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Critical Asset and Portfolio Risk Analysis: An All‐Hazards Framework

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  • Bilal M. Ayyub
  • William L. McGill
  • Mark Kaminskiy

Abstract

This article develops a quantitative all‐hazards framework for critical asset and portfolio risk analysis (CAPRA) that considers both natural and human‐caused hazards. Following a discussion on the nature of security threats, the need for actionable risk assessments, and the distinction between asset and portfolio‐level analysis, a general formula for all‐hazards risk analysis is obtained that resembles the traditional model based on the notional product of consequence, vulnerability, and threat, though with clear meanings assigned to each parameter. Furthermore, a simple portfolio consequence model is presented that yields first‐order estimates of interdependency effects following a successful attack on an asset. Moreover, depending on the needs of the decisions being made and available analytical resources, values for the parameters in this model can be obtained at a high level or through detailed systems analysis. Several illustrative examples of the CAPRA methodology are provided.

Suggested Citation

  • Bilal M. Ayyub & William L. McGill & Mark Kaminskiy, 2007. "Critical Asset and Portfolio Risk Analysis: An All‐Hazards Framework," Risk Analysis, John Wiley & Sons, vol. 27(4), pages 789-801, August.
    • Handle: RePEc:wly:riskan:v:27:y:2007:i:4:p:789-801
    DOI: 10.1111/j.1539-6924.2007.00911.x
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    References listed on IDEAS

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    1. William L. McGill & Bilal M. Ayyub & Mark Kaminskiy, 2007. "Risk Analysis for Critical Asset Protection," Risk Analysis, John Wiley & Sons, vol. 27(5), pages 1265-1281, October.
    2. Louis Anthony (Tony) Cox & Djangir Babayev & William Huber, 2005. "Some Limitations of Qualitative Risk Rating Systems," Risk Analysis, John Wiley & Sons, vol. 25(3), pages 651-662, June.
    3. Harry F. Martz & Mark E. Johnson, 1987. "Risk Analysis of Terrorist Attacks," Risk Analysis, John Wiley & Sons, vol. 7(1), pages 35-47, March.
    4. Emanuele Borgonovo, 2006. "Measuring Uncertainty Importance: Investigation and Comparison of Alternative Approaches," Risk Analysis, John Wiley & Sons, vol. 26(5), pages 1349-1361, October.
    5. Sandler, Todd & Lapan, Harvey E., 1988. "The Calculus of Dissent: An Analysis of Terrorists' Choice of Targets," Staff General Research Papers Archive 10818, Iowa State University, Department of Economics.
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    Cited by:

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