Risks and uncertainty

When considering exploration economics, the possibility of spending funds with no future returns must be taken into account. A typical world-wide success rate for rank exploration activity is one commercial discovery for every ten wells drilled. Hence a probabilistic estimation of the reserves resulting from exploration activity must take into account the main risks and uncertainties in the volume of hydrocarbons in place, the recoverable hydrocarbons, and importantly the risk of finding no hydrocarbons at all. 

Economy of time and resources dictate using the smallest sized faciHty possible to assure that projected larger scale performance is within tolerable levels of risk and uncertainty. Minimum sizes of such laboratory and pilot units often are set by operabiHty factors not directly involving internal reactor features. These include feed and product transfer line diameters, inventory control in feed and product separation systems, and preheat and temperature maintenance requirements. Most of these extraneous factors favor large units. Large industrial plants can be operated with high service factors for years, whereas it is not unusual for pilot units to operate at sustained conditions for only days or even hours. 

Risk and uncertainty associated with each venture should translate, ia theory, iato a minimum acceptable net return rate for that venture. Whereas this translation is often accompHshed implicitly by an experienced manager, any formal procedure suffers from the lack of an equation relating the NRR to risk, as well as the lack of suitable risk data. A weaker alternative is the selection of a minimum acceptable net return rate averaged for a class of proposed ventures. The needed database, from a collection of previous process ventures, consists of NPV, iavestment, venture life, inflation, process novelty, decision (acceptance or rejection), and result data. 

The two principal approaches of interest for situations involving risk and uncertainty are decision trees and Monte Carlo simulation (26,29,30). 

Risk and Uncertainty Discounted-cash-flow rates of return (DCFRR) and net present values (NPV) for future projects can never be predicted absolutely because the cash-flow data for such projects are subject to uncertainty. Therefore, when stating predicted values of (DCFRR) and (NPV) for projects, it is also desirable to give a measure of confidence in the predictions. 

Money does not hold the same value for each company or each individual. A dollar may keep a pauper from starvation while being a trivial amount to the person who gave it. Attempts have been made to quantify a company s attitude to money, risk, and uncertainty by asking business executives a number of questions such as the following ... 

Managing risk and uncertainty was increasingly seen as a priority in recent conferences, reflected in these comments from R D management interviews ... 

The visualization of trade-offs involving risk and uncertainty is clearly one such powerful aid to insight. Questions frequently encountered are Where should in silico and other predictive technologies best be applied within the R D process What workflows involving such technologies add most value What should be the approach to selecting cutoffs ... 

Lohani, B., Evans, J., Everitt, R., Ludwig, H., Carpenter, R., Tu, S-L. (1997). Risk and Uncertainty in Environmental Impact Assessment In Environmental Impact Assessment for Developing Countries in Asia. Vol. 1. Manila Asian Development Bank (ADB), Philippines. 

In sum, if viewed apolitically, the problem of chemical hazards tends not to include considerations of (1) who gains and loses in risk decisions, (2) what logics and forces act on firms making such decisions, and (3) what responsibilities contemporary consumers are increasingly faced with, under the conditions of risk and uncertainty that result. A political approach to the risk ecology of the lawn, which addresses all these issues, seems relevant for understanding the problem. 

Q Interpreting and Communicating Risk and Uncertainty for Decision Making... 

There are many reasons why communicating risk and uncertainty to stakeholders and participants is critical to an informed assessment but 3 are, perhaps, most fundamental. First, participants (especially stakeholders with expertise in topics germane to probabilistic risk assessment or a particular assessment), if given opportunities to interact with practitioners, can contribute information and perspectives that could help focus and... 

Viscusi, W. Kip, and Joseph E. Aldy. 2003. The Value of a Statistical Life A Critical Review of Market Estimates throughout the World. Journal of Risk and Uncertainty 27(l) 5-76. 

Managing risks and uncertainties Historical swings in demand and prices are likely to be amplified as the unpredictable Chinese market grows in importance (see Chapter 6). 

However, there are hurdles to be overcome, and companies pursuing such growth will have to manage risks and uncertainties, plan their growth routes carefully, and build critical organizational skills. 

Finally, in order to capture the value, petrochemical companies need to excel along the dimensions of business intelligence, microeconomic rigor, management of risks and uncertainties, organizational excellence, and execution. 

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