Tolerable risk thresholds, also known as risk tolerance, are always project- and owner-specific. They indicate the level of risk which has been deemed acceptable for a specific project or operation. Furthermore, tolerable risk thresholds and appetite for risk are quite different for various key stakeholders, such as the mine owner, regulatory bodies, adjacent communities, etc.
Additionally, a topic that comes up regularly in the mining world is diverging risk tolerance among joint venture participants. A junior company may have much greater appetite for risk than a major company, and their respective risk tolerance may be completely different.
So how can one manage the divergent tolerable risk thresholds between stakeholders?
First of all, at the end of the day, satisfactory outcomes depend on effective communication and transparency in the evaluation approach alongside demonstrated compliance with legislated acceptance criteria.
Now, to be concrete, we show below a series of concepts and solutions we implement when dealing with complex tolerance multi-stakeholder discussions.
Risk Tolerance and Appetites Management Concepts and Solutions
Concept 1: Various stakeholders will have different risk tolerances/appetite and the risk assessment changes as the observer changes. For example, the risk assessment developed for an operation is not identical to the one for the inhabitants.
Solution: Carefully perform the risk assessments for the various stakeholders, ensuring they are compatible.
Concept 2: The risk tolerance is not constant in time during the productive life of the operation. It will also change post-closure.
Solution: Ensure timely updates of the risk assessment and the risk tolerance thresholds.
Concept 3: The key for opening a healthy debate will lie in the consequence metric, the consequences dimensions, and how they combine in the tolerance threshold, so that all stakeholders end up speaking the same language.
Solution: It is paramount to clearly define and develop the consequence metric, consequence dimensions and system definition before starting any risk management effort to avoid biases.
Concept 4: Often people around the same table do not even use the same language and the confusion is highly problematic, especially for long-term projects.
Solution: We keep publishing and updating our risk glossary, which is compatible with ISO 31000, but is more detailed and technical.
Concept 5: Legislated acceptance criteria are, of course, jurisdictional and constitute only one aspect of the complex issue of tolerance.
Solution: We see that the public is way more reactive than regulators, and matters of ethics and public opinion are becoming paramount.
Conclusion of Tolerable Risk Thresholds Management Discussion
The tolerable risk thresholds management discussion calls for the following closing remarks:
- Company- or project-specific risk tolerance thresholds should be developed and discussed with key personnel and stakeholders.
- The development of risk tolerance curves requires consensus, caution and continuous calibration.
- The curves should be defined by a group and not an individual. It is indeed completely normal to have different tolerances at different levels of the organization; tolerance at the operational level is necessarily more stringent than at the corporate level. This explains the importance of a reproducible and swift definition at all levels pertinent with the enterprise risk management.
We devote a full chapter in our new book, Convergent Leadership-Divergent Exposures, on risk tolerance. We also have a full chapter on risk tolerance in our book Tailings Dam Management for Twenty-First Century with detailed references.
