Developing Composite Measures in Global Risk Assessment
Yasemin Gaziarifoglu is a 2nd year Ph.D. student in the Criminal Justice program at Rutgers University. Prior to undertaking her graduate study at Rutgers, Ms. Gaziarifoglu received her M.A. degree in Forensic Science at Istanbul University Institute of Forensic Sciences with her thesis titled “Fear of Crime and Perceived Risk of Crime”. She holds her B.A. degree in Sociology and Psychology from Middle East Technical University, Turkey. Currently she is working as a research assistant for Rutgers Institute on Corruption Studies and Rutgers Center on Public Security and teaching an undergraduate level course on Crime and Crime Analysis. Her research interests include systemic and local analysis of corruption, activity spaces of offenders, victimization and risk assessment methodologies.

The Evolution of Risk Assessment and Decision Making
In conventional methodology, risk assessment is defined as a “methodology to determine the nature and extent of risk by analyzing potential hazards and evaluating existing conditions of vulnerability that together could potentially harm exposed people, property, services, livelihoods and the environment on which they depend” (UN/ ISDR, 2009:26). Using the idea of “risk conflation”, we can see a transition towards a more holistic risk assessment and decision-making approach where identification and prioritization of risks is based on the assumption that “risks are rapidly transmitted across geographical and systemic boundaries” (World Economic Forum, 2006:6). (See Figure 1)

Figure 1. Evolution of Risk Assessment and Primary Decision Making  

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Developing Composite Measures
Identification of the Risk
In any risk management practice before any counter-measure is implemented, a risk analysis should be implemented. All risk assessment and decision-making processes, whether from an individualistic or holistic approach, starts with the identification of the threat or hazard focusing on the source of the problem or the “problem” itself. This identification is established through data collection from various resources, therefore the nature of risk identification can be qualitative and/or quantitative.

Prioritization of the Risk
The main aim of risk prioritization is to prioritize the risks identified for risk mitigation as resources for risk mitigation are limited. Similar to the risk identification phase, prioritization of risks can be qualitative and/or quantitative in nature. However unlike to the risk identification phase, today’s risk prioritization procedures has started to show a drastic evolution towards a holistic approach in response to the increasing the connectivity between risks and increasing homogeneity of risk across the globe. Accordingly, from this point on we’ll discuss real-life applications of risk prioritization to highlight this methodological transition.

Individual measures
In this very first stage, risk prioritization is established through a process in which the probability of the risk event and the consequence of the relevant risk’s occurrence are used to create a risk factor. Accordingly this risk prioritization application may be seen as an elimination process in which relative importance and impact of each risk is calculated to exclude the irrelevant risks from a pool of risks. In this simple stage of risk prioritization the interactions between risks are not taken into consideration. An example for this type may be a simple supply chain risk assessment and evaluation process in which the risk in the extended supply chain is tried to be identified through prioritization among different types of risks such as; supply risks, operational risks, demand risks, security risks, macro risks etc. In this example - assuming a supply chain is vulnerable to many risks - the risks to which supply chain is most vulnerable are tried to be identified (Manuj and Mentzer, 2008:133-155).

Composite Measures
This stage constitutes a big leap in risk assessment and risk prioritization as we start to move along categories of composite measures, the existence of a relationship between risks and the strength of the relationships are gradually more and more elaborated. This characteristic is pivotal in 21st century’s risk assessment as the systemic nature of risk requires an ongoing and iterative risk assessment procedure.


March 2010

Developing Composite Measures
Cumulative calculation of risks
The basic difference of this category from our first individual measures category is its acceptance of the relationships between different risks. Therefore in this category basically every new condition is assigned the same risk factor and by adding up the ratings of different risk indicators, the final risk is calculated. The classification of the risk ranges is often subjective where risk analysts and experts identify the thresholds for certain risk categories (such as low risk, moderate risk and high risk). An example for this type is the Failed States Index (Foreign Policy) in which countries are ranked on their global security levels (such as critical, in danger, borderline, stable, and most stable) according to the total scores of 12 indicators indicated in the index (each indicator is assigned a value between 0-10, accordingly the total score is the sum of the 12 indicators and is on a scale of 0-120). Although this index is highly influential as with its structure it attracts attention to the additive effect of risks (rather than the individual effect of each risk); the index doesn’t reflect the direction and strength of relationships between different indicators. Additionally with regards to the scoring system: a score of 60 (or any other score) in this scale neither indicates the weight of indicators nor an existence of a relationship between indicators.

Identification of the relationship between risks
As indicated in the previous section, one of the biggest problems in relation to initial composite measures of risks is their deficiency to detect relationships between different risk indicators. Taking this point into consideration some organizations have proposed new risk assessment models in which the relationships of risks are elaboration. The World Economic Forum’s Risk Correlation Matrix provides an index in which the interconnectedness of different risks is assessed in terms of correlations. Their correlation matrix shows the strength of the macro correlations perceived by the experts of the relevant global risk report. Although this example represents a further step in risk assessment with regards to the emphasis on the interconnectedness of risks through a correlation analysis in which existence of a relationship, and the strength of relationships are taken into consideration, still we cannot understand the dynamics of the relationship between risks and causal relationships. As these maps only show the positive relationships between risks, the negative relationships which might be important for mitigation efforts are also omitted from the analysis (World Economic Forum, 2008: 25).

The nature of relationship between risks
Although the correlation analysis of risks through matrixes revolutionizes the way risk assessment is performed, the methodology still lacks some essential components for identifying the dynamics of relationships between risks. The Global Risk Network’s Risk Interconnection Maps (World Economic Forum, 2010:35-37) and United Nation’s Global Impact and Vulnerability Alert System (GIVAS) Initiative (United Nations, 2009) are the most recent examples for a more sophisticated risk assessment approach which point out to the complexity and interconnectedness of the risks in the 21st century. The main aim of GIVAS as indicated on the UN website is “a representative but manageable set of global indicators that can provide powerful signals of changing vulnerabilities on the ground across regions”. In a similar vein, Global Risk Network tries to establish the same aim through trying to identify the changing dynamics

Developing Composite Measures
of the relationships between different risk events with the ideas of experts from different fields. These risk interconnection maps not only shows the strength of the relationship between different risks but also shows the similarity of correlations, accordingly similar risks.

Conclusion and Discussion
In a nutshell, in our century where the interconnectivity between risks increases in parallel to globalization, it’s not feasible to manage the global risks with an “individual” and “silo” approach (World Economic Forum, 2007:25). Accordingly like we don’t have the luxury to deal with the risk events independent of other individuals, organizations, or countries, we don’t have the luxury to evaluate them on an individual basis, as well. And this necessity of a systemic risk approach is reflected in the risk assessment phase of risk management through a more holistic risk identification and prioritization process exemplified by the composite measures of risks which takes the strength and nature of relationships between various risks into consideration. The combination of risks affects all nations and organizations. Furthermore combined risks may result in consequences which outsize the initial risk assessments. However, since interconnections between risks complicate prioritization with regards to cost-befit analysis interconnections require an extended cooperation between different stakeholders a systematic approach to risk assessment may be challenging for risk mitigation. Most risks although pertaining to a specific locality or nation directly or indirectly affect other regions and countries, as well. With the systemic nature of the risk, the cooperation between governments, public and private sectors and individuals becomes a prerequisite for a common framework for risk assessment and risk management. However, as indicated earlier despite the increased interest in developing ways in which threats can be monitored and their consequences reduced, it is apparent that there is no real common methodology in the ways in which agencies across threat areas develop and conduct risk assessments. Unsurprisingly, against the challenges of the fast paced, globalized world and with the lack of a common methodology  the ample and efficient risk management at a local level, and  the efficient and unstrained communication of risk data across different levels of the same organization and different organizations, and  a “common consent” risk identification and prioritization, and  (existence of) parties eager to take responsibility for risk, and  long-term dedications for risk management, and  an “all satisfying” risk response seem more like a fantasy than science.


March 2010

About ET21
The Rutgers Center for the Study of Emergent Threats in the 21st Century (ET21) is an interdisciplinary center of excellence designed to research a variety of emergent threats to civilians and offer policy prescriptions that generate suitable responses to these threats through three component programs focused on: Global Security, Civil Resistance, and Immigration ET21 was created in order generate better linkages between the research activity of faculty and those of students, creating a better prepared and educated cohort of graduates able to compete in the global marketplace for jobs. By developing a long-term partnership with the programs, funds and specialized agencies of the United Nations, several national governments, as well as partner institutions across the globe, ET21 enlarges DGA’s global network of linkages. Current initiatives involving partner institutions that have recently been initiated but would be housed under the new Center’s rubric, for example, include Kassel (Germany), Koeceli (Turkey), Sciences Po (France), Viadrina am Oder (Germany) and the University of Warwick (UK). ET21 is housed under the Division of Global Affairs (DGA) at Rutgers University, Newark. The growing prominence and prestige of the DGA as a premier interdisciplinary researchoriented policy program have allowed it to establish itself as a center of excellence in the field of global affairs, worldwide.

Large scale threats such as the September 11 terrorist attacks, the emergence of new diseases, and the militarization of cyberspace in the past few years have raised the awareness of both government decision makers and the private sector that the vital systems and infrastructures upon which our societies and economies depend on are at great risk from the complex threats emerging in the 21st Century. ET21 is an initiative begun by the Division of Global Affairs in an effort to contribute to a better understanding of the structural sources of these threats, and to identify the kind of policy actions that will need to be adopted to mitigate their consequences. The ET21 center brings together practitioners, policymakers and scholars to find solutions to the challenges many organizations face in developing early warning systems, crisis awareness, and response. The focus of the centers work is divided into four themes related to the study of emergent threats as follows: Data needs and structures, Threat assessment methodology, Analytics, Visualization An important aspect of the center’s work is the involvement of students in research and policy development. In addition, the center is developing its outreach which includes an initial symposium on the development of common methodology employed in threat assessment.

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