Monetary Value of Risk Analysis

Companies and organizations that deal with complex socio-technical systems and that could suffer severe/high consequences from incidents and accidents, often need to make decisions on a fine line between safety and profitability. Instead of cutting program budgets or being overly conservative in their safety measures, what if there were ways for these companies to achieve a balance that not only promotes safety, but also achieves profitability?

SoTeRiA lab is addressing the question of safety-profitability in ongoing research on the monetary value of Probabilistic Risk Assessment (PRA). PRA is a systematic tool for estimating risk from the interactions of equipment failure and human error. PRA is used worldwide at many Nuclear Power Plants (NPPs) to evaluate risk. It is now one of the key pillars of the Risk-Informed regulatory framework for the Nuclear Regulatory Commission (NRC). In addition to NRC, a growing number of government agencies in the U.S., including the Department of Energy (DOE), the Federal Aviation Administration (FAA), the National Aeronautics and Space Administration (NASA), the Department of Defense (DOD), the Environmental Protection Agency (EPA), and the Food and Drug Administration (FDA) have begun to utilize PRA for policy setting and decision-making.

Industry-Academia Collaboration

With adequate risk information, the balance of safety and profitability can be scientifically evaluated and confidently implemented and monitored. Risk information is the key to understanding how much a company will gain or lose by choosing a specified operational, maintenance, or design strategy.

The SoTeRiA lab have been working with the South Texas Project Nuclear Operating Company (STPNOC) to advance research on the monetary value of PRA. At STPNOC, safety plays a crucial role in all activities, and risk has become a critical part in decision making for all phases of operation and maintenance. STPNOC data is used to generate an integrated approach, combining aspects of benefit cost analysis and multi-attribute decision making within the PRA framework. The methodology advances Risk-Informed Decision Making for high-consequence industries (i.e., nuclear, healthcare, aviation, oil and gas), by creating the opportunity to systematically model a course of action and to determine its monetary cost or benefit before a safety-significant change is made, or a problem occurs. The applications of this research will allow managers to consider multiple event sequences of socio-technical system failures, along with critical decision-making points that provide detailed systematic causal models of cost estimations.