Framework for investment decision-making under risk and uncertainty for infrastructure asset management

A study has been conducted to investigate current practices on decision-making under risk and uncertainty for infrastructure project investments. It was found that many European countries such as the UK, France, Germany including Australia use scenarios for the investigation of the effects of risk and uncertainty of project investments. Different alternative scenarios are mostly considered during the engineering economic cost-benefit analysis stage. For instance, the World Bank requires an analysis of risks in all project appraisals. Risk in economic evaluation needs to be addressed by calculating sensitivity of the rate of return for a number of events. Risks and uncertainties of project developments arise from various sources of errors including data, model and forecasting errors. It was found that the most influential factors affecting risk and uncertainty resulted from forecasting errors. Data errors and model errors have trivial effects. It was argued by many analysts that scenarios do not forecast what will happen but scenarios indicate only what can happen from given alternatives. It was suggested that the probability distributions of end-products of the project appraisal, such as cost-benefit ratios that take forecasting errors into account, are feasible decision tools for economic evaluation. Political, social, environmental as well as economic and other related risk issues have been addressed and included in decision-making frameworks, such as in a multi-criteria decisionmaking framework. But no suggestion has been made on how to incorporate risk into the investment decision-making process.

Spatial distribution of soil heavy metal pollution estimated by different interpolation methods: Accuracy and uncertainty analysis

Mapping the spatial distribution of contaminants in soils is the basis of pollution evaluation and risk control. Interpolation methods are extensively applied in the mapping processes to estimate the heavy metal concentrations at unsampled sites. The performances of interpolation methods (inverse distance weighting, local polynomial, ordinary kriging and radial basis functions) were assessed and compared using the root mean square error for cross validation. The results indicated that all interpolation methods provided a high prediction accuracy of the mean concentration of soil heavy metals. However, the classic method based on percentages of polluted samples, gave a pollution area 23.54-41.92% larger than that estimated by interpolation methods. The difference in contaminated area estimation among the four methods reached 6.14%. According to the interpolation results, the spatial uncertainty of polluted areas was mainly located in three types of region: (a) the local maxima concentration region surrounded by low concentration (clean) sites, (b) the local minima concentration region surrounded with highly polluted samples; and (c) the boundaries of the contaminated areas. (C) 2010 Elsevier Ltd. All rights reserved.

Chernobyl: Living with Risk and Uncertainty

The nuclear accident in Chernobyl in 1986 is a dramatic example of the type of incidents that are characteristic of a risk society. The consequences of the incident are indeterminate, the causes complex and future developments unpredictable. Nothing can compensate for its effects and it affects a broad population indiscriminately. This paper examines the lived experience of those who experienced biographical disruption as residents of the region on the basis of qualitative case studies carried out in 2003 in the Chernobyl regions of Russia, Ukraine and Belarus. Our analysis indicates that informants tend to view their future as highly uncertain and unpredictable; they experience uncertainty about whether they are already contaminated, and they have to take hazardous decisions about where to go and what to eat. Fear, rumours and experts compete in supplying information to residents about the actual and potential consequences of the disaster, but there is little trust in, and only limited awareness of, the information that is provided. Most informants continue with their lives and do what they must or even what they like, even where the risks are known. They often describe their behaviour as being due to economic circumstances; where there is extreme poverty, even hazardous food sources are better than none. Unlike previous studies, we identify a pronounced tendency among informants not to separate the problems associated with the disaster from the hardships that have resulted from the break-up of the USSR, with both events creating a deep-seated sense of resignation and fatalism. Although most informants hold their governments to blame for lack of information, support and preventive measures, there is little or no collective action to have these put in place. This contrasts with previous research which has suggested that populations affected by disasters attribute crucial significance to that incident and, as a consequence, become increasingly politicized with regard to related policy agendas.

Australian Mothers' notions of risk and uncertainty in relation to their pre-teen children

In this article we examine the ways discourses of risk manifested and played out within and across two groups of Australian mothers living in two large urban centres in Australia: the first comprised of mothers who had a pre-teen child diagnosed with an eating disorder (n = 13); the second of mothers who had a pre-teen child without the symptoms or diagnosis of an eating disorder (n = 13). In 2011 and 2012, we conducted in-depth interviews with the mothers in their homes on their ideas about health and their relationships with their children. An analysis of the data collected from these interviews indicated that having a pre-teen child diagnosed with an eating disorder had a decisive impact on how the mothers constituted and responded to risk. For mothers, who had a pre-teen child with an eating disorder, risk was intensified by bio-medical discourses. The particular intensifications of risk limited the ways in which mothers could act and often threatened to undermine their abilities as competent carers. By contrast, the mothers who did not have a pre-teen child with an eating disorder spoke about risk less directly, and with less sense of immediacy. Where these mothers acknowledged risk discourses particularly in regard to health, they were in a stronger position to negotiate them. Our analysis indicates that the ways in which mothers responded to risk is contingent on circumstances and contexts. Mothers’ responses to risk were related to the calculability of the risk and their perceived capacity to manage it.

Risk and uncertainty in supply markets and sustainability-related innovation

tentially valuable innovations. In energy policy, much attention is given to analysing and incentivising customer demand, but new technologies also need new supply markets, to provide products and services to build, operate and maintain the innovative technology. This paper addresses the impact of supply constraints on the long-term viability of sustainability related innovations, using the case of energy from waste (EfW). Uncertainties in the pricing and availability of feedstock (i.e. waste) deter potential investors in EfW projects. We draw on prior supply management research to conceptualise the problem, and identify what steps might be taken to address it. Based on this analysis, we propose a research agenda aimed at purchasing and supply scholars and centred on the need to understand better how markets evolve and how stakeholders can (legitimately) influence the evolution of supply markets to support the adoption of sustainability related innovation. Within this broad case, specific themes are recommended for further investigation.

Model sensitivity and uncertainty analysis using roadside air quality measurements

Most of the air quality modelling work has been so far oriented towards deterministic simulations of ambient pollutant concentrations. This traditional approach, which is based on the use of one selected model and one data set of discrete input values, does not reflect the uncertainties due to errors in model formulation and input data. Given the complexities of urban environments and the inherent limitations of mathematical modelling, it is unlikely that a single model based on routinely available meteorological and emission data will give satisfactory short-term predictions. In this study, different methods involving the use of more than one dispersion model, in association with different emission simulation methodologies and meteorological data sets, were explored for predicting best CO and benzene estimates, and related confidence bounds. The different approaches were tested using experimental data obtained during intensive monitoring campaigns in busy street canyons in Paris, France. Three relative simple dispersion models (STREET, OSPM and AEOLIUS) that are likely to be used for regulatory purposes were selected for this application. A sensitivity analysis was conducted in order to identify internal model parameters that might significantly affect results. Finally, a probabilistic methodology for assessing urban air quality was proposed.

Transonic aeroelastic simulation for instability searches and uncertainty analysis

In this paper the use of eigenvalue stability analysis of very large dimension aeroelastic numerical models arising from the exploitation of computational fluid dynamics is reviewed. A formulation based on a block reduction of the system Jacobian proves powerful to allow various numerical algorithms to be exploited, including frequency domain solvers, reconstruction of a term describing the fluid–structure interaction from the sparse data which incurs the main computational cost, and sampling to place the expensive samples where they are most needed. The stability formulation also allows non-deterministic analysis to be carried out very efficiently through the use of an approximate Newton solver. Finally, the system eigenvectors are exploited to produce nonlinear and parameterised reduced order models for computing limit cycle responses. The performance of the methods is illustrated with results from a number of academic and large dimension aircraft test cases.

Controls on inorganic nitrogen leaching from Finnish catchments assessed using a sensitivity and uncertainty analysis of the INCA-N model

The semi-distributed, dynamic INCA-N model was used to simulate the behaviour of dissolved inorganic nitrogen (DIN) in two Finnish research catchments. Parameter sensitivity and model structural uncertainty were analysed using generalized sensitivity analysis. The Mustajoki catchment is a forested upstream catchment, while the Savijoki catchment represents intensively cultivated lowlands. In general, there were more influential parameters in Savijoki than Mustajoki. Model results were sensitive to N-transformation rates, vegetation dynamics, and soil and river hydrology. Values of the sensitive parameters were based on long-term measurements covering both warm and cold years. The highest measured DIN concentrations fell between minimum and maximum values estimated during the uncertainty analysis. The lowest measured concentrations fell outside these bounds, suggesting that some retention processes may be missing from the current model structure. The lowest concentrations occurred mainly during low flow periods; so effects on total loads were small.

Common components of risk and uncertainty attitudes across contexts and domains: Evidence from 30 countries

Attitudes towards risk and uncertainty have been indicated to be highly context-dependent, and to be sensitive to the measurement technique employed. We present data collected in controlled experiments with 2,939 subjects in 30 countries measuring risk and uncertainty attitudes through incentivized measures as well as survey questions. Our data show clearly that measures correlate not only within decision contexts or measurement methods, but also across contexts and methods. This points to the existence of one underlying “risk preference”, which influences attitudes independently of the measurement method or choice domain. We furthermore find that answers to a general and a financial survey question correlate with incentivized lottery choices in most countries. Incentivized and survey measures also correlate significantly between countries. This opens the possibility to conduct cultural comparisons on risk attitudes using survey instruments.

Moderate stake variations for risk and uncertainty, gains and losses: methodological implications for comparative studies

Risk attitudes are known to be sensitive to large stake variations. However, little is known on the sensitivity to moderate variations in stakes. This is important for studies that want to compare risk attitudes between countries or over time. I find that variations of ±20% affect only utility, while larger variations may affect also probability weighting. Surprisingly, the effect on weighting functions is larger for losses than for gains. It is also more pronounced for risk than for uncertainty.