Managing Your
Public Risk

December 1999

The Qualitative Side of Risk

Last month we looked at assessing risk numerically – the quantitative approach.  This month, let’s examine the qualitative approach.

The late Admiral Hyman Rickover, an engineer and father of the US nuclear Navy, knew that risk had to be managed qualitatively, not just by the numbers. He knew the first naval reactor catastrophe would probably kill more than the nuclear propulsion program, which was essential to US defense policy.  In defiance of cost benefit analysis and severe cold war production pressures, he demanded the highest standards.  Enforcing them ruthlessly, he once ripped out all the reactor tubing in USS Nautilus, at great cost and delay.  Like the Tylenol decision, (MYPR-Nov.) that call was a defining moment in the US Navy’s reactor safety standards.  The lesson, 45 years old, has not been forgotten to this day.

A similar defining decision was seen at SNCF, the French railroad system, which installed an electronic signaling system costing 5 billion francs (about $1.15 B Cdn.), on the prospect of saving only 5 lives.  SNCF put such a high value on their reputation, including that of their world famous high-speed train, the TGV, they accepted this expense as cost effective.  In both cases, qualitative arguments over-rode quantitative analysis. Other successful companies do likewise. 

In contrast, four years before the 1979 Three Mile Island incident, civilian nuclear regulators claimed a meltdown would occur only once every 17,000 reactor/years.  Two months before the 1986 Chernobyl crisis, Soviet authorities claimed it wouldn’t occur inside of 10,000 years.  NASA figured a shuttle launch disaster was a 1:100,000 prospect.  Then came Challenger at launch 25.  That ‘Titanic’ mentality is still with us, caused by ignorance, an overweening pride, production or financial pressures or a “good enough” attitude.

We can all add our own examples of where short-term quantitative pressures displaced longer-term 
qualitative standards.  It takes courage not to succumb to these pressures and discipline not to fall 
into temptation.  It equally human nature to deny or shrug off these problems until too late.  One wag 
wryly observed that human history is little more than the record of such foibles.

The moral of this story?  Since history has a way of defying the best numeric projections, a disciplined qualitative ethic must overlay any quantitative approach.  Clear and defendable policies, rigorously and consistently enforced can remove or reduce many risks in ways that a “numbers-only” approach can’t.  Rickover, Tylenol and SNCF knew that and decided to make a difference.  What will you do?

Recommended Reading for Risk Managers  

This month, and on the eve of a new millennium, is a good time to browse what is arguably the world’s best book on risk management: the Bible.  In addition to addressing almost every modern risk concept, e.g. clear goals, explicit assumptions, thinking in scenarios, derivatives, taking bold risks, corrective measures, decision analysis, it contains profound wisdom on how to deal with the most difficult of all risks, the Mark I Human Being, starting with our motivations and relationships with others.   Both Y2K and Y3K compliant, it’s a timeless gift for those who value life or manage risk.


A Merry Christmas to All and to All

a Happy and Safe New Y2K!

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Murphy spent 17 years (78-96) with Transport Canada, his last five as Regional Director General, Aviation in Winnipeg.  Originally trained as a professional pilot, he is the author of an internationally acclaimed 500-page report entitled "An Evaluation of Emergency Response Services at Airports in Canada," currently in its second revised edition (August 1999).  He is also the Chairman of the Air Passenger Safety Group (APSG), a Director of Transport 2000 Canada, a Director of the Ottawa Chapter of Christian Businessmen's Committee (CBMC) and the Secretary General of the Peugeot Club of North America (PCNA).

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CADMUS Corporate Solutions Limited, 
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