Guidelines for Environmental Risk Assessment and Management
[This document refers, in a number of instances, to the then Department of the Environment, Transport and the Regions (DETR). The text of this document has not been updated since the transfer of environmental protection functions to Defra.]
Chapter 8
Options appraisal and decision-making
8.1 Introduction
Options appraisal is the process of identifying the 'best' risk management technique. This may involve scoring, weighting and reporting different risk management options. Various criteria are used for identifying the 'best' option, according to context, but a common framework is to seek to maximise some long-term definition of human well-being such as sustainability, net social benefit or value for money. Key inputs for this process are the controlling factors for each risk identified during the problem formulation stage (Chapter 4). For instance, if a controlling factor is the level of investment in monitoring and control equipment, then options appraisal can focus on those issues immediately.
An appraisal process normally involves identifying and reporting the benefits and costs of options, and then ranking those options with regard to the appropriate criteria, and risk management is no different. Relevant options may include emerging technologies and management techniques which reduce a risk's frequency or consequences. Social issues and the perceptions and aspirations of the public should also be considered as part of the process (Chapter 7). Combining all of these elements permits a systematic comparison of options for risk management. The process may be iterative, with options appraisal feeding back to the various tiers of risk assessment (Figure 2.1 and Section 8.4 ).
General risk management options
There are three main options available to the risk manager when presented with a risk problem. The options are to: reject the intention altogether because it poses unacceptable risks; accept whatever risk is imposed; or reduce the risk in some way, by doing one or more of the following: modifying the receiving environment or hazard; modifying or avoiding exposure; or modifying the effects or consequences of a risk.
8.2 Trade-off analysis: methods for decision-making
This section outlines some of the systematic methods that can be used for comparing and evaluating (or trading off) alternative risk management options. There is no universal decision-focused method suitable for all circumstances, rather, selection or adaptation of an existing methodology or development of a new methodology will be necessary.
All good policy decisions rely on the effective analysis of alternative options. Therefore, a systematic appraisal is important to ensure that the decision-maker is clear about the objectives and how to decide where the balance lies between the benefits from the reduction of the risk and the implications for society of introducing potential control measures. A systematic appraisal of the options will be the process of identifying, quantifying and weighting the costs and benefits of the measures which have been identified as means of implementation. This process must include all implications of the potential options, and not just those that can be quantified.
All appraisals should involve a systematic approach. This is generally best achieved through a step-by-step process to help guide the decision-maker through the development of the strategy in a structured way. Each appraisal will require varying degrees of emphasis at different stages depending on the individual circumstances, but a common framework can be envisaged consisting of the following steps:
- Identification of the objective, ensuring a clear and common understanding of what is the desired outcome.
- Identification of the options. In most cases there will be options that are obvious to the decision-maker. Some will be less applicable than others and it will be necessary to identify those that have the potential, either in whole or part, to meet the objective.
- The options identified will need to be implemented using various tools, such as policy instruments, economic measures or regulations. Consideration should be given to the selection of those most appropriate while recognising that they will not be mutually exclusive and a combination of one or more may be appropriate for one or more options.
- Identification of the impacts of the options. This will require collection of data from those stakeholders that will be affected by potential measures. Close consideration should be given to the implications of changes in working methods (good and bad) to meet the objective.
- Clarify the decision criteria such as the economic costs, the implications of change, and the human health and environmental benefits.
- Compare the advantages and drawbacks for each option including the trade-off between quantified and qualitative data to draw conclusions.
Some of the techniques for taking forward such a systematic appraisal are summarised below.
Environmental impact assessmentEnvironmental impact assessment (EIA) is a widely used procedure for systematically assessing the environmental impacts of proposed projects. It is a legal requirement for certain projects likely to have significant effects on the environment. Information on the environmental effects of a project, and the main alternatives, is documented in a form which provides a focus for public scrutiny of the project. It enables the importance of the predicted effects, and the scope for mitigating them, to be evaluated before a decision is made as to whether the project can proceed. Under EIA there is no requirement to produce monetary evaluations of environmental impacts and no requirement to consider formally the costs of risk management options.
Strategic environmental assessmentStrategic environmental assessment (SEA) is closely allied to EIA but focuses on the potential environmental effects of policies, plans or programmes (PPPs) as opposed to individual projects or developments. PPPs may be concerned with programmes of development (eg transport or power networks), geographical areas (eg local authority areas, regions or countries), types of area (eg cities or shorelines), or economic sectors (eg mining or agriculture). SEA uses a range of techniques to predict both the direct effects of PPPs and their interaction with other PPPs and activities.
The Government requires environmental effects to be considered in decision-making at all levels and SEA is widely undertaken in this context and as part of the assessment framework for sustainable development. The European Commission has proposed a directive requiring SEA of a range of plans and programmes which are likely to have significant effects on the environment. The Directive is expected to be adopted around the end of 2000, with Member States then having three years to incorporate it into national law.
Cost-benefit analysisCost-benefit analysis (CBA) involves expressing as many costs and benefits as possible in terms of the monetary or other value placed on them by society, and deriving the net benefit. This is a very general technique, but it has stringent information requirements. A particular area of difficulty is choice of a discount rate which may discriminate unduly against long-term options.
In many CBAs there will be effects that cannot be given a monetary value and there will sometimes be key environmental assets which cannot readily be valued. Where there is no market for an environmental good, techniques for monetary valuation exist that measure people's preferences. These techniques need to be used with caution, as the values they produce may not always be robust for their intended (or unintended) uses. There is always a danger with valuation techniques of placing too much emphasis on those attributes that can be measured at the expense of those that cannot. Such approaches to trade-off often require the specialist advice of environmental economists. They are summarised in HM Treasury's 'Green Book', Appraisal and Evaluation in Central Government.
Environmental capitalConsideration of environmental capital is a more recent and unique approach. It rests on the idea that the environment consists of assets which can provide a stream of benefits or services as long as care is taken not to damage them. A distinction is often made between 'critical', 'constant' and 'tradable' environmental capital.
Ranking, rating and weightingFurther methods have been developed involving ranking, rating or scaling and weighting to compare alternative options. These involve summarising both quantitative and qualitative information on alternative options using the assignment of a rank, rating or scale value relative to each of a number of decision factors or criteria. These decision factors can include the economic costs and benefits of the intention, social and political perspectives, and so on. Ranking involves placing options from best to worst; scaling refers to the assignment of algebraic or letter scales; and rating employs a pre-defined range. The rank, rating or scale value is then presented in a matrix to aid decision-making.
A trade-off analysis using a weighting approach involves weighting the relative importance of each decision factor. Such an approach will always be open to criticism because the weights may be seen as arbitrary or biased. Although some methods are available, experience indicates that it may be difficult to reach a consensus about the appropriate weights to be allocated. It is desirable to undertake sensitivity analysis on the scores and weights attached to different criteria (Section 6.3).
The techniques summarised above can be incorporated into what is termed multi-criteria, or multi-attribute, analysis. This approach involves multiplying the weighting for each decision factor by the rank, rating or scale value of each option. The resulting products are then totalled to arrive at an overall score for each option.
8.3 Which technique?
Any particular technique selected for trade-off analysis will have inherent assumptions and limitations and these should be stated for the purposes of openness and transparency. The results of a particular analysis should be seen as an aid to decision-making, rather than providing a definitive answer on the preferred option.
Unless the intention is very simple it will be necessary to revisit some or all stages in the risk assessment process. Certainly, the decision-making process may highlight significant information gaps not identified at an earlier stage. The problem is in balancing an understandable desire to gather ever more information before choosing a course of action with the need to make a timely decision. Lack of information should not be used as an excuse for postponing or avoiding decision-making. Significant information gaps may be cause to invoke the precautionary principle (Section 1.6).
If the risks associated with an intention are acceptable then the intention can go ahead. If an intention presents unacceptably high risks, however, then mitigatory options will be required. This can include not undertaking the intention and thereby completely avoiding the risk (but also forfeiting any benefits that might have resulted). Each risk management option should be reassessed through the risk assessment process to determine whether it reduces the risks to an acceptable level. Each option may introduce new risks and the reassessment should not just be a review of what has already been considered.
8.5 Risk communication and decision-making
During options appraisal it will normally be necessary, as in all preceding stages, to engage in dialogue with relevant stakeholders. The guidance provided in Chapter 3 is as relevant to the risk management process as it is to risk assessment.
The case studies in Annex I provide examples of how decisions were reached in some particular instances.
8.6 Further information
Key references
Department of the Environment (1991) Policy Appraisal and
the Environment, London, UK, HMSO
This document highlights the need to examine environmental impacts
within policy decision analyses.
EFTEC for DETR (1998) Review of the Technical Guidance on Environmental Appraisal, London, UK, DETR
Environment Agency (1997) Taking Account of Costs and Benefits,
Bristol, UK, Environment Agency
Provides guidance for Environment Agency staff on how the 'Cost and
benefits' duty in Section 39 of the Environment Act 1995 may be carried
out.
HM Treasury (1997) Appraisal and Evaluation in Central Government:
Treasury Guidance, London, UK, TSO
This document deals with risk and environmental impacts as aspects
of the general appraisal framework for projects, programmes and policies.
Presidential/Congressional Commission on Risk Assessment and Risk
Management (1997) Framework for Environmental Health Risk Management
(Final Report), Vol. 1, Washington DC, USA, Presidential/Congressional
Commission on Risk Assessment and Risk Management
Presidential/Congressional Commission on Risk Assessment and Risk Management
(1997) Risk Assessment and Risk Management in Regulatory Decision Making
(Final Report), Vol. 2, Washington DC, USA, Presidential/Congressional
Commission on Risk Assessment and Risk Management
A particularly useful reference in discussing the role and involvement
of stakeholders.
Key periodicals
Journal of Environmental Assessment Policy and Management
Journal of Environmental Management
Project Appraisal
Risk Analysis
Sustainable Development
Page published 2 August
2000;
Page last modified
19 September, 2002