Risk-based Cost-benefit Analysis Research Articles

Risk-based cost-benefit analysis of structural strengthening to mitigate disproportionate collapse of buildings under abnormal blast loading

Strengthening building structures to mitigate their likelihood of disproportionate collapse, due to initial damage produced by abnormal loads, has a significant impact on construction costs. The decision to strengthen or not needs to be taken under significant epistemic uncertainty related to potential blast hazard scenarios and threat probabilities. In this manuscript we present a novel risk-based cost-benefit analysis to address optimal and codified design options for RC buildings subject to blast hazards. Building frames of different aspect ratios (number of bays × number of stories) are addressed. Three terrorist blast hazard scenarios are considered: two VBIEDs and one smaller suitcase bomb. The large uncertainty in threat likelihood is addressed by treating annual threat probability as the independent parameter in the analyses. This makes the blast hazard analysis, and the progressive collapse analysis, independent of the factors that can make a particular building a target, like location, environment, ownership, and use. The analysis reveals the break-even hazard (threat) probabilities, which make the cost of structural strengthening equal to the reduction in expected cost of progressive collapse. For a particular building location, use, and blast threat, if the hazard probability is larger than the break-even probability, strengthening is cost-effective. The break-even point between the choices of strengthening with removal of a single or of two columns is also presented and discussed. Practical recommendations for codified Alternate Path Method include a distinction between strengthening factors for beams and columns, much in the same way as already done in conventional design.

Risk-based cost-benefit analysis of alternative vaccines against COVID-19 in Brazil: Coronavac vs. Astrazeneca vs. Pfizer

We propose a probabilistic model to quantify the cost-benefit of mass Vaccination Scenarios (VSs) against COVID-19. Through this approach, we conduct a six-month simulation, from August 31st, 2021 to March 3rd, 2022, of nine VSs, i.e., the three primary vaccine brands in Brazil (CoronaVac, AstraZeneca and Pfizer), each with three different vaccination rates (2nd doses per week). Since each vaccine has different individual-level effectiveness, we measure the population-level benefit as the probability of reaching herd immunity (HI). We quantify and categorize the cost-benefit of VSs through risk graphs that show: (i) monetary cost vs. probability of reaching HI; and (ii) number of new deaths vs. probability of reaching HI. Results show that AstraZeneca has the best cost-benefit when prioritizing acquisition costs, while Pfizer is the most cost-beneficial when prioritizing the number of deaths. This work provides helpful information that can aid public health authorities in Brazil to better plan VSs. Furthermore, our approach is not restricted to Brazil, the COVID-19 pandemic, or the mentioned vaccine brands. Indeed, the method is flexible so that this study can be a valuable reference for future cost-benefit analyses in other countries and pandemics, especially in the early stages of vaccination, when data is scarce and uncertainty is high.

Erratum: Merisalu et al. A Framework for Risk-Based Cost–Benefit Analysis for Decision Support on Hydrogeological Risks in Underground Construction. Geosciences 2021, 11, 82

The Geosciences Editorial Office would like to make the following change to this paper [...]

A Framework for Risk-Based Cost–Benefit Analysis for Decision Support on Hydrogeological Risks in Underground Construction

Construction below the ground surface and underneath the groundwater table is often associated with groundwater leakage and drawdowns in the surroundings which subsequently can result in a wide variety of risks. To avoid groundwater drawdown-associated damages, risk-reducing measures must often be implemented. Due to the hydrogeological system’s inherent variability and our incomplete knowledge of its conditions, the effects of risk-reducing measures cannot be fully known in advance and decisions must inevitably be made under uncertainty. When implementing risk-reducing measures there is always a trade-off between the measures’ benefits (reduced risk) and investment costs which needs to be balanced. In this paper, we present a framework for decision support on measures to mitigate hydrogeological risks in underground construction. The framework is developed in accordance with the guidelines from the International Standardization Organization (ISO) and comprises a full risk-management framework with focus on risk analysis and risk evaluation. Cost–benefit analysis (CBA) facilitates monetization of consequences and economic evaluation of risk mitigation. The framework includes probabilistic risk estimation of the entire cause–effect chain from groundwater leakage to the consequences of damage where expert elicitation is combined with data-driven and process-based methods, allowing for continuous updating when new knowledge is obtained.

Risk-Based Cost Benefit Analysis of Offshore Resource Centre to Support Remote Offshore Operations in Harsh Environment

Marine Logistics support during regular and emergency operations in remote North Atlantic regions is risky due to longer helicopter flying distances and extreme environmental conditions. In this paper, the safety and economic aspects of the previously introduced concept of an intermediate offshore resource centre (ORC) are evaluated. The ORC goals are to provide an intermediate helicopter landing station and a forward staging area for emergency response. Among many advantages, an ORC mitigates the logistical risk associated with the extended distance from shore support by reducing the response time in the case of accidents. This paper presents a risk-based cost-benefit analysis of the ORC. A probabilistic loss function model is developed based on the costs of historical offshore blowout incidents and their corresponding response times. The cost and benefit model is simulated in a probabilistic framework using a Monte Carlo simulation. The developed methodology and model help to assess the financial viability of an ORC in order to assist in informed decision-making regarding risk reduction measures.

Risk-based cost-benefit analysis of frame structures considering progressive collapse under column removal scenarios

The decision to design a frame structure to bridge over a column lost due to accidental loading has obvious impacts on construction costs. Moreover, not all structures are potential targets of hazards likely leading to column loss events. In this context, we propose a formulation for risk-based cost-benefit analysis of design for load bridging over failed columns. The formulation combines normal with abnormal loading conditions, treating column loss probability as an independent parameter. The proposed formulation is employed in design of continuous beams, typical RC floors and regular frame structures. The study reveals the conditions for load bridging design in frame structures to be cost-effective. We show that column loss probabilities play a major role in optimal design and reinforcement decisions. The proposed formulation allows optimal design of frame structures addressing competition between failure modes. Under discretionary column removal, competition between local bending and local pancake failures is typical of regular frame buildings, as stronger beams favor pancake compression failures.

A risk-adjusted decoupled-net-present-value model to determine the optimal concession period of BOT projects

PurposeThe net-present-value (NPV) method is well-known for its drawbacks. To overcome some of these NPV weaknesses this paper aims to provide a methodology to determine an optimal concession period that treats risk and time separately. The purpose of this paper is to apply the notion of risk-adjusted decoupled net present value (risk-adjusted DNPV) to determine a conception period taken into consideration synthetic insurance premiums as compensation for risks.Design/methodology/approachThis paper conducts theoretical and empirical analysis and provides an integrated model for deriving concession periods of any PPP projects. The model is able to capture several contractual issues such risks costing and other contractual scenarios. Methodologically, the paper addressees both the issues of risk-based cost–benefit analysis and cash flow analysis bearing an emphasis of risk-adjusted DNPV to compute an optimum concession period.FindingsThe results show that using DNPV will produce a shorter concession period comparatively to NPV. The consequence of this is that the public sector will gain financially from an earlier transfer of the concession.Research limitations/implicationsThis paper contributes to the PPP literature by combing DNPV and risk to determine the PPP concession period for the mutual benefits both the private and public sectors. The decoupling of risk from traditional NPV computation will allow for risk pricing and tradability through insurance and allocation.Originality/valueThe attempt to decouple time and risk in the computation of NPV is the added value to the body of knowledge.

Risk-based cost-benefit analysis of climate adaptation measures for Australian contemporary houses under extreme winds

Climate adaptation measures improve housing resilience to extreme winds, and reduce economic losses associated with wind and rainfall damage under a changing climate. Several adaptation measures are adopted in this study for Australian contemporary houses subjected to non-cyclonic windstorms to either reinforce the building envelope or increase the water resistance of building interior. A risk-based cost-benefit analysis is conducted to evaluate the cost-effectiveness of these adaptation measures that considers the effect of construction defects. It was found that the annual expected losses for houses in Brisbane with construction defects are considerably higher than those without considering construction defects, whereas the influence of construction defects is lower for the Melbourne houses. The cost-benefit analysis reveals that strengthening windows is cost-effective for Brisbane and Melbourne houses. Installing window shutters significantly reduces economic risks associated with extreme winds and is cost-effective for houses in Brisbane. Adaptation measures are generally not cost-effective for Melbourne houses due to lower extreme wind speed and associated rainfall.

Risk-based cost-benefit analysis for the retrofit of bridges exposed to extreme hydrologic events considering multiple failure modes

Bridges exposed to flooding, hurricanes, tsunamis, and other extreme hydrologic events have been observed to fail due to deck dislodgement, pier failure, or foundation failure. However, the risk assessment and retrofit methodologies for these bridges have typically only been developed around a single failure mode. This paper addresses this gap by integrating the three observed failure modes for bridges vulnerable to extreme hydraulic events into a comprehensive risk assessment framework. Through the use of an event tree, the methodology accounts for the different consequences of failure associated with different failure modes. Bridge management strategies are investigated to determine the effectiveness of the retrofit actions with respect to their benefit (i.e. reduction in risk) and costs. An illustrative example for riverine bridges under various exposure scenarios is presented. The risk assessment and benefit-cost analysis elucidate the need to incorporate all pertinent failure modes of the structure by highlighting the competing nature of different failure modes. The illustrative example shows that the effective management of structures is site-specific and, that the intensity of the hazard at the bridge location affects which management strategy is preferred. The sensitivity to exposure level indicates that the optimal management of the structure should incorporate considerations for potential future changes in the intensity and frequency of the hazard.

Risk-based cost-benefit analysis for evaluating microbial risk mitigation in a drinking water system.

Waterborne outbreaks of gastrointestinal diseases can cause large costs to society. Risk management needs to be holistic and transparent in order to reduce these risks in an effective manner. Microbial risk mitigation measures in a drinking water system were investigated using a novel approach combining probabilistic risk assessment and cost-benefit analysis. Lake Vomb in Sweden was used to exemplify and illustrate the risk-based decision model. Four mitigation alternatives were compared, where the first three alternatives, A1-A3, represented connecting 25, 50 and 75%, respectively, of on-site wastewater treatment systems in the catchment to the municipal wastewater treatment plant. The fourth alternative, A4, represented installing a UV-disinfection unit in the drinking water treatment plant. Quantitative microbial risk assessment was used to estimate the positive health effects in terms of quality adjusted life years (QALYs), resulting from the four mitigation alternatives. The health benefits were monetised using a unit cost per QALY. For each mitigation alternative, the net present value of health and environmental benefits and investment, maintenance and running costs was calculated. The results showed that only A4 can reduce the risk (probability of infection) below the World Health Organization guidelines of 10-4 infections per person per year (looking at the 95th percentile). Furthermore, all alternatives resulted in a negative net present value. However, the net present value would be positive (looking at the 50th percentile using a 1% discount rate) if non-monetised benefits (e.g. increased property value divided evenly over the studied time horizon and reduced microbial risks posed to animals), estimated at 800-1200 SEK (€100-150) per connected on-site wastewater treatment system per year, were included. This risk-based decision model creates a robust and transparent decision support tool. It is flexible enough to be tailored and applied to local settings of drinking water systems. The model provides a clear and holistic structure for decisions related to microbial risk mitigation. To improve the decision model, we suggest to further develop the valuation and monetisation of health effects and to refine the propagation of uncertainties and variabilities between the included methods.

Reviewing estimates of the economic efficiency of disaster risk management: opportunities and limitations of using risk-based cost–benefit analysis

There is a lot of rhetoric suggesting that disaster risk reduction (DRR) pays, yet surprisingly little in the way of hard facts. This review paper examines the evidence regarding the economic efficiency of DRM based on CBA. Specifically, it addresses the following questions: What can be said about current and best practice regarding CBA for DRR including limitations and alternatives? And, what, if at all, can be said in terms of quantitative insight for informing policy and practice? The review compares the documented evidence on the net benefits over a range of disaster management interventions, such as risk reduction, preparedness and risk financing. The review also critically discusses the applicability of cost–benefit analysis as well as other economic decision-supporting tools for assessing the efficiency of certain DRM interventions. Disaster risk is characterized by variability, which requires a risk-based assessment. As a key best practice criterion, and in order to avoid overestimating the benefits and returns on investment, the review focuses on studies that provide a risk-based estimate of benefits. This review shows that for the limited evidence reported the economic case for DRM across a range of hazards is strong and that the benefits of investing in DRM outweigh the costs of doing so on average, by about four times the cost in terms of avoided and reduced losses. In an age of austerity, cost–benefit analysis continues to be an important tool for prioritizing efficient DRM measures but with a shifting emphasis from infrastructure-based options (hard resilience) to preparedness and systemic interventions (soft resilience), other tools such as cost-effectiveness analysis, multi-criteria analysis and robust decision-making approaches deserve more attention.

Economic analysis of adaptive strategies for flood risk management under climate change

Climate change requires reconsideration of flood risk management strategies. Cost-benefit analysis (CBA), an economic decision-support tool, has been widely applied to assess these strategies. This paper aims to describe and discuss probabilistic extensions of CBA to identify welfare-maximising flood risk management strategies under climate change. First, uncertainty about the changes in return periods of hydro-meteorological extremes is introduced by probability-weighted climate scenarios. Second, the analysis is extended by learning about climate change impacts. Learning occurs upon the probabilistic arrival of information. We distinguish between learning from scientific progress, from statistical evidence and from flood disasters. These probabilistic extensions can be used to analyse and compare the economic efficiency and flexibility of flood risk management strategies under climate change. We offer a critical discussion of the scope of such extensions and options for increasing flexibility. We find that uncertainty reduction from scientific progress may reduce initial investments, while other types of learning may increase initial investments. This requires analysing effects of different types of learning. We also find that probabilistic information about climate change impacts and learning is imprecise. We conclude that risk-based CBA with learning improves the flexibility of flood risk management strategies under climate change. However, CBA provides subjective estimates of expected outcomes and reflects different decision-maker preferences than those captured in robustness analyses. We therefore advocate robustness analysis in addition to, or combined with, cost-benefit analysis to support local investment decisions on flood risk reduction and global strategies on allocation of adaptation funds for flood risk management.

Economic risk analysis for sustainable urban development: validation of framework and decision support technique

Sustainable urban development requires detailed assessment of economic, environmental and social impacts borne by major stakeholders. A framework to address these complex issues underpinning sustainable urban development is proposed to aid decision making in the face of uncertainties. An analytical approach is developed as a tool to assist decision makers by using an engineering approach, risk-based cost-benefit analysis model that encompasses concepts from “Life Cycle Costing”, “Engineering Reliability Analysis” and “Risk Management”. It aims to rank design options based on model outputs, such as rate of return, probability of loss and value at risk. This study presents the logic of this approach and tests the framework using a synthetic project formulated around the economic perspective of an investor in considering the implementation of various desalination plant technologies. Two alternative desalination plants were evaluated based on a collective of project information, and the results showed that the model output provided a clear indication of the preferred option using risk-based metrics.

Review of QTRA and Risk-based Cost-benefit Assessment of Tree Management

Quantified Risk Assessment (QRA) has been in wide use in risk management since the 1960s for systems ranging from aviation, nuclear power, and offshore platforms to medical treatment and pharmaceuticals. The Quantified Tree Risk Assessment (QTRA) system is examined considering the principles of QRA. A case study of 14 fig trees in Newcastle, Australia, illustrates some limitations of the QTRA process, and extrapolating risks for a single tree to a group of trees. There is a need for any risk management process involving trees, not only to assess the risk, but to weigh the benefits provided by trees by a risk-based cost-benefit analysis. Tree risk assessors should rely on benchmarks to ensure that their assessment is not outside of the realms of reality or scientific rigor.

Cyclone Damage Risks Caused by Enhanced Greenhouse Conditions and Economic Viability of Strengthened Residential Construction

Hurricanes and tropical cyclones constitute significant sources of economic loss and social disruption. Furthermore, according to the Intergovernmental Panel on Climate Change, enhanced greenhouse conditions may increase the intensity and/or frequency of tropical cyclones (hurricanes), which potentially will result in more wind damage. The paper develops a risk-cost-benefit framework to assess regional cyclone damage risks and economic viability of several hazard mitigation strategies to address the challenge of potential increase in wind damage due to enhanced greenhouse conditions, using residential construction in North Queensland, Australia as an example. The analysis includes a probabilistic wind model to account for cyclone intensity and frequency, and a vulnerability function to represent the potential damage for a given wind speed. Increases in mean annual maximum wind speed from 0 to 25% over 50 years are considered to represent the uncertainty in changing wind hazard patterns as a result of climate change. The effect of regional changes to building inventory, rate of retrofitting, cost of retrofit, reduction in vulnerability, and discount rate will be considered. The risk-based cost-benefit analysis can be used to help optimize the timing and extent of retrofitting existing houses to adapt to the potential impact of enhanced greenhouse conditions.