Simple But Effective Risk Analysis!

It is impossible that improbable will never happen.

-Emil Gumbel, Mathematician

Risk is part of every endeavor.  By analyzing your situation, you can determine the risks associated with a course of action and then reduce the risk to improve the chance of success.   

I have spent a lot of timing in risky situations and I have found understanding the associated risks will ensure success.  As a military pilot, I accomplished an Operational Risk Management (ORM) evaluation before each mission.  ORM allows you to quantify the risk you face, and determine if a mission is worth the risk.  I have used risk analysis in business to determine if a startup business was worth the investment.  I have also used risk analysis as an emergency manager and emergency management instructor, risk analysis allows the emergency manager to determine what mitigation steps should be taken or how to prepare for a possible disaster.  I have diverse experience and I have found risk analysis improves the chance of success, saves lives, saves property and improves profitability.

What is risk?  From Merriam-Webster: 1- possibility of loss or injury, 2-  someone of something that creates a hazard. I have a simple definition; risk is the likelihood a hazard will occur.  A hazard to a business is the loss of a large customer; a hazard to combat mission is flying against an enemy with an SA-14 surface to air missile or the hazard to the emergency manager is the breaking of a dam.  What is the likelihood a hazard will cause damage… it is the risk. 

In risk analysis we measure the likelihood of a hazard impacting your endeavor and the consequence it causes.  There are complex risk analysis tools available and risk analysis consultants but I will present a simple method to capture your risks and rank them. 

The Risk Analysis Process:

During the Risk Analysis, identify the hazards that directly impact your business, endeavor or operations’ process. There are many hazards in the world but what effects you directly.  Indirectly a storm could effect the delivery of your products, the hazard is not the storm to you, but the failure of your logistics operation to deliver products as schedule… does that effect your business?

  

1-   Brainstorm Hazards: What hazards effect your business? 

2-   Determine the likelihood a hazard will effect you and assign a numerical value to the hazard, 1- low probability of a hazard effecting you to 5- a high likelihood a hazard will occur.

3-   What is the consequence of a hazard’s impact on your business? Rank according to the problems associated with a hazard, 1- low to no effect on the business to 5- the business’ operation may fail.

4-   Total up he likelihood and consequence thus you have the risk to your business. 

5-   Rank the hazards based on the risk

6-   Consider methods to avoid, mitigate or prepare for the risk.

Preparedness is your fallback position, first avoid a risk if you can still accomplish your goals, secondly mitigate the risk if the costs are affordable and finally be prepared to respond if the risk effects your operation.

What do you think?  Will disaster strike?  Lightning doesn't strike twice?

Be prepared!

Michael James Smyth

Energy Security – Are We Secure?

“All power corrupts but we need electricity”

-Anonymous

Could the United States’ electrical grid be knocked offline?  For months… What would this do to our society? The United States’ electrical grid is a national asset for without it, we would quickly revert to the Middle Ages or worse! Without electrical power, we do not have power for gas pumps, transportation would be limited, supermarkets will struggle to operate and resupply their stock, and banks? Investments? Communications require power… yes, we could live for awhile without food or the stock market, but what about water? Our water supply requires electricity to power the pumps and to clean the water. 

I spent time in Iraq as a military leader and as a Diplomat. During my stay, I met a lot of Iraqis. The people were great, most had the same issues as we in the States, kids’ activities, prepping the children for University or jobs, finding useful work or creating a small business… While working with the Iraqis I heard many stories of life in Baghdad after the US military attacks of 2003. Power was knocked out; that’s when the city people of Baghdad realized they had no water for drinking, septic system or showers.  Eventually the government was able to provide a few hours of power a day and that allowed people to fill their bathtubs and storage containers with water… But what if the power didn’t come back?

The United States’ electrical power grid has approximately 2,000 very large transformers; these transformers are critical pieces of the power grid. The transformers take months to build and cost millions of dollars each. These transformers a custom made for a location, hard to replace. These custom-made transformers which allow electricity to flow through the grid from the power plant to your home, without the transformers it is like having a bridge out along a large canyon, it is not easy to get across

The US has about 6000 power plants. According to the Department of Energy, damage to high voltage transformers could keep a power plant offline while replacement transformers are procured which may take months, possibly years. See figure 1 for a big picture layout of the electrical grid. 

Figure 1: Electrical Grid  (US Department of Energy, 2006)

Hospitals, government and many businesses have backup power generators. These generators can provide essential services, however keeping those running while the electrical grid is repaired could get complicated. There are a lot of logistics involved in refueling the diesel generators dispersed throughout a city or county. 

Are we safe today?  No. In the past year and a half, we have had at least 2 terrorist attacks on the grid.  Maybe more?

Last year terrorist attacked a San Jose, CA substation. Referencing a Wall Street Journal account of the incident (Smith, 2014); the attack began around 1 am April 16, 2013. Multiple coordinated attackers were involved, how do we know multiple attackers were involved? The attack took place at multiple locations and surveillance video recorded the attackers using flashlights to signal each other. First, the attackers cut telephone lines then they used sniper rifles with precision to knock out 17 large transformers that sent power to Silicon Valley. Fortunately the power was quickly routed from others parts of California to cover the shortfall.

On 10 June 2014, a power plant in Nogales, AZ was attacked with an Improvised Explosive Device (IED). An IED was left next to a valve of a 50,000 gallon tank of diesel gas.  Fortunately the IED did not destroy the valve or rupture the tank of diesel  fuel.  The tank was charred and the ATF is investigating. Act of terror… yes. 

Bloomberg News has reported that "dozens" of cyberattacks were made from China on U.S. electric and gas utilities in 2012 and 2013. Is a cyberattack dangerous? Yes, it is possible for a coordinated cyberattack to cause more physical damage to the electrical grid than a conventional attack. It would be hard for terrorist to target all of the grid with guns and explosives because there are 6000 power plants, 2000 very large transformers and thousands of critical transformers spread-out all over the country.  However, a simultaneous attack to power plants and the grid could be programmed through the internet!  The electrical grid is vulnerable to cyberattack because power plants and transformers are connected to the internet, thus connected to hackers, Chinese and terrorist.

What is being done about the vulnerability of the electrical grid? Multiple government agencies, departments and utility companies are looking into safeguarding the electrical grid. I have attended DHS tabletop exercises on a cyberattack and I participate with the Colorado Emergency Preparedness Partnership (CEPP). CEPP is an organization designed to allow private businesses, governmental organizations to work together to prepare for disasters and other problems.

Energy security is an important topic requiring more discussion. In the next article, we will discuss the definition of Energy Security and the cost of improving security.  Also we will look into what you can do at your business and home, and what should your elected officials be working on.

Michael James Smyth

References:

·         The Colorado Emergency Preparedness Website. http://thecepp.org/new/

·       

·         http://www.washingtontimes.com/news/2014/jun/11/makeshift-bomb-explodes-at-nogales-power-plant/

Smith, R. (2014, 2 5). Assault on California Power Station Raises Alarm on Potential for Terrorism. The Wall Street Journal.    http://online.wsj.com/news/articles/SB10001424052702304851104579359141941621778

US Department of Energy. (2006). Benefits of Using Mobile Transformers and Mobile Substations for Rapidly Restoring Service. DOE. http://energy.gov/sites/prod/files/oeprod/DocumentsandMedia/MTS_Report_to_Congress_FINAL_73106.pdf

  http://energy.gov/sites/prod/files/Large%20Power%20Transformer%20Study%20-%20June%202012_0.pdf

Emergency Management Blog 2; Energy Security 1

Global Risks 2014

Global Risks 2014

The world is big… or is it?  Do global environmental, economic, social, political or technological risks effect you? Where does your company, your government or you expend capital to reduce risks?  

Preparing to teach my Emergency Management class, I read the World Economic Form’s, Global Risks 2014.  The report analyzed the risks facing the world and rank orders the more likely events.  The report is an eye opener!!

The Global Economic Form mapped 31 global risks, they categorized the risks into the following categories:  economic, environmental, geopolitical, societal and technological. The following top 10 Global Risks are from the report:

No.      Global Risk  

1          Fiscal crises in key economies    

2          Structurally high unemployment/underemployment    

3          Water crises

4          Severe income disparity    

5          Failure of climate change mitigation and adaptation   

6          Greater incidence of extreme weather events (e.g. floods, storms, fires)     

7          Global governance failure            

8          Food crises  

9          Failure of a major financial mechanism/institution      

10        Profound political and social instability  

What do you think?  I think the report is spot on.  Why?  Because we have already seen the disruption a fiscal crisis can cause to the world. We have not fully recovered from the 2008 crisis. Europe’s economy is still in trouble, high unemployment, debt and possible deflation. Deflation is bad if you have debt, because now you owe more than you borrowed! 

For example, Hitler capitalized on the weak economy of Germany to take power.  Shortly after world war one, in the early 1920’s the Nazi party and Hitler were on a rise, however after the Nazis had a few setbacks then Germany’s economy improved causing Hitler and the Nazi’s influence to wane. 1929! The Great Depression, kind of like the recession of 2008, money dried up, there was very little lending and some financial institutions failed.  Hitler and the Nazi’s were able to capitalize on this and take power.  Could this happen again?  Look at Al Qaeda, they are capitalizing on structurally high unemployment, income disparity and governance failure (related to fiscal issues).

The Global Risks 2014 Report closes with the following:

Ultimately, leaders in both the public and private sectors need to be able to ask themselves concrete questions. The following checklist may provide guidance:

1.    What are the top five risks facing the organization and what does its risk appetite suggest with respect to managing them?

2.    What are the exposed assets, and how vulnerable are they?

3.    What options can address these risks relative to what is being done currently?

4.    What support is needed, and from whom?

Despite recent progress, many leaders are still unable to answer these questions confidently.

We, the Global inhabitants are at high risk.  Climate change is real, the causes for it you decide.  The sea is rising, droughts are staying around a long time… water issues.  The economies need to become more secure by reducing debt and practicing sound monetary policies… another bubble is out there, governments should not allow a bursting bubble drag them down.

Interdependences, remember a large disaster will cause economic issues, which will in turn lead to unemployment, income disparity and conflict.   A government  or private industry should plan for disaster with economic and security, mitigation procedures and response capability.  In other words, money should be set aside to keep workers paid and security should be flexible enough to move in after a disaster. 

These problems are scalable, they effect the planet to the individual.  So take a look at Global Risks 2014.  See what you can do for your country, state, city, business and home. 

Internet Reading: Global Risks Report 2014

–     http://www3.weforum.org/docs/WEF_GlobalRisks_Report_2014.pdf

Emergency Management Blog 1

Michael James Smyth