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Why Risk Analysis is Difficult, and Some Thoughts on How to Proceed

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  • Yakov Ben‐Haim

Abstract

Risk analysis is challenged in three ways by uncertainty. Our understanding of the world and its uncertainties is evolving; indeterminism is an inherent part of the open universe in which we live; and learning from experience involves untestable assumptions. We discuss several concepts of robustness as tools for responding to these epistemological challenges. The use of models is justified, even though they are known to err. A concept of robustness is illustrated in choosing between a conventional technology and an innovative, promising, but more uncertain technology. We explain that nonprobabilistic robust decisions are sometimes good probabilistic bets. Info‐gap and worst‐case concepts of robustness are compared. Finally, we examine the exploitation of favorable but uncertain opportunities and its relation to robust decision making.

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  • Yakov Ben‐Haim, 2012. "Why Risk Analysis is Difficult, and Some Thoughts on How to Proceed," Risk Analysis, John Wiley & Sons, vol. 32(10), pages 1638-1646, October.
    • Handle: RePEc:wly:riskan:v:32:y:2012:i:10:p:1638-1646
    DOI: 10.1111/j.1539-6924.2012.01859.x
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    1. Tversky, Amos & Thaler, Richard H, 1990. "Anomalies: Preference Reversals," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 201-211, Spring.
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    Cited by:

    1. J. Park & T. P. Seager & P. S. C. Rao & M. Convertino & I. Linkov, 2013. "Integrating Risk and Resilience Approaches to Catastrophe Management in Engineering Systems," Risk Analysis, John Wiley & Sons, vol. 33(3), pages 356-367, March.
    2. Ludovic Gaudard & Franco Romerio, 2020. "A Conceptual Framework to Classify and Manage Risk, Uncertainty and Ambiguity: An Application to Energy Policy," Energies, MDPI, vol. 13(6), pages 1-22, March.
    3. Ahmad, Nasir & Derrible, Sybil, 2018. "An information theory based robustness analysis of energy mix in US States," Energy Policy, Elsevier, vol. 120(C), pages 167-174.
    4. Ben-Haim, Yakov, 2021. "Feedback for energy conservation: An info-gap approach," Energy, Elsevier, vol. 223(C).
    5. Payuna Uday & Karen Marais, 2015. "Designing Resilient Systems‐of‐Systems: A Survey of Metrics, Methods, and Challenges," Systems Engineering, John Wiley & Sons, vol. 18(5), pages 491-510, October.

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