On the Need for Rethinking Current Practice that Highlights Goal Achievement Risk in an Enterprise Context

This article addresses the issue of how performance and risk management can complement each other in order to enhance the management of an enterprise. Often, we see that risk management focuses on goal achievements and not the enterprise risk related to its activities in the value chain. The statement “no goal, no risk” is a common misconception. The main aim of the article is to present a normative model for describing the links between performance and risk, and to use this model to give recommendations on how to best structure and plan the management of an enterprise in situations involving risk and uncertainties. The model, which has several novel features, is based on the interaction between different types of risk management (enterprise risk management, task risk management, and personal risk management) and a structure where the enterprise risk management overrules both the task and personal risk management. To illustrate the model we use the metaphor of a ship, where the ship is loaded with cash‐generating activities and has a direction over time determined by the overall strategic objectives. Compared to the current enterprise risk management practice, the model and related analysis are founded on a new perspective on risk, highlighting knowledge and uncertainties beyond probabilities.     

On Different Types of Uncertainties in the Context of the Precautionary Principle

Few policies for risk management have created more controversy than the precautionary principle. A main problem is the extreme number of different definitions and interpretations. Almost all definitions of the precautionary principle identify “scientific uncertainties” as the trigger or criterion for its invocation; however, the meaning of this concept is not clear. For applying the precautionary principle it is not sufficient that the threats or hazards are uncertain. A stronger requirement is needed. This article provides an in‐depth analysis of this issue. We question how the scientific uncertainties are linked to the interpretation of the probability concept, expected values, the results from probabilistic risk assessments, the common distinction between aleatory uncertainties and epistemic uncertainties, and the problem of establishing an accurate prediction model (cause‐effect relationship). A new classification structure is suggested to define what scientific uncertainties mean.     

Financial hardship during unemployment in Norway: the impact of public and private income support

It is common to assume that long-term unemployment no longer causes financial hardship because of generous welfare benefits. It is further assumed that unemployment benefits have eroded the traditional role of the family in protecting its members against hazards. This panel study of long-term unemployed people in 1991-1992 demonstrates the inadequacy of unemployment benefits and the importance of family support in reducing the risk of financial hardship. Vulnerable household types, such as single people and families with limited economic resources, at the outset seem unable to bear the personal risk of unemployment that is built into the benefit scheme. Persons disadvantaged at the outset risk a downward spiral because of long-term unemployment. Especially during times of high unemployment, the compensation level is not optimal from a welfare point of view. Greater coverage and more generous unemployment benefits may help unemployed people to cope better financially and thus avoid applying for discretionary and highly stigmatized social assistance allowance.     

Tests for the Proportional Intensity Assumption Based on the Score Process

Proportional intensity models are widely used for describing the relationship between the intensity of a counting process and associated covariates. A basic assumption in this model is the proportionality, that each covariate has a multiplicative effect on the intensity. We present and study tests for this assumption based on a score process which is equivalent to cumulative sums of the Schoenfeld residuals. Tests within principle power against any type of departure from proportionality can be constructed based on this score process. Among the tests studied, in particular an Anderson-Darling type test turns out to be very useful by having good power properties against general alternatives. A simulation study comparing various tests for proportionality indicates that this test seems to be a good choice for an omnibus test for proportionality.     

Forecasting Immigration in Official Population Projections Using an Econometric Model

Although substantial research has been conducted to quantify the determinants of international migration, most official population projections do not include such determinants in a formal migration model. Statistics Norway forecasts gross immigration to Norway using an econometric model based on standard migration theories. The main variables include income level, unemployment, and population size in Norway and the sending countries, and the number of immigrants already living in Norway. Projections of exogenous variables are drawn from international and Norwegian sources. Three different alternatives are specified for the income variables, leading to three different forecasts for gross immigration until 2100.     

Collaborative innovation: the decade that radically changed drilling performance

This article sheds light on key factors associated with innovations that are mainly based on experiential learning. The history of a company engaged in the offshore oil and gas industry exemplifies the points: Hitec started out as a small company with limited financial resources, but over a 10-year period, its innovations and improvements radically transformed offshore oil and gas drilling operations. An evolutionary methodological approach is balanced by theoretically informed analysis. A main finding is that customer–supplier interaction was crucial. Hitec's success, crowned by its eventual acquisition by American capital, can be attributed in part to the know-how and technology provided by one of its suppliers and partners during the early phase. However, it has also depended on a series of other factors: a flexible, motivated and creative organisation; targeting of the right know-how; being part of a cluster and thus enjoying easy access to important customers and suppliers as well as easy, informal flow of ideas and information; developers and entrepreneurs prepared to take risks; being in the right place at the right time; a good measure of luck; the underdeveloped state of American drilling control technology; Norwegian oil and gas policies supportive of domestic technological companies; and proximity to research labs which were conducting full-scale tests of drilling operations. An invention made by regional researchers can also be linked to Hitec's innovation of a drilling control system. The relevance of the article is its contribution to a better understanding of the complexity involved in the implementation of major practice-based innovations – a process which includes identifying and creating ideas; finding a market/customer and putting the ideas into practice.     

Foundational Issues in Risk Assessment and Risk Management

This is a perspective article on foundational issues in risk assessment and management. The aim is to discuss the needs, obstacles, and challenges for the establishment of a renewed, strong scientific foundation for risk assessment and risk management suited for the current and future technological challenges. The focus is on (i) reviewing and discussing the present situation and (ii) identifying how to best proceed in the future, to develop the risk discipline in the directions needed. The article provides some reflections on the interpretation and understanding of the concept of “foundations of risk assessment and risk management” and the challenges therein. One main recommendation is that different arenas and moments for discussion are needed to specifically address foundational issues in a way that embraces the many disciplinary communities involved (from social scientists to engineers, from behavioral scientists to statisticians, from health physicists to lawyers, etc.). One such opportunity is sought in the constitution of a novel specialty group of the Society of Risk Analysis.     

An Evaluation of the Treatment of Risk and Uncertainties in the IPCC Reports on Climate Change

Few global threats rival global climate change in scale and potential consequence. The principal international authority assessing climate risk is the Intergovernmental Panel on Climate Change (IPCC). Through repeated assessments the IPCC has devoted considerable effort and interdisciplinary competence to articulating a common characterization of climate risk and uncertainties. We have reviewed the assessment and its foundation for the Fifth Assessment Reports published in 2013 and 2014, in particular the guidance note for lead authors of the fifth IPCC assessment report on consistent treatment of uncertainties. Our analysis shows that the work carried out by the ICPP is short of providing a theoretically and conceptually convincing foundation on the treatment of risk and uncertainties. The main reasons for our assessment are: (i) the concept of risk is given a too narrow definition (a function of consequences and probability/likelihood); and (ii) the reports lack precision in delineating their concepts and methods. The goal of this article is to contribute to improving the handling of uncertainty and risk in future IPCC studies, thereby obtaining a more theoretically substantiated characterization as well as enhanced scientific quality for risk analysis in this area. Several suggestions for how to improve the risk and uncertainty treatment are provided.