Decision Risk Management (DRM) [Jan 2006]
An aid to complex decision making
Decision Risk Management (DRM)
An aid to complex decision making
What is DRM?
All organisations have to make decisions - and many organisations subscribe to a relatively fixed scheme of procedures to manage decisions from the initial consideration stage through to final agreement of required actions.
For relatively straightforward issues, this approach works. However, organisations can encounter significant difficulties when the decision involves complex issues such as:
- Significant investment
- A diverse range of interest groups
- Conflicting objectives
- Significant risks and uncertainties
- Constraints
Decision Risk Management (DRM) uses meetings chaired by skilled practitioners to help organisations make complex decisions in a structured and auditable way that fully accounts for uncertainty. The techniques used at such meetings were originally conceived for military logistics purposes but developed to improve the quality of decision-making in the electricity generation industry - particularly with regard to nuclear power stations and nuclear fuel reprocessing. The DRM approach proved so effective that it became increasingly adopted by the oil and gas industry. However, because it is essentially a management approach, its benefits are readily transferable to other complex undertakings - including the water industry.
The benefits include:
- Ensuring that expert opinions are fully understood
- Identifying the best strategy
- Enabling all interest groups to reach agreement
- Providing an audit trail for future assessments
Ofwat (the economic regulator for the water and sewerage industry in England and Wales) will support well-structured and well-argued business cases that assist the assessment and approval of water industry projects. DRM can play a vital role in ensuring that the decision making associated with the preparation of such business cases is of the highest, fully auditable, quality - and is understood by all parties.
Why is it necessary?
Personal, subjective judgements regarding values and uncertainties are important factors in decision making - but decision-makers sometimes consider that analytical management procedures tend to ignore these subjective judgements and produce an 'optimal' decision based solely on objective inputs. The DRM approach, however, allows the inclusion of subjective judgements. Indeed, DRM requires subjective judgments because it recognises that they are important elements in arriving at good decisions.
Nevertheless, it is essential to remember that humans cannot be relied upon to be perfect processors of information. Subjective judgements can be misleading - particularly if the person making the judgement displays a high degree of confidence. DRM techniques take account of the limitations of human cognitive capabilities. This is critically important because decision makers who fail to assess and incorporate subjective judgements competently can magnify, rather than adjust for, human shortcomings.
How does it work?
Specifically, DRM:
- Helps define the scope of the situation facing the decision-makers
- Elicits objectives, data and concerns from the interest groups
- Identifies a fit-for-purpose analysis methodology
- Undertakes quantitative modelling of technical, environmental and economic issues. This process captures (i) the science and engineering practicalities of a potential strategy and (ii) the essential elements of different concerns - and combines them into a common value measure. This measure is usually economic-based, but can be based on other considerations
- Explains to the interest groups why a particular strategy is best
DRM in action - a case study
The situation described here demonstrates the contribution made by the use of risk analysis techniques to assist in framing a complex decision relating to the management of water produced from an oil reservoir - and also how best to handle the drill cuttings generated by the drilling of oil wells.
Water produced in association with oil is highly non-potable - and rock cuttings generated from drilling oil wells would be of various rock-types (including, in this case, salt lithologies) and could contain large volumes of potential pollutants (e.g. hydrocarbons and drilling muds).
Part of the complexity inherent in this case study stemmed from the fact that several large organisations, each from a different country and with different business cultures, were partnered in the development and production of a large hydrocarbon asset. This asset has been in production for some years - and current plans are such that it is now moving towards the next phase of development.
Crucial in successfully addressing a complex multi-disciplinary problem such as water and waste handling for an oil field is the preparation and management of an effective discussion forum (workshop) that brings together all interested parties, and enables them to agree on a mutually acceptable, structured and auditable method of addressing the issues and producing sound decisions.
In this case, participants in a series of workshops agreed that the key aims were to:
- Frame potential waste strategies for produced/process water and drill cuttings
- Select the optimum strategy from those identified
- Identify the "champions" responsible for successfully delivering the strategy for each waste stream
- Provide a decision audit trail which justified each chosen strategy
One of the cornerstone techniques used as part of a workshop for DRM is the construction of an objectives network diagram. Such diagrams are built up by describing the highest level objective for the interested parties - in this case 'full exploitation of the hydrocarbon reservoir in a socially responsible way', and then establishing subsidiary objectives by asking the question 'How do we achieve this?'
When produced by skilled practitioners, these diagrams provide a clear illustration of the inter-relationship of key objectives involved in making a given decision - and the framework around which the decision needs to be investigated. The objectives for the waste strategy are illustrated in Fig 1 and show the interconnections
between the various technical, legal and social responsibilities involved in the problem. (The Figs used in this case study are highly specific to the oil project described. In the context of this article, however, they are intended only to illustrate the procedures used.)
To progress a good decision requires a sound foundation on which to build - and this entails agreement of a common set of rules and 'givens' i.e. parameters or decisions that can be accepted by all parties as being fixed or decided - and thus not requiring examination and discussion in a repetitive and non-productive cycle. One of the most useful techniques which can be applied here is to use a Decision Pyramid (Fig 2). This categorises decisions and issues into those which are 'given'; those which must be considered at the current time ('for now'); and those which will not be dealt with at the current time because they are outside the scope of the problem, or small in their impact ('for later'). This is a powerful technique for establishing documented clarity on issues such as timings and budgets - which can often be a source of confusion when partner groups with differing business cultures come together.
With this identification of 'given', 'for now' and 'for later' issues, and with the objectives interconnected and structured by the objectives network, the workshop was able to identify the following eight decisions for focussed consideration:
- Subsurface disposal route
- Subsurface location
- Size of interim storage
- Surface storage location
- Interim storage operator
- Segregation of drill cuttings streams
- Endpoints
Each of these decisions had a variety of associated decision options - and several discrete strategies were defined by combining specific decisions options. These strategies summarised a reasoned - and reasonable - range of approaches that could be applied to the decision under consideration. As all parties had previously agreed with the inputs, this range of possible strategies represented clearly defined options that could be progressed using structured ranking.
Sub-issues were identified en-route that various parties believed required further analysis. One of these concerned threats and solutions pertaining to waste water management. Structure was given to these by using a Mind Map approach, which identified sub-issues associated with management requirements, water volumes uncertainty, water shortage etc (Fig 3).
Similarly, options for handling produced water were also summarised on a Mind Map. Mind Maps present only a selection of choices, or a list of techniques. This information was developed into a Decision Tree which is an alternative to using a Strategy Table. The Decision Tree defines a number of options. Progressing this to a decision requires assessment, for which a range of approaches are available.
For example:
- o Show of hands
- Threat/benefit log - followed by voting
- Weighted ranking against a list of objectives
- Quantitative decision risk model
It is important to select a 'fit-for-purpose' level of assessment. This will depend on the complexity of the decision and the time available. In this instance, a Threat/Benefit log was selected and the 'pluses and minuses' of each strategy under consideration were recorded, these typically are explicitly technical.
Having defined and agreed the strategies, and discussed the pros and cons of each one, the participants were able to vote on the strategies and select the best way forward.
The DRM approach explained in this article enabled a diverse group of partners to rapidly and efficiently construct an auditable structure around a complex decision - and do it in such a way that all the partners could agree that the decision had been considered correctly and with due regard to the relative importance of all the parameters involved.
The skilled preparation and execution of workshops, and the correct selection of the appropriate techniques to apply to the problem, were essential to enable the decision to be made with the unreserved acceptance of all the partners.
The DRM approach can be applied to many complex decisions
Author
Dr. Pete Naylor is a Decision Risk Management consultant with RPS. Based at Winfrith in Dorset, UK, he works closely with clients - helping them to make complex strategic and operational decisions in a structured and auditable way, taking full account of uncertainties. He has worked in the upstream oil & gas, water and nuclear industries. Example applications of DRM include asset development, asset management, asset integrity and value-of-information decisions. He is a Chartered Engineer, a Chartered Scientist and a Fellow of the Institution of Chemical Engineers. The RPS Group is an international consultancy providing advice on the responsible development of natural resources, land and property, the management of the environment and the health and safety of people. www.rpsgroup.com
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