CEP: Editorial - Moving Beyond the Black Swan Excuse

Days after Superstorm Sandy hit the northeastern U.S., I attended the session “Accounting for Beyond Design Basis Events” at the 2012 AIChE Annual Meeting in Pittsburgh, where CCPS Consultant John Murphy gave a talk entitled “Beware the Black Swan.” (His paper on the same topic appeared in the Dec. 2012 issue of Process Safety Progress [PSP], pp. 330–333.) Two weeks later, I came across a press release headlined “How ‘Black Swans’ and ‘Perfect Storms’ Become Lame Excuses for Bad Risk Management,” discussing research by Stanford Univ.’s Elisabeth Paté-Cornell. In this issue’s Spotlight on Safety (p. 20), CCPS Technical Director Louisa Nara discusses the importance of considering highly improbable (or black swan) events.

The term black swan refers to a highly improbable event that is unpredictable, carries a massive impact, and in retrospect can be explained in a way that makes it appear less random and more predictable than previously thought. Incidents such as the terrorist attacks of Sept. 11, 2001, Hurricane Katrina, the credit crisis and Great Recession, the Gulf of Mexico oil spill, the Fukushima Daiichi nuclear reactor meltdowns, Superstorm Sandy, and a variety of other calamities have been called black swans.

Although many use the terms interchangeably, Paté-Cornell, a professor of management science and engineering, distinguishes between a black swan — an event that is impossible to imagine because we’ve known nothing like it in the past — and a perfect storm — in which multiple forces combine to create a disaster greater than the sum of its parts. In a paper published in the November issue of the journal Risk Analysis, she suggests that people in government and industry are using these terms too liberally in the aftermath of a disaster as an excuse for poor planning.

Murphy points out that hazard and operability (HAZOP) study team members often hesitate to suggest hazard scenarios when the events have not occurred before. Even if they can imagine a scenario, if they cannot provide any examples of a company that has experienced it, they dismiss it as “not credible” rather than recommend spending money to address it.

For the highest-impact events, probabilities are irrelevant. If a catastrophic consequence is possible, appropriate safeguards should be installed, or the hazard reduced or eliminated through inherently safer design and/or operation. At the very least, emergency response procedures that cover a wide range of black-swan- and perfect-storm-like contingencies must be prepared, practiced, publicized, and promptly put into action.

Major process safety incidents are almost always preceded by warning signs. Learning from past incidents can help us to recognize those signs. Addressing them when they are minor anomalies might enable us to prevent a black swan.

Nancy Green, Executive Vice President at Aon Risk Solutions, noted in a 2011 white paper that the phenomenon of black swans — events that take an organization by surprise and shake it to the core — is a hot topic in businesses and board rooms. Maybe now is the time for process-hazard-analysis (PHA) teams to escalate the highest-consequence scenarios beyond the PHA and help upper management understand what could happen and the scale of the consequence if it does. They might decide to fund the project that prevents a black swan.