Studies from University of Texas Austin Update Current Data on Risk Management (A Markov Decision Process Approach for Cost-benefit Analysis of Infrastructure Resilience Upgrades): Risk Management

2021 NOV 15 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- Research findings on Risk Management are discussed in a new report. According to news originating from Austin, Texas, by NewsRx correspondents, research stated, “As climate change threatens to cause increasingly frequent and severe natural disasters, decisionmakers must consider costly investments to enhance the resilience of critical infrastructures. Evaluating these potential resilience improvements using traditional cost-benefit analysis (CBA) approaches is often problematic because disasters are stochastic and can destroy even hardened infrastructure, meaning that the lifetimes of investments are themselves uncertain.”

Financial supporters for this research include Lawrence Berkeley National Laboratory (LBNL), Energy Institute at The University of Texas at Austin.

Our news journalists obtained a quote from the research from the University of Texas Austin, “In this article, we develop a novel Markov decision process (MDP) model for CBA of infrastructure resilience upgrades that offer prevention (reduce the probability of a disaster) and/or protection (mitigate the cost of a disaster) benefits. Stochastic features of the model include disaster occurrences and whether or not a disaster terminates the effective life of an earlier resilience upgrade. From our MDP model, we derive analytical expressions for the decisionmaker’s willingness to pay (WTP) to enhance infrastructure resilience, and conduct a comparative static analysis to investigate how the WTP varies with the fundamental parameters of the problem. Following this theoretical portion of the article, we demonstrate the applicability of our MDP framework to real-world decision making by applying it to two case studies of electric utility infrastructure hardening. The first case study considers elevating a flood-prone substation and the second assesses upgrading transmission structures to withstand high winds.”

According to the news editors, the research concluded: “Results from these two case studies show that assumptions about the value of lost load during power outages and the distribution of customer types significantly influence the WTP for the resilience upgrades and are material to the decisions of whether or not to implement them.”

This research has been peer-reviewed.

For more information on this research see: A Markov Decision Process Approach for Cost-benefit Analysis of Infrastructure Resilience Upgrades. Risk Analysis, 2021. Risk Analysis can be contacted at: Wiley, 111 River St, Hoboken 07030-5774, NJ, USA. (Wiley-Blackwell - http://www.wiley.com/; Risk Analysis - http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1539-6924)

The news correspondents report that additional information may be obtained from Benjamin D. Leibowicz, University of Texas Austin, Grad Program Operat Res & Ind Engn, Austin, TX 78712, United States.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1111/risa.13838. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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