Infrastructure Risk Management Research Articles

An applied complex systems framework for risk-based decision-making in infrastructure engineering

Infrastructure networks are complex, distributed, socio-technical systems whose study requires the integration of several domains of knowledge and techniques to coherently capture key features of their constituent components (e.g., fragility), the dynamics of such networked components, and their behavior as affected by human use and operation. This paper introduces an integrative, applicable framework of Complex Distributed Agent Networks (CoDAN) for infrastructure risk assessment and management. CoDAN detects sub-systems at multiple geographical scales and associates decision units (agents) to them in the context of a decision problem. Agents use advanced optimization and risk assessment methods for decision support, and allow to model decentralized yet coordinated decisions about performance and risk management (e.g., maintenance or restoration), mimicking behavior and system response observed in practice. The application of CoDAN to illustrative examples shows the potential of the framework to unravel the complex evolution of infrastructure network performance under hazard exposure, and to reduce the computational burden of tasks associated to risk assessment and management, as compared to traditional centralized formulations.

Risk Management Infrastructure as a Living Organism

Risk Management Infrastructure as a Living Organism

Condition assessment for bridges: a hierarchical evidential reasoning (HER) framework

Infrastructure risk management practices enable decision-makers to effectively monitor and assess structural condition for repairing/replacing elements before major damage or collapse state is reached. Improved techniques have enhanced inspection and monitoring of infrastructure, but assessment and interpretation of the collected data remains a challenge. In this article, a hierarchical evidential reasoning (HER) framework is proposed for the condition assessment of bridges. The approach involves using a HER framework for classifying bridge data into primary, secondary, tertiary and life safety-critical elements. The proposed HER framework combines different distress indicators (bodies of evidence) at different hierarchical levels. The information is aggregated using Dempster–Shafer (D–S) and Yager rule of combination to propagate both aleatory and epistemic uncertainties throughout the model. Furthermore, importance and reliability factors (collectively termed ‘‘credibility factor’) are introduced for discounting evidence based on importance of bridge element and reliability of the collected data. The data are systematically combined to obtain primary/secondary/tertiary/life safety-critical condition indices. Finally, an overall bridge condition index is obtained. The indices are based on information from multiple sources thereby providing a more reliable assessment of bridge condition. The HER framework is applied to data from an existing bridge in order to demonstrate application of the proposed approach.

State of Liquidity Management in Islamic Financial Institutions

Liquidity position and liquidity risk of Islamic financial institutions has been changing over time. Using three measures of liquidity this paper analyses the state of liquidity and the risk management practices of Islamic banks across countries and regions and compares them with conventional banks. It calls for creating new instruments and infrastructure for liquidity risk management and proposes fresh approaches to manage this risk.

Risk management infrastructure as a living organism

Like any complex, intelligent, adaptive organism, a financial institution depends on the performance of its critical systems, of which risk management is one. Just as the institution’s health and longevity depend on the performance of these systems, they in turn depend on the soundness of their infrastructure. This paper examines the essential elements of risk management infrastructure in a financial institution using another complex, intelligent, adaptive organism as an analogy — the human anatomy. The critical elements of the human anatomy — brain, skeleton, cardiovascular, muscular, nervous and immune systems — all have their counterparts in the infrastructure of a high-functioning risk management system. In addition to establishing this analogy, the paper will translate the insights it provides to real-life contexts, using actual examples from the financial sector to highlight the preservative effects of robust risk management infrastructure elements as well as the catastrophic effects of flawed ones.

Evolution in Risk Reporting: What’s Next?

The process of measuring, monitoring, and reporting risk has taken on increased importance during the past decade. In particular, the financial crisis of 2008–2009 highlighted the need for portfolio-level and firm-level risk management and hastened the pace of adoption of a formal risk management infrastructure for investment management firms.

Institutional Aspects of Prudential Supervision of Banks in Bosnia and Herzegovina with Special Emphasis on Banking Risk Management

The goal of this paper is to analyze banking regulation in Bosnia and Herzegovina and the progress made by banks in the management of banking risks. Basel Committee on Banking Supervision requires banks to establish a reasonable infrastructure for risk management. This infrastructure should identify, measure, monitor and control the risks that the bank is exposed to their operations. In this sense, the work was carried out research on the management of credit risk, liquidity risk and operational risk in order to gain knowledge about the progress of the banking sector in Bosnia and Herzegovina on the implementation of Basel 2. This paper represents the results of a research carried out on twenty out of thirty planned banks in Bosnia and Herzegovina that were surveyed during 2009, which makes 66.6% of the total sample (or 83.17% of total assets of the banking sector in Bosnia and Herzegovina). Summarized results of the questionnaire also showed further progress of the banks in complying with Basel 2, although it turned out that they often react to developments and changes without the existence of necessary infrastructure and business culture to keep it.

Look! Up in the Sky! It’s a Bird … It’s a Plane … It’s the Tobin Tax! Is a Global Financial Transactions Tax the World’s Next Economic Superhero?

Like the classic superheroes, a Tobin Tax has been suggested as a solution for any number of problems. In the Tobin Tax context these problems range from currency speculation (the original issue) to financial market volatility. However, a tax is only one of many options for controlling market volatility and other kinds of economic risks. Choosing the appropriate method from among the many requires a careful evaluation of economic realities as well as the capabilities and limitations of each method. For example, in the modern global economy, local financial actions have global ramifications, often in unexpected places and in unexpected ways. Yet, current risk management techniques remain primarily national. This is partly because of existing legal regimes and partly because of administrative challenges in implementing even a regional risk management infrastructure. A Tobin Tax is rumored to be able to overcome those challenges and apply broadly across differing legal regimes. At heart, a Tobin Tax is a type of financial transactions tax (FTT) – it is essentially a tax levied on one or more of many types of non-banking financial transactions. To many academics and, lately, politicians, it is a magic bullet for all manner of financial monsters. To others, it is an unwieldy, dangerous, and impractical product of ivory tower thinkers. Nonetheless, the idea has consistently gained traction in the aftermath of late-twentieth, and now early-twenty-first, century financial crises. Of course, everyone wants to avoid financial crises. But, the question is: will a FTT do that? And, even if it might, somehow, help prevent a crisis, is it a good idea to use such a tax to accomplish that goal? This paper will investigate each of these questions in the context of the 2008-2009 financial crisis.

Web cartography with open standards – A solution to cartographic challenges of environmental management

The visualization of spatial information in the form of maps is a critical task to facilitate decision making in environmental management. Web Map Services (WMS), Styled Layer Descriptor (SLD) and Symbology Encoding (SE) already created an open framework for Web mapping services. However, from the cartographic point of view, the OGC standards have several limitations for producing high quality cartographic representations. Fortunately, these standards can be cartographically enriched to fulfil the complex visualization requirements coming from environmental management. A solution to creating cartographic visualizations based on open standards was developed in the frame of two major European projects, namely ORCHESTRA (Open Architecture and Spatial Data Infrastructure for Risk Management) and SANY (Sensors Anywhere). For example, the IST – 6th Framework Integrated Project SANY, focuses on interoperability of in situ sensors and sensor networks. In this context, sensors serve as an extreme illustration for the dynamic nature of spatial information that must be represented in the form of maps. The cartographic extensions for the Symbology Encoding (SE) standards allow expressing cartographic rules with spatial operators and advanced feature filtering for layer masking, flexible point symbolization, and patterns and gradients for all spatial features. Furthermore the critical point of creating thematic maps is also solved with extensions for intuitive choropleth and various diagram types generation.

Validation techniques and performance metrics for loss given default models

This paper presents a practical framework for empirically evaluating the performance of loss given default models as part of a greater credit risk management infrastructure. It discusses the use of quantitative metrics such as the confusion matrix, the expected loss shortfall, and the loss capture ratio as part of a periodic validation/approval process.

Information Sharing for Infrastructure Risk Management: Barriers and Solutions

There is a public interest in ensuring that infrastructure systems are appropriately protected and prepared for disruptions. While infrastructure protection is usually viewed as a public responsibility, infrastructure risk management actually requires a high degree of cooperation between the public and private sectors, particularly in the sharing of information about risks to infrastructure. Discussions with Chief Security Officers across sectors of the US economy reveal the complexity of the task, as they describe at length the private sector's requirements of multiples types of information about a range of potential threats. While the US government has established many mechanisms for sharing information, barriers remain that inhibit both the private and public partners from obtaining the information needed to protect infrastructure. Overcoming these barriers requires new thinking about the intelligence generation process, the mechanisms and practices upon which the process relies, and the responsibilities of those in the private sector who participate in it.

Maintenance of flood storage reservoirs

Flood storage reservoirs are generally empty for most of the time and therefore provide some interesting, and often challenging, problems for their effective maintenance. There are a growing number of these reservoirs as the investment into flood risk management infrastructure continues to increase and there are useful lessons to be learned from the design of existing reservoirs and the maintenance issues that they pose. This paper examines some of the principal elements of these reservoirs and the problems affecting their maintenance. It considers how attention to the design or modification of them can provide for improved and more effective maintenance while at the same time affording safer working conditions for those performing the maintenance.

Hedgehog and Fox Strategies for Reducing Risks in Infrastructure Systems

In this paper, we employ the metaphors of the hedgehog and the fox, as elaborated by Isaiah Berlin and recently employed by Philip Tetlock, in order to contrast two opposite but complementary approaches to infrastructure risk management. We summarize how a combined hedgehog and fox strategy is in evidence in two peer-reviewed monographs recently published by ASCE, as well how additional activities such as those by the American Lifelines Alliance have deployed this combined strategy. We provide plausible reasons why a combined hedgehog and fox strategy can be more successful in reducing risks in civil infrastructure systems than either an exclusively hedgehog or an exclusively fox strategy.

Working with technical experts in the risk management infrastructure

One daunting challenge to public relations practitioners is the need to help foster communication between sources of industrial risk and persons who work and live in communities where the source of risk is located. Public relations practitioners often cannot serve as primary sources of information but must assist others in this endeavor. One potential group of technical experts, industrial hygienists, was studied to determine the role they believe they play in this process. Results indicate that hygienists who are employed in the industry show significant differences from non-employees, especially in terms of level of cognitive involvement, uncertainty, use of business as sources of information, perceived knowledge of risks, and confidence in industry's willingness to exert selfcontrol to abate risks. Of related importance is the prevalence of communication networks technical experts use to obtain and vet information regarding risks.

THE BARINGS CRISIS: SOME LESSONS FOR THE MANAGEMENT OF TRADING RISKS IN FINANCIAL INTERMEDIARIES

The collapse of Barings Bank in February this year provided a stark illustration of the need for adequate systems and controls in managing trading risks. This paper reviews the current advice on best practice from regulators, industry groups and government agencies. It emphasises the importance of strong corporate governance, the need for a strong risk management infrastructure, and suggests ways in which the incentives for excessive risk‐taking generated by existing systems of bonus payments might be corrected. The paper also recommends each firm perform an annual risk control assessment under the direction of its audit committee. It concludes by arguing that enhanced public disclosure has an essential role to play in providing an additional discipline on the board and senior management to ensure the adequacy of systems and controls.

Risk-management infrastructures

All major projects are subject to risk. Current research has concentrated on eliciting individuals' risk attitudes, and analysing projects to estimate overall project risk. The paper explains the need for a risk-management infrastructure. Criteria for choosing methods are described. Various techniques in current use are discussed. Issues involved in multicompany projects are noted.

Risk Management: The Key to Successful Software Projects

This paper describes a systematic approach to risk management for software projects. A brief survey of risk management is presented, various types of risks for software projects are identified, a project infrastructure for risk management is described, and a risk breakdown structure of specific techniques for risk management is presented.