highly visible, emotional incident
focuses attention, and Congress writes regulatory
laws in a spasm.
• We regulate environmental pollution because we
think it is the right thing to do.
Ethics (2)
• Humans have an anthropogenic view—
expressed by Aldo Leopold in A Sand County
Almanac—his land ethic
• Fairness is an important public value. The
costs of environmental regulation should be
borne in an equitable way.
• Two ethical principles—utilitarian and
libertarian
Ethics (3)
• Utilitarian: Do the most good for the most people in
society. Deliberately sacrificing a few for interests
of all requires a decision maker, who may
degenerate into a tyrant.
• Libertarian: Each person is the sole arbiter of their
own behavior. It leads to minimal government and
personal freedom, but life becomes dominated by
market forces, which are hard to control and selfinterested.
Ethics (4)
• The U.S. has an uneasy equilibrium between
libertarian and utilitarian.
• For health and safety we believe the
government must protect us.
• The regulatory agency serves as the dictator,
but we also want to observe personal and
property rights.
Legislation (1)
• Members of Congress must cooperate with each
other to get anything done.
• House members perpetually campaign, plus have
budgets, press and public interaction
responsibilities.
• Few members have technical skills or staff
scientists.
• Must react rapidly to “crises” like Bhopol (EPCRA),
toxic waste (CERCLA), or pollution in New Orleans’
water (SDWA)
Legislation (2)
• Regulatory agencies have research arms and
associated agencies, and can contract research.
• Congress conducts oversight—has multiple
committees and subcommittees for each agency.
• Congressional concern is how much discretion and
money to give each agency.
Legislation (3)
• Many new regulatory laws allow citizen suits
and have “list and hammer” provisions.
• Three models of agency discretion: coercive,
proscriptive, and ministerial
• Coercive: agency has discretion –
proscriptive: agency must follow detailed
criteria – ministerial: deadlines
Administration (1)
• President controls regulatory process through
appointees, executive orders, and managerial
controls (OMB).
• Offbudget spending: ~ $180 billion/yr in public funds
for environmental regulation.
• Limits are information, personnel and funds.
• Most data are anecdotal. Only regulatory agency
without a statistics bureau is EPA.
Administration (2)
• EPA has separate fiefdoms for air, water,
solid waste, pesticides, chemical substances,
policy, and research.
• Use risk to set priorities – often opposite of
public and Congressional perception.
• APA requires public notice, opportunity for
public comment, and publication of final rule.
(Compare other systems.)
Administration (3)
• “Red border” review
• Contractors may screen public comments.
• Over 80% of legal deadlines have been
missed by EPA.
• Ossification(?)
• Negotiated rulemaking (RegNeg)
• Eliminate regulations that do not work?
Courts
• Review regulations as part of the rule-making
process.
• Follow Congressional intent.
• Agencies must make rule-making records
available.
• Standard of review is fact finding ….
• Courts defer to agency expertise.
Summary of regulation
• The U.S.regulatory process involves
interactions between the three branches of
government and the public.
• Regulatory agencies provide greater
technical and policy making expertise.
• Regulation involves ethics.
• Regulation often involves risk reduction.
So,risk analysis provides useful inputs.
More information
• Internet sites, e.g., Resources for the Future - www.rff.org
• Email listservers, e.g., FDA-NEWSDIGEST-L@LIST.
NIH.GOV
• Journals, e.g., Regulation magazine, published by the Cato
Institute.
• Books, e.g., F. FUKUYAMA, The Great Disruption : Human
Nature and the Reconstitution of Social Order (ISBN:
068484530X) The Free Press, NY (1999).