FINK AND RISK

A qualitative method of displaying risk for decision making

Walter G. Green III, Ph.D., FACCP

Disaster Theory Series No. 10Copyright 2008 by Walter G. Green III

FIVE BASIC QUESTIONS 1. How intense will it be and how quickly

will it develop? 2. Will there be media or regulatory

scrutiny? 3. Will it interfere with the ability to do

business 4. Are you culpable and are you liable? 5. How will the bottom line be damaged?

A POSSIBLE MODIFIED SET OF QUESTIONS FOR GOVERNMENT

1. How intense will it be and how quickly will it develop?

2. How prepared are you for the event? 3. What will be the damage – lives lost,

injuries, economic impact, disruption? 4. What are the political impacts? How will

the media treat us? 5. What will recovery be like?

FIVE BASIC QUESTIONS Each question is rated from 0 to 10,

with 0 being minimal to no impact and 10 being catastrophic impact.

Ratings are qualitative and subjective, but can be increased in objectivity by using your company’s experience and the similar experiences of other businesses.

QUESTION 1 - ISSUES

What level of intensity can you stand for how long?

What is your definition of intense?

QUESTION 2 - ISSUES

News media interest and coverage of your role – front page versus back page versus none?

Will state and/or federal regulators be involved?

QUESTION 3 - ISSUES

Ability to ship product or provide services?

Supply chain and inventory impacts? Ability to pay creditors? Diverts attention from routine, must-

do items? Personal impact on decision makers?

QUESTION 4 - ISSUES

Are you the victim or the cause? Have you a history of careless

operations or violations that could have caused this?

Have you shown due diligence? Do you have positive credit in the

image bank?

QUESTION 5 - ISSUES

Direct impact on the financial numbers?

Indirect losses – productivity, staff, workers claims, absenteeism, etc.

Reputational loss

IMPACT VALUE

Add the scores for the 5 questions and divide by 5.

This average is plotted on a vertical scale from 0 (low) to 10 (high) with 5 as the mid-point.

PROBABILITY Probability is computed on a

percentage basis. Use all available data on incident

frequency, related to a time line. For example, a 100 year flood does not

happen every 100 years – it is a flood that on average happens once every 100 years – a 1% probability each year

PROBABILITY

If you lack your own data for hazards, look at: the community’s hazard and

vulnerability analysis National Weather Service or Geological

Survey data local historical data experience of others in similar industries

PROBABILITY

And be sure to adjust for: your location may have a greater

probability of a particular event – it is hard to have a train wreck in your front yard if you are 2 miles from the tracks

changes in the environment since the data was gathered

HORIZONS Defining your planning horizon is critical.

for regular events, if your planning horizon is inside event recurrence, probability approaches 0

if recurrence is inside the horizon, probability approaches certainty

For irregular events with data to support analysis, apply forecasting and trend analysis techniques to determine probability

PROBABILITY

Divide the percentage by 10 and plot the resulting number on a horizontal scale of from 0 (no probability) to 10 (certainty).

The horizontal probability scale intersects with the vertical impact scale at 5.

DATA PERFECTION More accurate data for impact and

probability = more exact grid location … but, given the variability in events,

best estimates are good enough … … too much “accuracy” may not be a

good thing - it imparts an exactness that may not be there.

THE SCALES

impact

probability

CONVERTING TO A MATRIX The scales are contained in a square. Upper right – high impact, high

probability – RED Upper left – high impact, low

probability – YELLOW Lower left – low impact, low

probability – GREEN Lower right – low impact, high

probability - GREY

FINK’S MATRIX

HIGH IMPACTLOW PROBABILITY

HIGH IMPACTHIGH PROBABILITY

LOW IMPACTLOWPROBABILITY

LOW IMPACTHIGHPROBABILITY

A SPECIFIC EVENT

Fujita F3 tornado in Fort Morgan, Colorado:

X

THOUGHTS Identifies hazards. Combines hazards and vulnerabilities

as impact. Tool that directly reflects the formula:

impact X probability = risk Visual tool displays outcome of risk

computations in a simple form Multiple events shown on one matrix.