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Society For Risk Analysis Annual Meeting 2007

Risk 007: Agents of Analysis

Session Schedule & Abstracts

* Disclaimer: All presentations represent the views of the authors, and not the organizations that support their research. Please apply the standard disclaimer that any opinions, findings, and conclusions or recommendations in abstracts, posters, and presentations at the meeting are those of the authors and do not necessarily reflect the views of any other organization or agency. Meeting attendees and authors should be aware that this disclaimer is intended to apply to all abstracts contained in this document. Authors who wish to emphasize this disclaimer should do so in their presentation or poster. In an effort to make the abstracts as concise as possible and easy for meeting participants to read, the abstracts have been formatted such that they exclude references to papers, affiliations, and/or funding sources. Authors who wish to provide attendees with this information should do so in their presentation or poster.

Common abbreviations

M3-A Risk Management Frameworks and Economics: Part I Room: 202A   2:00 - 3:30 PM

Chair(s): Christina McLaughlin

M3-A.1  14:00  The Proposed ISO 31000 Risk Management Standard: Limits to its applicability to risk-informed decision making in regulatory agencies. Mangalam S*, Paoli G; Technical Standards and Safety Authority, Decisionalysis Risk Consultants   smangalam@tssa.org Abstract: Public sector agencies, globally, are moving towards adopting a risk-informed regulatory framework. As a result, there is an every increasing need for a suitable risk management standard that will assist these agencies in successfully implementing risk-informed or risk-based frameworks. The International Standards Organization (ISO) is proposing a new risk management standard – ISO 31000, which aims to provide generic guidelines on the principles of risk management and its implementation within an organization. It also seeks to assist in the harmonization of risk management processes and definitions in existing and future standards. The standard is being considered to be adopted by many jurisdictions around the world including Canada, Europe and Australia. The standard, as it is currently proposed, fails to adequately represent several core requirements of risk management in a typical public sector regulatory agency whose mandate is to meet and deliver societal quality of life expectations. Public sector agencies such as those involved in the environmental, health and safety regulations are expected to manage environmental, health and safety risks (public risk) on behalf of the public, while ensuring that their organizational risks (enterprise risk) are internally managed. The standard fails to make the distinction under the assumption that managing risks to organizational objectives would adequately incorporate management of risks borne by the public. This presentation will focus on highlighting the specific requirements of public sector agencies, particularly in the need for formal separation of public risk from enterprise risk within the risk management process. In addition, it will identify some limitations in the proposed ISO standard and will provide recommendations for some key attributes of a risk management standard that is more appropriate for regulatory agencies.

M3-A.2  14:20  Decision Making in the Absence of Information on Benefits . Shapiro S*; Rutgers University   stuartsh@rci.rutgers.edu Abstract: Since September 11, 2001, there have been many laws passed and many regulations promulgated to reduce the risk associated with the threat of terrorism. These regulations are primarily issued by the Department of Homeland Security and its agencies; but also come from the Food and Drug Administration and the Department of the Treasury. As with any regulations, agencies issuing homeland security regulations are required to calculate the costs and benefits of their actions for any regulations with an impact of at least $100 million. Unfortunately, because of the classified nature of information regarding the risk of terrorism, agencies rarely calculate (at least publicly) the benefits of their regulations. This paper will examine the regulations issued since 9-11 to reduce the risk of terrorism. Since there is no public information on the benefits of these rules, I will address the question of how great do the benefits need to be in order to outweigh the costs? This involves questions such as: how many lives would a regulation need to save and what would the probability of an attack need to be for benefits to exceed costs. I will also examine how these calculations are affected by the fact that multiple homeland security regulations are designed to reduce a specific threat (contamination of the food supply, an airline hijacking)? Finally I will compare these calculations with the benefit-cost data for environmental regulations. Environmental regulations have probably the most robust information on benefits and costs. Like homeland security, multiple environmental regulations are often designed to address the same problem. Finally, I will examine how successful homeland security regulations need to be in order to show the net benefits demonstrated by environmental regulations.

M3-A.3  14:40  The optimal use of ex-ante and ex-post food safety control mechanisms with endogenous risk. Mojduszka EM*, Turvey CG; 1. USDA, 2. Cornell University   emojduszka@oce.usda.gov Abstract: In this paper, we develop and present new research methods and approaches in the area of food safety economics that can improve the allocation and effectiveness of private and public resources and efforts in ensuring food safety. The focus is on approaches that build a comprehensive understanding of the interdependence between ex-ante and ex-post food safety control mechanisms, including direct regulation by process and performance safety standards, traceability requirements, product liability, and insurance. We build on and extend previous work on the interaction of ex-ante and ex-post control mechanisms, and the insurability of risks in livestock production, as well as on survival functions applied to food safety recalls (Turvey, 2002; Turvey et al., 2002; Salin et al., 2002). A central theme of our analysis is the impact and the role of traceability for safety attributes on the effectiveness of ex-ante and ex-post food safety control mechanisms. Economic research on issues of traceability is quite limited so far since these systems have been widely developing only within the last ten years (Golan et al., 2004; Hobbs, 2004). Nevertheless, work by Fetter and Caswell (2002), Caswell (2002), and Teisl and Caswell (2002) suggests the key interaction between specification of quality attributes and the control systems necessary to assure that quality. Our dynamic and endogenous risk model of the optimal use of ex-ante and ex-post food safety control mechanisms shows that mixed regulatory systems with a combination of ex-ante and ex-post food safety controls can be more efficient from an economics standpoint as well as more effective from a public health standpoint. We also estimate the model empirically using the data for the E.coli O157 meat contamination cases in the United States in the period 1999-2004.

M3-A.4  15:00  Effect of Food Code Adoption on the Risk of Foodborne Illness. Scharff RL*; The Ohio State University   scharff.8@osu.edu Abstract: Recent highly publicized foodborne illness outbreaks have led to increased interest in reforming risk management procedures for dealing with food safety. One response to the perceived crisis has been renewed effort to pursue uniform adoption of the U.S. Public Health Service’s Food Code. Supporters of this solution believe that uniform rules will more effectively protect the nation’s food supply. Alternatively, it may be that state-specific environmental and demographic differences call for regional and/or state-specific rules. In this paper, I test these alternative theories by analyzing the effect of food code adoption on state food safety outcomes. To do so, I look at the effect of adoption of alternative versions of the food code on both the rate of food-related outbreaks and the rate of foodborne illness (reported through passive surveillance) in each state. I use a multivariate analysis incorporating a number of independent variables to account for environmental and demographic influences. I address expected endogeneity by incorporating exogenous determinants of food code adoption in an instrumental variables model. The conclusions drawn from this study have important implications for the debate over optimality of uniform rules versus tailored rules for the effective management of foodborne illnesses.

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