Transport Policy Risk Analysis
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Questions and Answers

Traffic risk is a key step in a systematic approach to designing transport policy/infrastructure __________.

interventions

One source of uncertainty in traffic analysis includes the value of travel time __________.

savings

Errors in model specification and parameters can significantly affect the __________ of traffic models.

accuracy

Economic __________ can significantly influence traffic risk and project appraisal.

<p>growth</p> Signup and view all the answers

Factors such as cost escalation and __________ stability are important considerations in risk assessment.

<p>political</p> Signup and view all the answers

Assessing the current and future conditions play a vital role in the __________ of transport projects.

<p>evaluation</p> Signup and view all the answers

The _________ effects refer to changes in the transport system that can impact the results of a project or policy.

<p>network</p> Signup and view all the answers

Possible strategies and measures should be determined to address the various __________ during appraisal.

<p>risks</p> Signup and view all the answers

One method for analyzing future events is through __________, which considers several alternative outcomes.

<p>scenarios</p> Signup and view all the answers

The __________ method is a structured communication technique relying on a panel of experts to forecast outcomes.

<p>Delphi</p> Signup and view all the answers

Risk transfer can be managed through public-private partnerships, where private operators can assume __________ and revenue risk for toll roads.

<p>traffic</p> Signup and view all the answers

Stakeholder Engagement is crucial for identifying __________ during risk assessments.

<p>risks</p> Signup and view all the answers

When analytical techniques are unfeasible due to constraints, judgement-based methods often utilize expert __________.

<p>judgment</p> Signup and view all the answers

Techniques such as __________ and hedging are important for managing financial risks like fuel price volatility.

<p>insurance</p> Signup and view all the answers

Optimism Bias can affect decision-making approaches, leading to __________ in risk evaluation.

<p>overconfidence</p> Signup and view all the answers

A __________ planning strategy is often employed to prepare for unexpected events and potential risks.

<p>contingency</p> Signup and view all the answers

The impact of fluctuations in fuel prices, economic conditions, and currency exchange rates are key drivers of ______.

<p>demand</p> Signup and view all the answers

Economic downturns, such as the 2008/9 financial crisis, led to shortfalls in toll road revenue and ultimately contributed to toll road companies filing for ______.

<p>bankruptcy</p> Signup and view all the answers

Exchange rate risks are crucial, especially for servicing debts secured from ______ lenders.

<p>international</p> Signup and view all the answers

The Covid pandemic of 2020 led to a significant reduction in public transport ______.

<p>usage</p> Signup and view all the answers

Technical risks include construction delays, equipment failure, design flaws, and their impact on project ______.

<p>timelines</p> Signup and view all the answers

Technological uncertainty surrounds rapid advancements, such as uncertainty around electric vehicle ______.

<p>adoption</p> Signup and view all the answers

Changing laws and regulations, like discouraging the import of diesel/petrol vehicles into Ethiopia, represent ______ uncertainty.

<p>policy</p> Signup and view all the answers

Judgement-based approaches like the ______ method help in understanding uncertainty.

<p>Delphi</p> Signup and view all the answers

The core scenario should reflect 'firm and funded government ______'

<p>commitments</p> Signup and view all the answers

Scenario 1 is known as '______' which involves a smooth recovery from the pandemic.

<p>Go-Ahead</p> Signup and view all the answers

Scenario 2 emphasizes the astonishing acceleration in ______ and energy sources for transport.

<p>technologies</p> Signup and view all the answers

The 'Limits to Growth' scenario serves as a ______ scenario if the pandemic and war impact are worse than expected.

<p>contingency</p> Signup and view all the answers

Sensitivity testing assesses how robust a decision is to changes in specific ______.

<p>inputs</p> Signup and view all the answers

Sensitivity testing is particularly useful when there is a high level of uncertainty around key ______ and model parameters.

<p>inputs</p> Signup and view all the answers

Monte-Carlo Simulation is a method used to assess risks and uncertainties in ______.

<p>models</p> Signup and view all the answers

One disadvantage of testing is that it can be ______ intensive.

<p>resource</p> Signup and view all the answers

Analysts and scheme promoters should present __________ to decision makers

<p>uncertainty</p> Signup and view all the answers

Assumptions used to create __________ should be clearly drawn out and explained

<p>forecasts</p> Signup and view all the answers

An uncertainty log should summarise all known __________ and uncertainties in the modelling and forecasting approach

<p>assumptions</p> Signup and view all the answers

The focus should be placed on what the uncertainty analysis can tell decision makers and support them in making more __________ decisions

<p>informed</p> Signup and view all the answers

The presentation of uncertainty is an integral part of uncertainty analysis and will help ensure such analysis feeds through to __________

<p>decision making</p> Signup and view all the answers

A triangular distribution is defined by three parameters: lower percentile value, modal value, and ______ percentile value.

<p>upper</p> Signup and view all the answers

The ______ distribution is often used for risk quantification for continuous random variables.

<p>triangular</p> Signup and view all the answers

In Monte Carlo Simulation, multiple iterations of key variables are run through the model to produce a distribution of ______.

<p>outputs</p> Signup and view all the answers

The cumulative density function (CDF) of a random variable X is a function F(x) such that ______ = P(X ≤ x).

<p>F(x)</p> Signup and view all the answers

Inverse Transform Sampling Method is a common approach to generating random numbers from ______.

<p>CDFs</p> Signup and view all the answers

The mean BCR for a project can be calculated assuming different components follow a triangular distribution with a mode at ______.

<p>c</p> Signup and view all the answers

Optimism bias adjustments are made based on statistical modelling of similar past ______.

<p>projects</p> Signup and view all the answers

In terms of risk management, identifying sources of ______ and uncertainty is essential for effective project planning.

<p>risks</p> Signup and view all the answers

Statistical distributions are represented by probability density functions (PDFs) and ______ density functions (CDFs).

<p>cumulative</p> Signup and view all the answers

A triangular distribution can be skewed or ______, meaning it is not equally distributed about the mean.

<p>asymmetric</p> Signup and view all the answers

Flashcards

Traffic Risk

The possibility that actual traffic volumes on a new toll road will differ from the projected volumes, impacting the financial viability of the project.

External Factors

Factors outside the control of the project that can influence its outcomes, such as economic growth, fuel prices, political stability, or unforeseen events like pandemics.

Network Effects

The impact that changes in one part of the transport system can have on other parts, such as a new toll road affecting traffic on existing roads.

Risk Assessment

The process of identifying, analyzing, and managing potential risks in a project, including traffic risk, external factors, and network effects.

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Uncertainty in Appraisal

The uncertainty that arises from the imperfect knowledge of future conditions, such as economic growth, cost escalation, or changes in technology.

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Traffic Demand Estimation

The process of using models and data to estimate the potential impact of transport interventions, such as new roads, on traffic demand.

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Value of Travel Time Savings

The value of the time saved by drivers due to faster travel times, which is a key factor in evaluating the benefits of a new road.

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Elasticity of Demand

The change in demand for a good or service in response to a change in its price, such as the reduction in traffic on a toll road due to higher tolls.

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Monte Carlo Simulation

A risk modelling technique that uses random sampling and simulations to estimate the likelihood and impact of different potential outcomes.

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External Risks

Fluctuations in fuel prices, economic conditions, currency exchange rates and pandemics can significantly impact transport projects and demand.

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Optimism Bias

A type of bias where individuals overestimate the likelihood of positive outcomes and underestimate the chance of negative events.

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Economic Factors

Economic factors play a major role in determining the demand for transport projects. During economic downturns, demand often decreases, leading to potential revenue shortfalls.

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Contingency Planning

A systematic approach to planning for unexpected events or changes, including identifying potential problems, developing solutions, and assigning responsibilities.

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Exchange Rate Risk

Changes in exchange rates can pose challenges, especially when servicing debts incurred from international lenders.

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Technical Risk

Construction delays, equipment failures, or design flaws can impact project timelines and increase costs.

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Risk Transfer

Shifting the responsibility for managing risks to other parties, typically through contracts or insurance.

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Operational Risk

Maintenance and operational challenges can arise due to factors like harsh weather conditions, impacting project costs.

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Delphi Method

A structured communication method used to gather and synthesize expert opinions on a particular topic through multiple rounds of anonymous feedback.

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Scenario Analysis

A process of exploring multiple possible future scenarios to understand their potential impacts on a project or plan.

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Technological Uncertainty

Advancements in transportation technologies, like the adoption of electric vehicles, can create uncertainty about future revenue.

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Core Scenario

A key scenario that forms the basis of a project or plan, serving as a reference point for evaluating other scenarios.

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Policy and Regulatory Uncertainty

Changing laws, regulations, and funding priorities can affect project feasibility. This can include policies discouraging certain types of vehicles.

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Stakeholder Engagement

Engaging stakeholders such as communities, experts, and policymakers in the risk assessment process.

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Social and Political Risks

Public opposition, community disruptions, social inequalities, political instability, and regulatory uncertainty can pose challenges.

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Scenario Planning

A planning method where multiple possible future scenarios are created to explore how different conditions could impact a project or plan.

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Go-Ahead Scenario

A scenario representing a favorable future where Ethiopia achieves strong economic growth and attracts significant foreign investment.

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Next Generation Scenario

A scenario where rapid advancements in technology, particularly in renewable energy sources for transportation, drive the development and adoption of more sustainable transport systems.

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Limits to Growth Scenario

A scenario reflecting a more challenging future where the ongoing effects of the pandemic and global conflicts negatively impact Ethiopia's economy.

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Sensitivity Testing

A technique used to assess the robustness of a model or decision by systematically changing key input parameters and observing the impact on the output.

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Risk Management

The process of identifying, analyzing, and mitigating the potential negative impacts of uncertain or unpredictable events on a project.

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External Factors Analysis

A process of carefully assessing and taking into account the influence of external factors on a project or plan. These factors are beyond the control of the plan implementer.

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Uncertainty Presentation in Decision Making

Presenting uncertainty effectively means communicating its possible impact on decision-making.

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Uncertainty Log

A log that summarizes all assumptions and uncertainties used in a project's modeling and forecasting, ensuring transparency and accountability.

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Visualizing Uncertainty

Visual representations like error bars, fan charts, and violin plots are powerful tools to visualize uncertainties.

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Decision Making under Uncertainty

The practice of making informed decisions based on an understanding of uncertainty.

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Triangular Distribution

A probability distribution where the most likely value occurs at the center and the probability decreases towards the edges.

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Modal Value

The value at which a triangular distribution peaks, representing the most likely outcome.

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Lower Percentile

The 10th percentile in a triangular distribution, representing the lowest value that 10% of the data will fall below.

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Upper Percentile

The 90th percentile in a triangular distribution, representing the highest value that 10% of the data will fall above.

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Optimism Bias Adjustments

Adjustments made to account for optimism bias in project appraisal, usually based on statistical analysis of similar past projects.

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Project Financial Viability

The ability of a project to generate a positive benefit-cost ratio (BCR), indicating financial viability.

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Inverse Transform Sampling

A method used to generate random numbers that follow a specific probability distribution.

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Mean BCR

The average benefit-cost ratio (BCR) considering the uncertainty in various project parameters.

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Study Notes

Planning & Economic Evaluation of Transport Projects

  • Course: CENG6304
  • University: Addis Ababa University
  • Week: 9
  • Instructor: Fitsum Teklu

Last Few Weeks

  • Topics covered:
    • Social cost-benefit analysis
    • Alternative methods
    • HDM (likely Highway Design Model)

Treatment of Risks & Uncertainty

  • Key sources of risk and uncertainty in transport project appraisal:
    • Traffic risk
    • External factors (economic growth, cost escalation, political stability, COVID-19)
    • Network effects
    • Other changes impacting project/policy

Traffic Risk

  • A key step in designing transport policy involves estimating traffic demand for alternative options (e.g., toll roads)
  • Sources of uncertainty concerning inputs include travel time savings, GDP forecasts, vehicle operating costs (including EV technology), errors in model specification/parameters, and alternative route options for comparison
  • Information is needed on elasticity of demand for price increases

External Risks

  • Fluctuations in fuel prices, economic conditions, currency exchange rates, and pandemics (like COVID-19) have a significant impact on transport project demand.
  • Economic downturns can lead to financial crises impacting toll road revenues and potential bankruptcy.
  • Exchange rate risks are crucial for servicing international lender debts.
  • The Covid pandemic significantly reduced public transport use.

Other Risks

  • Technical risk: Construction delays, equipment failure, design flaws affecting project timelines and costs, and maintenance challenges like harsh weather impacting bridge costs are considerations.
  • Technological uncertainty: Rapid advancements in transport technologies (e.g., electric vehicles) present uncertainties regarding revenue from fuel taxes.
  • Policy and regulatory uncertainty: Changing laws, regulations, and funding priorities, such as a policy discouraging diesel/petrol vehicles in Ethiopia, are significant uncertainties.
  • Social and political risks: Public opposition, community disruption, social inequalities, policy changes, and government instability impact transport projects.

Techniques for Understanding / Accounting for Uncertainty

  • Judgment-based approaches (Delphi): Experts provide input in rounds, revising based on summarized feedback from prior rounds.
  • Scenarios: Analyzing multiple plausible future outcomes (e.g., low, medium, high scenarios) regarding variables like GDP, or using the Ethiopian Transport & Logistics Master Plan as example data.
  • Sensitivity studies: Assessing decision robustness by evaluating changes in specific inputs (e.g., vehicle operating cost, travel time).
  • Monte Carlo simulation: Using software for multiple iterations with assigned probability distributions for input variables to produce a distribution of output possibilities.

Other Strategies for Managing Risk

  • Contingency Planning: Prepare for potential challenges.
  • Risk transfer: Private parties may assume responsibilities via partnerships (e.g., private operators assuming traffic/revenue risk for toll roads).
  • Insurance and Hedging: Insurance and financial instruments (e.g., hedging against fuel price volatility) are used.
  • Stakeholder Engagement: Involve all parties (communities, experts, policymakers) for better risk assessment.

Methods

  • Focus on judgement-based methods, emphasizing the use of expert judgment for project risk assessments.
  • The Delphi method is a structured technique.

Scenarios

  • A systematic process for analyzing future events, considering multiple alternative outcomes.
  • Scenarios need realistic, plausible outcomes for evaluation against strategic goals.

The 30-Year Ethiopian Transport and Logistics Master Plan

  • The plan is based on three national economic scenarios:
    • "Go-Ahead": smooth recovery from pandemic and other factors.
    • "Next Generation": technology and energy source acceleration in transportation.
    • "Limits to Growth": economic effect of the pandemic and war worse than expected

Sensitivity Testing

  • Assessing how resistant a decision or model output is to changes in input data. It is most useful when dealing with significant uncertainties.
  • Standard practice involves testing key sensitivities, noting that it is often resource-intensive.
  • It does not provide probabilities of outcomes.

Monte Carlo Simulation

  • A method for quantifying uncertainty.
  • Steps involve identifying uncertainty in key inputs, assigning ranges or probability distributions, and running iterations through the model.
  • Results produce a distribution of outcomes with useful output probabilities.

Additional Topics

  • Error bars, fan charts, and violin plots for visual representation of uncertainties.

Questions?

  • A prompt asking for any questions from the audience/students.

Next Week

  • Topic: Monitoring & Evaluation.

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2024 CE6304 Risk & Uncertainty PDF

Description

This quiz explores key concepts related to traffic risk in the context of transport policy and infrastructure design. It covers topics such as uncertainty in traffic analysis, the impact of economic factors, and methods for assessing future conditions. Dive deep into the systematic approaches affecting project appraisals and outcomes.

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