2005 – RISK MANAGEMENT − PUBLIC POLICY VS CORPORATE LIABILITY

This paper relates to the conference sub-themes of Dam Safety Upgrades – Management of
Risk and Due Diligence and Dam Construction.
Specifically, it relates to the changing willingness of governments to fund risk reduction in
dams compared with risk reduction in other areas.
The cost of dam safety upgrades is just one of a portfolio of risk reduction strategies
affecting the general community that governments are required to underwrite.
This paper examines the variation in acceptable risk standards between dam safety and
other areas. This may be explained in terms of what is acceptable to the community and the
courts. For instance, a corporation is likely to attempt to minimise its liability (which may
differ to minimising risk for the community). We also examine:
• a portfolio approach to safety expenditure and the implicit cost-benefit relationship;
• the impact of the asymmetric relationship between expenditure and absolute size of
potential loss; and
• the importance of a whole-of-government approach and reviewing apparent
inconsistencies in approach to risk.
There is an increasingly well-established literature on the value of a human life and
increasingly systematic approaches to the evaluation of risk and the setting of risk
standards. Risk standards are particularly explicit in the area of dam safety – they set limits
of tolerable risks for large-scale loss of life (eg. for existing dams, a loss of life of more than
10 persons with a probability of more than one in a ten thousand per annum is regarded as
unacceptable under the Australian guidelines).
However, there are significant contrasts in what is tolerated as acceptable risk between
different areas of government activity. To date, there appears to be no systematic evaluation
of the portfolio of risks or a common view on what is acceptable levels.