Strategic Forecasting and Risk Analysis

Dr. V. MAGADZIRE
Ph.D. in Economics, University of Leeds, UK
Ph.D. in Public Policy, South Korea
Master of Public Policy, Japan
Master of International Business, The Netherlands
Master of Science in Finance and Investment, NUST Zim
B.Com (Hons) in Banking, NUST Zimbabwe
Definitions & Concepts

Achieving a common
terminology remains a challenge

Scientists and practitioners have

developed specific terminology
for the assessment of particular
risks and impacts
Definitons & Concepts

This terminology differs

significantly between the various
disciplines
Definitions & Concepts

i. Risk
ii. Vulnerability
iii. Risk assessment
iv. Risk analysis
v. Risk criteria
Definitions & Concepts

vi. Risk criteria

vii. Political/social impacts

viii. Threat

ix. Strategic forecasting

Definitions & Concepts

Risk:

is a combination of the

consequences of an event (hazard)
and the associated
likelihood/probability of its
occurrence
Definitions & Concepts

Risk:

In technical settings, risks are

described quantitatively by the likely
frequency of occurrence of different
intensities for different areas, as
determined from historical data or
scientific analysis
Definitions & Concepts

Risk analysis:

isthe process to comprehend the

nature of risk and to determine
the level of risk
Definitions & Concepts

Vulnerability

The characteristics and

circumstances of a community,
system or asset that make it
susceptible to the damaging effects
of a hazard
Definitions & Concepts

Vulnerability

In probabilistic/quantitative risk

assessments the term vulnerability
expresses the part or percentage of
exposure that is likely to be lost due
to a certain hazard
Intelligence and Risk
Objectives of the lecture

To:

describe how risk analysis can be

integrated into intelligence
Intelligence and Risk

We want to see how risk

specialists structure their problems

and what the implications are for

bringing risk management into
intelligence and security affairs
Intelligence and Risk

The reason risk management

hasn't been widely used in the
intelligence community is not
hard to understand
Intelligence and Risk

i. Few people have given much

thought to what it is or how it
could be used

 The same was once true in

other fields
Intelligence and Risk

ii. It isn’t bureaucratic resistance

that's the problem

Rather, the problem is the lack of

a clear statement of exactly what
risk management is and why it is
useful
Intelligence and Risk
It is necessary to dispose of some
preconceptions here.

One is that risk management

consists of using models and
mathematical methods

◦ e.g. Value at Risk, options theory , or decision

and fault trees
Intelligence and Risk

There are many modeling

techniques, and they may have
useful application in intelligence
Intelligence and Risk

But risk management conceived

as a collection of methodological
tools is much too narrow an
approach
Intelligence and Risk

Creating a collaborative structure

- for example, between
intelligence and operations –

ismore than just disseminating

narrowly focused tools
Intelligence and Risk

It is about managing the complex

interplay that occurs in these
disparate networks, of which one
of the most important is risk
Intelligence and Risk

The real payoff of risk

management lies in its ability to
foster a common language for
assessing and discussing risk by
the different parts of an
organization
Intelligence and Risk

It raises the level of conversation

about risk in such a way that
terms and categories have a
consistent meaning
Intelligence and Risk

Risk will take an increasingly

central place in national security
decision-making

For intelligence, this leads to a

new game
Intelligence and Risk

The intelligence community

needs not only to be aware of
this, but also to design their work
to better assess, clarify, and
define the risks that follow from
these changes
Intelligence and Risk
Intelligence also has to develop a
more productive conversation with
other operational components of
national security, because it is ever
more tightly linked to them. Risk
management offers a powerful
framework to facilitate this
conversation
Intelligence and Risk

Intelligence professionals can use

the risk analyst’s toolbox to
sharpen conclusions that are made
in intelligence products by
providing support for
identification of scenarios of
greatest concern
Intelligence and Risk

Risk analysis can also be used to

focus future collection efforts on
information that appears to be
most relevant to refining existing
estimates of risks
Intelligence and Risk
However, risk analyses must be
conducted to:

i. meet challenges of information

availability

ii. match resolution of results to the

problem
Intelligence and Risk

iii. reflect risk as the social

construct that it is

iv. and not ignore the possibility

of surprise
Intelligence and Risk

it is important that practitioners

applying risk analysis recognize
its limitations to ensure that results
are appropriate for the purpose
and that its use does not blind the
analyst to potential surprises
Intelligence and Risk

Risk analysis provides a

framework for considering threat,
vulnerability, and consequences of
potential terrorist attacks and
developing strategies to manage
these risks most effectively with
limited resources
Intelligence and Risk Analysis
risk analysis combines intelligence
about:

i. the objectives and capabilities of

terrorist groups with assessments
of the required capabilities and
resources to complete successfully
an attack
Intelligence and Risk analysis

ii. assessments of the vulnerabilities of

targets to different attack modes, and

iii. assessments of consequences of

different types of attacks on different
targets
Intelligence and Risk analysis

The product of this analysis is

identification of terrorism
scenarios that present the greatest
risk
Intelligence and Risk analysis

This result itself can be used by the

intelligence cycle

Thus, at its most basic form, risk

analysis can be integrated into the
intelligence cycle as part of the
analysis and production step
Intelligence and Risk analysis

However:

assessments of the relative risks of

different attack scenarios may only
be adequate as intelligence products
to support for strategic and
operational analysis
Intelligence and Risk analysis
Often more specificity than
relative risks of different attacks
is required about:

i. where an attack will occur

ii. when the attack will occur
iii. who will try to attempt the attack
Intelligence and Risk analysis
In particular:

Int-officers attempting to prevent

future terrorist attacks need to
have guidance of where to
conduct further surveillance and
who to target with such efforts
Intelligence and Risk analysis

This information requires an

understanding of the detailed
steps and timelines associated
with planning and orchestrating
an attack
Intelligence and Risk analysis

Some aspects of this are specific to the

target and attack mode being
considered

Others aspects are specific to how the

group that is planning the attack
operates
Intelligence and Risk analysis

Detailed information about

attack planning can be developed
through:

i. surveillance of terrorist groups

Intelligence and Risk analysis

ii. investigations into foiled or

successful plans for attacks

iii. red-teaming studies facilitated

by tools of risk analysis
Intelligence and Risk analysis
Rosoff and von Winterfeldt
(2006) demonstrated how
probabilistic risk analysis can be
used in this way within the
context of scenarios for
detonating a radiological device
at the ports of Los Angeles and
Long Beach
Intelligence and Risk analysis

In this study:

probabilisticrisk analysis was used

to decompose the attack scenario into
its component steps and explore how
defensive countermeasures directed at
each step could reduce the risks of
attack
Intelligence and Risk analysis

By combining the results of risk

analysis with detailed assessments of
the planning stages of terrorist attacks,
the intelligence process can provide
directed intelligence products and
refine future planning and direction of
intelligence collection
Intelligence and Risk analysis
 ANALYST’S CHALLENGES TO APPLYING RISK ANALYSIS
PRODUCTIVELY

The productive application of

risk analysis to support
intelligence analysis must address
four methodological challenges:
Intelligence and Risk analysis

i. developing methods that can

be supported with obtainable
information

ii. matching resolution of results

with the problem
Intelligence and Risk analysis

iii. applying the best practices of

risk analysis

iv. avoiding the potential for

blinding analysts to the
possibility of surprise
Intelligence and Risk analysis

Considerations regarding
availability of information to
support risk analysis:

Basing analysis on obtainable

information
Intelligence and Risk analysis
Intelligence and Risk analysis
 Matching resolution of analysis to the problem

There is no single risk

assessment tool that fits the
demands of all problems
Intelligence and Risk analysis

 Matching resolution of analysis to the problem

Each problem has unique aspects

that determine requirements for
the spatial and temporal
resolution of results
Intelligence and Risk analysis
 Matching resolution of analysis to the problem

Risk assessments intended to

support design or performance
assessment for security need to be
tuned to a specific threat or target,
but not necessarily on a specific
time
Intelligence and Risk analysis
 Matching resolution of analysis to the problem

For example, consider an assessment

used to buttress physical security at a
nuclear power plant. Designs need to be
focused on specific types of attacks on
specific parts of the plant, but it is
much less important whether the
attacks would occur this year or next
Intelligence and Risk analysis
 Matching resolution of analysis to the problem

Risk assessments for strategic

planning need to be specific
about what types of attacks could
occur,
Intelligence and Risk analysis

but do not require specificity of

when or where the attacks will
occur because strategic
assessments need only reflect the
range of threats of terrorism
Intelligence and Risk analysis

For example:

think of analysis to support the

division of resources among
control of nuclear proliferation
and border security
Intelligence and Risk analysis

Here the decision making does

not require distinctions between
specific places or which attack
will happen first

Itis important instead that the

planning consider the correct
range of attacks
Intelligence and Risk analysis

 Matching resolution of analysis to the problem

risk assessments to support

tactical decisions require both
spatial and temporal specificity
Intelligence and Risk analysis

 Matching resolution of analysis to the problem

They will be used to help decide

what actions to take and when to
take them
Intelligence and Risk analysis

For example:

 consideranalysis that would help local

law enforcement determine where and
how many officers to deploy in security
around a national political convention and
when and where to supplement security in
response to specific threats
Intelligence and Risk analysis

In this case:

Assessments of risks based on

capabilities terrorists had last year
are irrelevant if the way the group
operates has changed dramatically
Intelligence and Risk analysis
 Applying the best practices of risk analysis
The best practices of risk analysis
recognize that:

i. risk is a social construct

ii. risk analysis requires an analytic

and deliberative process
Intelligence and Risk analysis
 Applying the best practices of risk analysis

An analytic risk assessment must

address all three of the factors that
determine risk:

threat,
vulnerability, and
Consequence
Intelligence and Risk analysis

When feasible, this should be

done quantitatively

using qualitative methods to fill in

data gaps were necessary and
appropriate
Intelligence and Risk analysis

To the extent qualitative methods

are used, risk analysis will be
more useful for sorting high risks
from low ones than for
optimizing or fine tuning risk
management strategies
Intelligence and Risk analysis
 Applying the best practices of risk analysis

Risk assessments must be

repeatable so all parties can
replicate, analyze, and understand
them
Intelligence and Risk analysis

 Applying the best practices of risk analysis

Risk assessment will require

standard definitions within an
analysis or methodology to
ensure that results are consistent
among analysts
Intelligence and Risk analysis
 Applying the best practices of risk analysis

Itmay be impossible to develop consistent

definitions across all risk analyses

◦ However, that is not necessary so long as

consistency is applied within an analysis and
when results are compared from one analysis
to another
Intelligence and Risk analysis

 Applying the best practices of risk analysis

Itis most important that the

analysis is transparent such that
definitions are clearly
documented and appropriate for
the problem at hand
Intelligence and Risk analysis

Deliberative

A deliberative process is
necessary because the notion of a
cold, actuarial risk assessment is
unrealistic
Intelligence and Risk analysis

Deliberative

 Although one might think risk analysis could

be performed only on the basis of data about
threat, vulnerability and consequences, it is
not possible to assess risks without
considering individual values and judgments
about risks and risk exposures
Intelligence and Risk analysis
Deliberative
As a result:

risk analyses must include

deliberative processes that make
it possible to take these
judgments into account
Intelligence and Risk analysis

 Avoiding blinding analysts to surprise

The strength of applying risk

analysis to intelligence analysis is
that it provides a set of tools for
translating available information
about:
Intelligence and Risk analysis
i. motivations
ii. capabilities
iii. infrastructure
iv. vulnerabilities, and
v. attack consequences

 into a set of common metrics that can be

used to develop strategies to protect
communities from attack effectively
Intelligence and Risk analysis

 Avoiding blinding analysts to surprise

The results of a risk analysis are

bounded by the information and
assumptions that go into it
Intelligence and Risk analysis

Only those attacks that are

envisioned will be assessed and
only those targets that are
considered relevant will be
considered
Intelligence and Risk analysis
 Avoiding blinding analysts to surprise

As a result:
 the potential exists that risk analysis could
lead the intelligence community to place too
much attention on events that are presumed
to be likely, thus only reinforcing prior
beliefs about threats and risks and not
revealing new insights or trends
Intelligence and Risk analysis
 Avoiding blinding analysts to surprise
To counter this potential bias, it
is necessary to:

i. state explicitly the principal

assumptions built into risk
assessments and security plans
Intelligence and Risk analysis

 Avoiding blinding analysts to surprise

To counter this potential bias, it

is necessary to:

ii. fully explore uncertainties

around the risk
Intelligence and Risk analysis
 Avoiding blinding analysts to surprise

To counter this potential bias, it is necessary

to:

ii. adopt methods that allow analysts

to consider the extent to which
information they are assessing
could explain alternatives that
they are not considering
Intelligence and Risk analysis

 Avoiding blinding analysts to surprise

To counter this potential bias, it is necessary

to:

iii. consider institutional structures

designed to prevent myopic
policies with respect to the
possibility of surprise
Summary

In this lecture:

described how methods of risk

analysis can be integrated into the
intelligence cycle used to produce
warnings and threat assessments
Summary

This connection reveals two ways that

risk analysis can be of potential value to
the intelligence community

 Risk analysis can be a tool that can help

intelligence practitioners sharpen their
conclusions by providing analytic support
for identification of scenarios of greatest
concern.
Summary

Risk analysis can also be used to

direct future collection efforts on
information that appears to be
most relevant to refining existing
estimates of terrorism risks
Summary
However:

risk analyses must be conducted

to meet challenges of information
availability
Summary

However:

matching resolution of results to

the problem, reflecting risk as the
social construct that it is, and not
ignoring the possibility of surprise