Because acting proactively is difficult

2011 Degrees of Risk_Defining a Risk Management Framework for Climate Security_Full Report

Quote is from Machiavelli

Risk management needs to be fundamentally decision maker focused. It serves as a tool to

guide decisions and promote productive exchanges among empowered stakeholders. It

provides the basis for comparison between different policy choices, allowing decision makers

to compare likely human and financial costs and benefits of investing in prevention, adaptation

and contingency responses. While risk management responses must be tailored to fit

national (and sub-national) circumstances, having a common risk management framework

can promote alliances and partnerships based on common interests and shared vulnerabilities,

and reflect complementary strengths and role specialization.

One basic challenge with climate policy is that decision-making is diffuse. Among major

public policy issues, climate policy is perhaps the issue with the largest number of crucial

decision points. Not only is this an issue requiring international cooperation to produce

effective policy, but any strategy will also require significant cooperation from sub-national

government actors as well as a myriad of private sector concerns. Some of the most effective

tools of mitigating climate change require broad-based cooperation from millions of

individual citizens, for example, in energy conservation and efficiency measures.

An effective risk management framework requires first identifying the risk managers and the

environments that shape their risk management response. Confusing environments, perverse

incentives and insufficient public oversight can lead to poor or non-existent risk management

strategies, with disastrous consequences. For example, the way in which the financial sector

was bailed out after the poor investment choices that created the 2008 financial crisis essentially

socialized losses while privatizing gains, giving risk managers in that sector little incentive to

employ more effective risk management in the future. Similarly, the companies involved in the

2010 Deep Horizon oil spill were responding to an environment where liability was capped at

a level that was not significant when compared to expected returns, and government oversight

entities were ineffective. While adjustments are underway, the existing policy environment

provided little incentive for rigorous internal oversight or disaster response planning.

Risk management approaches do not provide absolute answers but depend on the values,

vulnerabilities, interests, perceptions and risk appetites of specific decision makers. Risk management

is as much about who manages a risk as what a risk is, and must always consider who is

best placed to actually influence outcomes. For example, The Maldives will have a different risk

management strategy to Russia; in India subsistence farmers will balance risks differently from

the steel industry. Legitimate differences in risk management strategies will form much of the

on-going substance of climate change politics at national and international levels. All societies

continually run public debates on similar existential issues such as the balance of nuclear deterrence

vs. disarmament, or civil liberties vs. anti-terrorism legislation. Decisions are constantly

made even when significant societal differences remain over the right balance of action.

Decision makers will generally tend to act rationally, but they can only do so if they are, in fact,

receiving accurate risk and reward signals. Often they do not receive these signals. They are

subject to organizational bias, work with incomplete information, run up against institutional

limitations, and/or have immediate political and institutional imperatives which bias against

responding to information. Fundamentally, the complexity of the world must be addressed

with imprecise tools and institutions that are ill equipped to deal with complex systems. These

institutional limitations are significant in the field of climate change. The author Upton Sinclair

famously noted in the 1930s, “It is difficult to get a man to understand something when his

salary depends upon his not understanding it.”215