A holistic approach towards risk explains the scholarly musing that risk management is neither an art nor science. As engineering systems entail multiple non-commensurate objectives, sub-objectives, multiple decision-making, crucial constituencies and a host of philosophical and methodological inquiries, such systems are holistically designed to merge art, science and other sub-categories of various philosophies that form a cycle.
The fact that art and science are the essential constituents in an engineering system is being validated by saying that the identification, quantification, evaluation, and trading off of risks, benefits, and costs should constitute an integral and explicit component of the overall managerial decision-making process, and not be a separate cosmetic afterthought (Sage Rouse 2009, p.157). Scholar Po-Lung Yu has expounded on the topic of the art and science of risk assessment and management by writing
Expanding and understanding your habitual domain is a lifelong process of self-discovery and personal growth that will make you happier, wiser and more effective person. It is the human software that directs the function of the most marvelous computer-your brain. (cited in Shi, Zeleny Lung Yu 2000, p.157)
Taking cues from the above treatise, it is noted that the art and science of risk management and their application to major projects is the main driver in acquiring an effective and empirical engine that allows for greater possibilities in reaching a desired goal. Lung Yu embraces the concept that both art and science is an infinite discovery directed towards achieving the best possible goal.
Applying both science and art in the aspect of risk management, it can be said that risk is neither an art nor science for it is a systematic discovery involving aspects beyond the scope of art and science that guides the industry in its exploration of habitual domains. The focal point of risk management is goal-setting that requires massive strategies and comprehension of various theoretical, practical, and realistic observation which can be included in the main factors of project planning and implementation. As the industry leaps forward to highly complicated boundaries of technology, art and science are being pushed to their limits to the extent that they can no longer be called as art and science but a systematic and strategic application of a certain course grounded on goal setting. This conception translates to the relevance of risk managements body of knowledge that is continuously criticized and improved as the industry progresses into new dimension consisting of new challenges and trends that scuffles with the traditional approaches.
II. Risk Management as Multi-Discipline Model
Sage Rouse ( 2009) viewed the body of knowledge in risk management as a complex and multi-disciplinary composite that spans and encompasses empirical and quantitative as well as normative, judgmental aspects of decision-making. Smith, Merna Jobling (2006) support that industry is a vast and multi-faceted by identifying divisions in projects and these are
Single discipline projects which are commonly implemented annually by one project team comprising of a single client and a single contractor.
Multidiscipline projects undertaken due to organizational complexity and requires various specialists for project planning, assessment and implementation. Such specialists may include sub-contractors for civil works, structural aspects, brickwork, carpentry, plumbing, installation of services, and telecommunications services.
Scholars say that, upon reflecting on the said notions, risk assessment and management bridges the crucial void and removes the barriers that exist between art and scientific applications. In the facet of the project planning and implementation, it is an inevitable reality that change is inherent and that this change has impacted the industry by producing adverse outcomes with many projects failing to meet deadlines and cost and quality targets (Smith, Merna, Jobling 2006, p.1). This failure is greatly attributed to the lack of right judgment regarding the good management of technological systems that are meant to address the holistic nature of the system in terms of its hierarchical, organizational, and fundamental decision-making structure (Shi, Zeleny Lung Yu 2000, p.160). Risk-based decision making and risk-based approaches are what signify various systematic processes that point towards uncertainties. Risk-based decision and risk-based approaches strengthened with reliable body of knowledge is being used to formulate policy options and assess their various distributional impacts and ramifications (Sage Rouse 2009, p. 155).
III. Decision-Making in Risk Management
At present, a finite number of professionals in the industry and the academe are devoting much of their time and resources for the habitual discovery of how to improve their comprehension and approach to decision-making in risk management procedures. This conquest extends beyond the horizon of science and art and distinguishes the concept that in this pursuit, they invariably rediscover (often with considerable frustration) the heuristic truism the more you know about a complex subject, the more you realize how much still remains unknown (Sage Rouse 2009, p. 155).
In the complexity of this pursuit, there are two factors that add complication to this quest. The first fundamental reason is that the decision-making literally encompasses every aspect, dimension and facet of our lives and secondly, risk-based decision making is cross-disciplinary and is further made complicated by the emergence of diverse approaches with varying reliability (Shi, Zeleny Lu Yu 2000). Decision making is a universal composite that can affect at the corporate, personal, and governmental levels as it is a multidisciplinary task that goes beyond what art and science can explicate. This is why the management of risk is neither an art nor science because professionals cannot measure the extent of searching for solutions in every uncertainty and cannot predict the stoppage for the exploration of effective strategies. Uncertainties envelop the decision-making procedure in both the aspects of single discipline and in multi-discipline projects. Uncertainties is being inhibited by economic or environmental factors driven by socio-political or geographical forces directed by technological know-how and influenced by several power brokers and stakeholders that consequently impacts goal setting and project implementation (Shi, Zeleny, Lung Yu 2000).
As risks are invisible to the bare eyes and unforeseen by the bare minds, risk management is infinitely transformed into a procedure towards avoiding, reducing, absorbing, or transferring risk and exploiting potential opportunities (Smith, Merna Jobling 2006, p.24). Such transformation in the aspect of risk is a subject which is not limited to both art and science but also to human and organizational factors which are beyond the jurisdiction of art and science. This conception relates to the fact that there are some philosophical queries regarding risks which are not yet solved due to disparities and differing views of those involved in the subject. As risk assessment and management extends beyond the scope of art and science, it must be an integral aspect of decision-making procedure rather than making it an unwarranted add-on technical analysis of various uncertainties.
The premise that risk management should an integral part of the overall decision-making procedure necessitates a systematic and holistic approach in countering risks. This notion poses the perspective that risk management cannot be a form of art only or a form of science but it should be a combination of the two otherwise, it cannot be called science or art. The lack of art in risk management process injures the effectiveness of solving risks or alleviating risks and this hold true for the shortage of science in dealing with risks. The art of imagining and formulating strategic decisions and applications can be considered a part of creative process in a scientific discovery of effective risk management.
IV. Evolution in Risk Analysis
As the industry moves forward, the shift of focus towards a more holistic approach to management wherein there is a convergence of ever-evolving and coherent methodologies, aggregate of theories, methodologies, heuristics and tools is gaining leverage. This idea introduces the evolution of risk analysis instigated by one of the fathers of systems engineering, Norbert Wiener. Wiener writes
If a new scientific subject has real vitality , the center of interest in it must and should shift in the course of yearsThe role of information and the techniques of measuring and transmitting information constitute a whole discipline for the engineer, for the physiologist, for the psychologist, and for the sociologistThus it behooves the cyberneticist to move in on new fields and to transfer a large part of his attention to ideas which have arisen(cited in Shi, Zeleny, Lung Yu 2000, p. 161).
This evolution in risk analysis validates the concept in which art and science are being combined to produce an effective process of dealing with risks. Such combination is what moves risk management beyond the edge of science and art and make it a product of a careful investigation of holistic ideas and philosophies.
V. Risk Management Process in the Industry
The construction industry is a kind of industry where performance of contractual obligations is accurately projected into the future and is widely concerned with effective risk analysis. As stated earlier in the discussion, there are many factors which negatively affect project implementation in the construction industry. The task of risk management is made difficult due to a large number of independent, but interdependent, contributors to the construction process (Fenn Gameson 1992, p.273). Risk management in the project implementation in the construction industry maybe defined as
Risk management involves the identification of the particular, significant risks which may impair the performance of a specific project. It requires the assessment of the effect of these risks on the project and the establishment of policies foe dealing with them. These policies may include clear allocation of risk to the various parties, determination of appropriate time, cost and quality allowances for risks, whether transferred or retained, and steps to reduce the likelihood, magnitude and impact of risks. (cited in Fenn Gameson 1992, p.73)
It is noted that the risk in the industry will likely arise from different sources which may vary in the possibility of eventual occurrence and in potential effect on the success of a major project. As an example, it is visibly assumed that inflation will increase the project during the procurement process but concurrently, the impact of inflation is low and predictable. It is in the form of uncertainties and conflicts which are sprouted out from categories beyond what art and science can defined that the transformation in risk management is being acknowledged.
There are seven wide categories of risk which are likely to occur in the industry and these are physical, construction, design, political, financial, legal and environmental categories (cited in Fenn Gameson 1992, p.73). The categories mentioned necessitate the convergence of both art and science in dealing with risks. As stated earlier in the discussion, the absence of either science or art may conjure with failure thus, risk management should be strongly tied up with the term convergence of art and science. Notably, there are types of risks that can relate to the categories conjure with the merging of art and science. Edwards (1995) says that risks can be
Physicalmaterial- loss due to structural defects
Consequential-loss of profits after certain destruction
Social-changes in public opinion, expectations of workforce, and moral and ethical issues
Legal- legal liabilities
Political- governmental intervention
Financial-inadequate inflation forecasts
Technical-increased technology in the industry
As risks are not limited to the extent of what art and science can define, they require more than a systematic and philosophical designed to meet the hazards and threats of a project.
Is risk analysis an art or science This question poses the answer that risk management can never be just an art or just a science because in the application of scientific method in project planning and implementation, accounts of strategic ways directed toward effective solutions occur in the process.
Within the concept of industry perspective, it can be noted that the risk management is a comprehensive and proactive combination of scientific methodologies meant to identify, explicate, assess, and minimize risks throughout the cycle. The developing nature of scientific methodologies requires the application of artistic approaches that contribute to the term called methodological development. These methodologies are projected towards the effective management of potential opportunities and adverse impacts.
Various cultures, procedures, and structures in the realm of risk management are aiming at estimating the level of risk or the probability of an uncertainty appearing and the magnitude of impacts that may occur with it.
The position of this paper reflects the perspective that risk management can never be a science or an art because of the broadening scope of the nature of dealing with risks. It is inherent in this issue that risk assessment is a procedure that produces an outcome which is not a final answer. In describing risk management and its application on a major project, it is noted that the risk analysis is a vital tool in decision-making in the modern industry and commerce. When dealing with risks and uncertainties, it is highly relevant to go beyond the controls of art and science in understanding risks and managing them.
As risk management is continuously innovating, it encompasses various theories, practical application, and philosophical queries, regulatory factors that can build up solutions for complex problems and improved decision-making. The risk management plan in the construction industry also serves as a baseline for the construction project to track variances, validate assumptions based on objective information and the potential probability, and the impact of the risk of events.
The structural approach of the risk management plan involves project cost control and project management reporting systems for a certain construction project. Professionals in the construction industry define a risk as any event that is likely to adversely affect the projects ability to achieve its defined objectives, which is completing the project on time, within budget, at high quality, and with a satisfied client who is willing to give the construction managergeneral contractor (CMGC) repeat business and a good reference (Lambeck Eschemuller 2008, p.23).
It is clearly manifested in the existing literatures regarding project management that dealing with a risk takes more than an art and science and it entails the fusion of various rational choices and tools that guide the decision-making procedure.
VI. The Fusion of Art and Science in the Industrys Risk Management Cycle
To further the discussion on the risk management being more than just a mere science and a mere art is but an in-depth fusion of both subjects, it is important to note some scientific and art points of a certain construction project management.
Scientific points
Various methodologies and frameworks
Standard procedures and knowledge areas
Application of accepted best practices and strategies
Languages spoken
Metrics that measure several project categories
Application of work templates
Art points
Applying the right procedure for the right project strategically
Formulating good and sound decisions on the project
Assuring that all specifications and requirements that apply to the scope of the project are available
Centering on the priorities, features, goals, and tasks of the project
Application of options when things go wrong
Reaching a successful end promptly and within budget limit
Executing effective and strategic meetings
Advancing the project through strategic transactions with politics and bureaucracy of an organization
In the two categories, the science and art categories, it clearly seen that both science and art run a certain project and this can be translated to the notion that risk management should be defined as the fusion of the two inseparable subjects. It is vividly manifested that art and science is a system and a cycle that makes up the whole risk management process and therefore the lack of either science or art, will disrupt the process and it is most likely that risk management will not continue. As such is said because the process of dealing with risks and uncertainties is occupied by a systematic and holistic cycle involving science and art to be able to produce an outcome which comes from goal setting. Risk management flowchart in a specific major project is illustrated below.
SHAPE MERGEFORMAT
Risk Management Flowchart by Lambeck Eschemuller (2008)
In the diagram, Lambeck Eschemuller (2008) analyze risk management as a systematic cycle comprising of art and science and producing an outcome that goes beyond scientific and artistic explanation. The diagram explicates that in order to properly manage the potential risks to the project, a risk management plan needs to developed to formally identify, quantify, assess, and mitigate the risks during the execution of the project (Lambeck Eschemuller 2008, p. 23). The utilization of the risk management system (CRMS) model is widely used in the construction industry for it provides an effective systematic framework for quantitatively, identifying evaluating, and responding to risks in construction projects (Lambeck Eschemuller 2008, p. 23).
It could be said that the risk procedure is not a subject which can only be considered as science because, as viewed by the diagram, risk management strategies fall under the realm of art category in which professionals who are involved in a decision-making procedure in risk management are required to think and analyze ways and options to effectively implement, control, and monitor risks. The diagram below explains that risk management is neither a science nor an art but a systematic cycle with a fusion of different elements.
SHAPE MERGEFORMAT
B. Illustrative View of Risk Management Cycle
The diagram briefly explains why risk management is neither a science nor an art because it is a systematic cycle of approach to dealing with risks involves more than just art and science but also various philosophies and scholarly queries imposed as the risk management process evolves into something new.
It is viewed that the infinite cycle which reaches across various disciplines conjuring with the term interdisciplinary work of science and art is the main framework and constituent of risk management process that is why it cannot be called a science or an art because risk management is definitely the combination of the two and a product of continuous research and development in the field of risk analysis and assessment which draw insights and ideas from the convergence of science and art and from the unlimited access to the whole facet of life.
As risk management is a finite process and bares no concrete solution that is universal for all of the industrys risks, it is perceived to be an adventuresome process that doesnt stop within the bounds of science and art. This conception is in line with the notion that risk management is not focused on technique versus knowledge but a systematic procedure of applying a certain skill, technique, and knack to an area of study or body of knowledge. It is in this position that the right question regarding objectivity and subjectivity of risks should be greatly emphasized.
VII. Subjectivity and Objectivity in Risk Management
The question should not be Is risk management a science or an art but should be To what extent the organization is applying scientific method and strategies to risk management In this query, it is vividly manifested that there is a spectrum of linkage between objectivity and subjectivity because it validates this papers notion that science and art form a systematic cycle as a pattern of approach to dealing with risks.
Subjectivity maybe identified as the establishment of a belief statement based from what the eyes and minds can perceive without the application of analytic rigor. Objectivity is exactly the analytic rigor that the previous statement signified. Applying both spectrum between the subjectivity and objectivity in managing risks for a major project, it can be said that putting analytic rigor to calculate the effectiveness of the formulated belief statement mirrors out the relationship between identifying risks, choosing what strategy to be utilized and putting that strategy to action to gain analytical results.
It is noted that the main goal of the rigorous analysis and science in applying risk management techniques is to measure the validity of a perceived technique deemed to be subjective. The topic on the subjectivity which can be referred to as art and objectivity considered as the scientific aspect in applying risk management technique has been cited by Harding (1998) who says that inevitable subjectivity does not mean that risk analysis fails to provide a useful input for environmental decision-making and management (Harding 1998).
He also writes
Risk analysis, and especially quantitative risk analysis is often portrayed as providing a rigorous and objective analysis of the relative risks facing humans and the environment and through this assisting in minimizing those risks in a cost-efficient way. There is however growing recognition that risk analysis is far from objective and that subjectivity is present from the first stage of hazard or risk identification through to the much more obvious subjectivity inherent in risk assessment. (Harding 1998, p. 183)
Harding (1998) says that the risk analysis is invaluable in providing a structured procedure for the chosen risk management technique as such procedure is centered on thinking through causes and effects. It is also noted that risk analysis is also deemed invaluable in the aspect of designing solutions and measures capable of minimizing risks to humans, organizations, and to the environment. Harding (1998) stresses that it is highly essential that uncertainty, assumptions and subjectivity are unmistakably acknowledged in risk management to be able to obtain the best possible strategy.
Another scholar who embraces the spectrum between subjectivity and objectivity is W. Ken Muhlbauer (2004) who poses the idea that subjective models surely utilize objective data to construct or support judgments or belief statements that may lead to better acquisition of risk management strategy. It is said that
In theory, a purely objective model will strictly adhere to scientific practice and will have no opinion data. A purely subjective model implies complete reliance on expert opinionObjectivity cannot be purely maintained while dealing with the real-world situation of missing data and variables that are highly confounded. (Muhlbauer 2004, p. 16)
Muhlbauer (2004) embraces the notion that science, art and philosophical facets that make up models for the planning and implementation of risk strategies must be all incorporated to achieve a complete, comprehensive and holistic risk picture. This conception strengthens the musing which says that risk management is neither an art nor science but a complete and systematic process extending up to the limits of what science and art can explain.
In choosing a risk management technique, Muhlbauer (2004) also renders several questions that may impact the choice of risk assessment technique and these are
What date do you have
What is the level of your confidence in the predictive value of data gathered
What resources are available in terms of money, manpower, and time
What benefits do you expect to accrue in the aspects of cost savings, regulatory burdens, public support and operational efficiency
The questions formulated by the scholar are indeed important for the identification of risk management techniques and will highlight specific deficiencies and point to appropriate mitigation capabilities. As risk management techniques can be called as the building blocks that support risk management, it can be assumed that the techniques overhaul management models making it efficient to render input for risk management.
The aspect of subjectivity and objectivity within risk management is regarded by Smith, Merna Jobling (2006) as part of the approaches to the management of risks which come in two types informal and the formal approach. The informal approach to the management of risk according Smith, Merna Jobling (2006) is a method which views the risks in a subjective manner. The informal approach involves having discussions with industry experts and professionals and simultaneously assessing their perspectives concerning the possible risks in a project. Afterwards, an in-depth review of the project in line with the predicted risks is executed. Smith, Merna Jobling (2006) explains that contingency funds can also be used as a technique in managing risks because it represents the cost of risks that are ought to occur in a certain project. In this specific technique, the merge between subjective and objective types is seen not in the sense that funds are in line with numerical values but such contingency funds as a technique entails a creative and justified manner of execution.
Smith, Merna Jobling (2006) describe the formalized procedure to the management or risk as structured and consisting of guidelines to be followed so that they can be utilized by the organizational members. The formal approach to management of risk serves to suit the demands of a specific organization and assures that the procedure is more of objective type than the informal approach. Scholars commonly emphasize that objectivity is an integral characteristic of risk management procedure. Even though there is no single methodology used in this kind of approach, it is noted that there frameworks for formalized risk management process which do not expound on the methods to be utilized but allow the user scope for picking the right appropriate techniques (Smith, Merna Jobling 2006). The general quality of the formal approach to the management of risks is signified below.
The quality of a formal process of risk management is generally accepted to be dependent upon management awareness, motivation among project personnel, a methodical approach, the information available which is often linked to the project phase, the assumptions and limitations upon which the risk analysis is based, the qualifications and knowledge within the project and the experience and personality of the risk analysts leading the process. (Smith, Merna Jobling 2006, p.39).
VIII. The Impact of the Complexity of Human Behavior in Risk Assessment
The implicit connotations regarding risks are explored by Hood Jones (1996) who explicates the fact the first widely held tacit assumption made by the industry is that risks can be treated as though they were steadfast and concrete physical constituents that can be accurately defined and perceptibly measured in objective terms. Hood Jones (1996) have argued that the complexity of human behavior in general and human errors in particular can be pre-specified and reduced to a simple unitary numerical representation (Hood Jones 1996, p. 104).
It is noted that the authors mentioned the complexity of the human behavior which impacts the use of probabilities risk analysis methodology. It is discussed in this paper that the results of risk management is a never-ending process that requires further studies. This notion validates Hood Jones (1996) argument which indirectly suggests that the risk management cannot be quantified in terms of numerical results and therefore, risk management is suggestive of the notion that dealing with risks is entails more than a combination of art and science due to human complexity that not even theories and numbers cannot signify.
Remarkably, this papers treatise that risk management is neither a science nor an art can also be supported by the work of Hood Jones (1996) which is grounded on the idea that there is no publicly available model that can accurately forecast human behavior, let alone predict the probability and types of errors that different people might commit under diverse, and in some cases extremely dangerous, circumstances (cited in Hood Jones 1996, p.104).
With the finite capabilities that underlie the process for the acquisition of risk management strategies, the legitimacy of numerical expression as the outcome of a risk analysis and assessment is being put to question even if there is a qualitative characteristics to support such outcome.
The strength of analytical character is then damaged by the questioned legitimacy of the quantifying and qualifying human behavior as risk management tries to become as complex as it can be as technological innovation progresses. This position is related to the saying that risk management goes beyond the capacities of science and art and requires a holistic approach on answering uncertainties.
There are literatures which explain why the risk management can never be a form of science or art because the main composites that drive the progression of a specified risk management project are finite dynamic and changing composites that necessitate an unlimited knowledge that goes beyond the horizon of science and art.
As risk management strategy is all about planning and execution, unrealized and plans can encourage a culture of defeat and consequently, without proper action the intentions of the industry may decay and be rotten with uncertainties. It is an acceptable fact that to be able achieve industry success through the execution of risk management strategy, it is required that a full analysis of risks that encompasses the boundaries of art and science must be done apart from reviewing studies and literatures which focus on the strategic planning aiming at profitability, productivity and the like.
IX. Dynamic Nature of the Industry
It is known that projects in done within the construction industry are basically completed through the efforts of several specialty contractors that enter into performance agreements with the prime contractor (Smith Hinze 2009). At present, the industry is shifting towards a measure involving contractors that began to demand changes, demand information, make decisions and insist pf rewriting the agentsbrokers role to include education (Palmer, Maloney Heffron 1996, p.2). The said paradigm shift has created new opportunities such as risk management profit institutions, contractor-controlled insurance programs, group captives and other highly specialized profit techniques that provide the contractors avenues for creating new methods on managing risks.
This idea reflects the dynamic nature of the industry that translates to the reality that philosophies which involve risk management and technique are also moving forward to a new sophistication that recognizes the fusion of art, science and various theories. It is being stressed that areas such as capacity, rate hikes, and insolvency have provided sophistication to the buying philosophy within the construction industry which in itself requires a cutting-edge creativity by service providers, and they will continue to revolutionize every facet of this business (Palmer, Maloney Heffron 1996, p. 2)
Upon mentioning the term creativity, the application of art in the aspect of identifying risk management techniques is considered to be a changing facet in the philosophy of risk management as the industry leaps forward to widening innovation. Palmer, Maloney Heffron (1996) describe the said paradigm shift as the Cost of Risk Engineering (CORE).
In the attempt to identify proper risk management techniques, it is recommended that a review of risk categories and the elements must be done prior to starting a risk management plan. The idea of information gathering must be done first in order to understand and fully comprehend the differences in the observed techniques and when to use them (Heldman 2005).
This paper validates the conception that risk management is neither a science nor an art because of several factors that redefine the management of risk as the industry leaps forward to a new level of sophistication. Risk management process is being defined in this paper as a holistic and systematic approach towards uncertainties extending beyond the scope of science and art. The procedure in dealing with risks is being considered as a finite quest to procure solutions for calculating and managing uncertainties which cannot be accurately predicted due to the complexity of the industry. The management of risks is purely grounded on the cycle involving science, art and several philosophies that maybe considered as catalysts for the evolution of risk management.
The aspect of objectivity and subjectivity is tackled in this essay because it translates to the fact that the industry is a dynamic and ever-changing system that produces an outcome which is not finalized and therefore, necessitates further studies due to the legitimacy of objective and subjective risk assessment which is being put to question. This essay upholds the fact that the management of risks and the identification of management techniques are deeply influenced by multi-disciplinary approach to various uncertainties concerning human complexity. It was in this notion that the paper was able to fill in the gap between the legitimacy of numerical outcomes and the accuracy of risk assessment results. Human complexity was tackled in the paper because such aspect requires more than an explanation of science, art and philosophical literatures focusing on risk management.
This essay explicates that the integrity of analytical character was being stained by the questioned legitimacy of the quantifying and qualifying human behavior as risk management tries to become as sophisticated as the industry progresses to a highly advanced technological direction. It was confirmed that risk management goes beyond the capacities of science and art and necessitates a holistic approach on assessing project uncertainties.
The focus on subjectivity and objectivity within risk management is being validated by legit forms of literatures that introduce two types of approaches to the management of risks which are the informal and the formal approach. This paper discussed the two types of risk management because it related to the aspect of the subjectivity and objectivity of risk management procedure. Proper risk management techniques could become an outcome of an in-depth review of risk categories and the elements surrounding a risk management plan. The concept of information gathering must be done in addition to the in-depth review of factors in order to learn how to creatively apply certain techniques or strategy together with the other essential constituents of a holistic approach towards answering uncertainties.
Risk management strategy is all about planning and execution that entails a richer analysis of risks that extends beyond the jurisdiction of art, science and philosophy to be able to identify an effective approach to the management of risks.
The fact that art and science are the essential constituents in an engineering system is being validated by saying that the identification, quantification, evaluation, and trading off of risks, benefits, and costs should constitute an integral and explicit component of the overall managerial decision-making process, and not be a separate cosmetic afterthought (Sage Rouse 2009, p.157). Scholar Po-Lung Yu has expounded on the topic of the art and science of risk assessment and management by writing
Expanding and understanding your habitual domain is a lifelong process of self-discovery and personal growth that will make you happier, wiser and more effective person. It is the human software that directs the function of the most marvelous computer-your brain. (cited in Shi, Zeleny Lung Yu 2000, p.157)
Taking cues from the above treatise, it is noted that the art and science of risk management and their application to major projects is the main driver in acquiring an effective and empirical engine that allows for greater possibilities in reaching a desired goal. Lung Yu embraces the concept that both art and science is an infinite discovery directed towards achieving the best possible goal.
Applying both science and art in the aspect of risk management, it can be said that risk is neither an art nor science for it is a systematic discovery involving aspects beyond the scope of art and science that guides the industry in its exploration of habitual domains. The focal point of risk management is goal-setting that requires massive strategies and comprehension of various theoretical, practical, and realistic observation which can be included in the main factors of project planning and implementation. As the industry leaps forward to highly complicated boundaries of technology, art and science are being pushed to their limits to the extent that they can no longer be called as art and science but a systematic and strategic application of a certain course grounded on goal setting. This conception translates to the relevance of risk managements body of knowledge that is continuously criticized and improved as the industry progresses into new dimension consisting of new challenges and trends that scuffles with the traditional approaches.
II. Risk Management as Multi-Discipline Model
Sage Rouse ( 2009) viewed the body of knowledge in risk management as a complex and multi-disciplinary composite that spans and encompasses empirical and quantitative as well as normative, judgmental aspects of decision-making. Smith, Merna Jobling (2006) support that industry is a vast and multi-faceted by identifying divisions in projects and these are
Single discipline projects which are commonly implemented annually by one project team comprising of a single client and a single contractor.
Multidiscipline projects undertaken due to organizational complexity and requires various specialists for project planning, assessment and implementation. Such specialists may include sub-contractors for civil works, structural aspects, brickwork, carpentry, plumbing, installation of services, and telecommunications services.
Scholars say that, upon reflecting on the said notions, risk assessment and management bridges the crucial void and removes the barriers that exist between art and scientific applications. In the facet of the project planning and implementation, it is an inevitable reality that change is inherent and that this change has impacted the industry by producing adverse outcomes with many projects failing to meet deadlines and cost and quality targets (Smith, Merna, Jobling 2006, p.1). This failure is greatly attributed to the lack of right judgment regarding the good management of technological systems that are meant to address the holistic nature of the system in terms of its hierarchical, organizational, and fundamental decision-making structure (Shi, Zeleny Lung Yu 2000, p.160). Risk-based decision making and risk-based approaches are what signify various systematic processes that point towards uncertainties. Risk-based decision and risk-based approaches strengthened with reliable body of knowledge is being used to formulate policy options and assess their various distributional impacts and ramifications (Sage Rouse 2009, p. 155).
III. Decision-Making in Risk Management
At present, a finite number of professionals in the industry and the academe are devoting much of their time and resources for the habitual discovery of how to improve their comprehension and approach to decision-making in risk management procedures. This conquest extends beyond the horizon of science and art and distinguishes the concept that in this pursuit, they invariably rediscover (often with considerable frustration) the heuristic truism the more you know about a complex subject, the more you realize how much still remains unknown (Sage Rouse 2009, p. 155).
In the complexity of this pursuit, there are two factors that add complication to this quest. The first fundamental reason is that the decision-making literally encompasses every aspect, dimension and facet of our lives and secondly, risk-based decision making is cross-disciplinary and is further made complicated by the emergence of diverse approaches with varying reliability (Shi, Zeleny Lu Yu 2000). Decision making is a universal composite that can affect at the corporate, personal, and governmental levels as it is a multidisciplinary task that goes beyond what art and science can explicate. This is why the management of risk is neither an art nor science because professionals cannot measure the extent of searching for solutions in every uncertainty and cannot predict the stoppage for the exploration of effective strategies. Uncertainties envelop the decision-making procedure in both the aspects of single discipline and in multi-discipline projects. Uncertainties is being inhibited by economic or environmental factors driven by socio-political or geographical forces directed by technological know-how and influenced by several power brokers and stakeholders that consequently impacts goal setting and project implementation (Shi, Zeleny, Lung Yu 2000).
As risks are invisible to the bare eyes and unforeseen by the bare minds, risk management is infinitely transformed into a procedure towards avoiding, reducing, absorbing, or transferring risk and exploiting potential opportunities (Smith, Merna Jobling 2006, p.24). Such transformation in the aspect of risk is a subject which is not limited to both art and science but also to human and organizational factors which are beyond the jurisdiction of art and science. This conception relates to the fact that there are some philosophical queries regarding risks which are not yet solved due to disparities and differing views of those involved in the subject. As risk assessment and management extends beyond the scope of art and science, it must be an integral aspect of decision-making procedure rather than making it an unwarranted add-on technical analysis of various uncertainties.
The premise that risk management should an integral part of the overall decision-making procedure necessitates a systematic and holistic approach in countering risks. This notion poses the perspective that risk management cannot be a form of art only or a form of science but it should be a combination of the two otherwise, it cannot be called science or art. The lack of art in risk management process injures the effectiveness of solving risks or alleviating risks and this hold true for the shortage of science in dealing with risks. The art of imagining and formulating strategic decisions and applications can be considered a part of creative process in a scientific discovery of effective risk management.
IV. Evolution in Risk Analysis
As the industry moves forward, the shift of focus towards a more holistic approach to management wherein there is a convergence of ever-evolving and coherent methodologies, aggregate of theories, methodologies, heuristics and tools is gaining leverage. This idea introduces the evolution of risk analysis instigated by one of the fathers of systems engineering, Norbert Wiener. Wiener writes
If a new scientific subject has real vitality , the center of interest in it must and should shift in the course of yearsThe role of information and the techniques of measuring and transmitting information constitute a whole discipline for the engineer, for the physiologist, for the psychologist, and for the sociologistThus it behooves the cyberneticist to move in on new fields and to transfer a large part of his attention to ideas which have arisen(cited in Shi, Zeleny, Lung Yu 2000, p. 161).
This evolution in risk analysis validates the concept in which art and science are being combined to produce an effective process of dealing with risks. Such combination is what moves risk management beyond the edge of science and art and make it a product of a careful investigation of holistic ideas and philosophies.
V. Risk Management Process in the Industry
The construction industry is a kind of industry where performance of contractual obligations is accurately projected into the future and is widely concerned with effective risk analysis. As stated earlier in the discussion, there are many factors which negatively affect project implementation in the construction industry. The task of risk management is made difficult due to a large number of independent, but interdependent, contributors to the construction process (Fenn Gameson 1992, p.273). Risk management in the project implementation in the construction industry maybe defined as
Risk management involves the identification of the particular, significant risks which may impair the performance of a specific project. It requires the assessment of the effect of these risks on the project and the establishment of policies foe dealing with them. These policies may include clear allocation of risk to the various parties, determination of appropriate time, cost and quality allowances for risks, whether transferred or retained, and steps to reduce the likelihood, magnitude and impact of risks. (cited in Fenn Gameson 1992, p.73)
It is noted that the risk in the industry will likely arise from different sources which may vary in the possibility of eventual occurrence and in potential effect on the success of a major project. As an example, it is visibly assumed that inflation will increase the project during the procurement process but concurrently, the impact of inflation is low and predictable. It is in the form of uncertainties and conflicts which are sprouted out from categories beyond what art and science can defined that the transformation in risk management is being acknowledged.
There are seven wide categories of risk which are likely to occur in the industry and these are physical, construction, design, political, financial, legal and environmental categories (cited in Fenn Gameson 1992, p.73). The categories mentioned necessitate the convergence of both art and science in dealing with risks. As stated earlier in the discussion, the absence of either science or art may conjure with failure thus, risk management should be strongly tied up with the term convergence of art and science. Notably, there are types of risks that can relate to the categories conjure with the merging of art and science. Edwards (1995) says that risks can be
Physicalmaterial- loss due to structural defects
Consequential-loss of profits after certain destruction
Social-changes in public opinion, expectations of workforce, and moral and ethical issues
Legal- legal liabilities
Political- governmental intervention
Financial-inadequate inflation forecasts
Technical-increased technology in the industry
As risks are not limited to the extent of what art and science can define, they require more than a systematic and philosophical designed to meet the hazards and threats of a project.
Is risk analysis an art or science This question poses the answer that risk management can never be just an art or just a science because in the application of scientific method in project planning and implementation, accounts of strategic ways directed toward effective solutions occur in the process.
Within the concept of industry perspective, it can be noted that the risk management is a comprehensive and proactive combination of scientific methodologies meant to identify, explicate, assess, and minimize risks throughout the cycle. The developing nature of scientific methodologies requires the application of artistic approaches that contribute to the term called methodological development. These methodologies are projected towards the effective management of potential opportunities and adverse impacts.
Various cultures, procedures, and structures in the realm of risk management are aiming at estimating the level of risk or the probability of an uncertainty appearing and the magnitude of impacts that may occur with it.
The position of this paper reflects the perspective that risk management can never be a science or an art because of the broadening scope of the nature of dealing with risks. It is inherent in this issue that risk assessment is a procedure that produces an outcome which is not a final answer. In describing risk management and its application on a major project, it is noted that the risk analysis is a vital tool in decision-making in the modern industry and commerce. When dealing with risks and uncertainties, it is highly relevant to go beyond the controls of art and science in understanding risks and managing them.
As risk management is continuously innovating, it encompasses various theories, practical application, and philosophical queries, regulatory factors that can build up solutions for complex problems and improved decision-making. The risk management plan in the construction industry also serves as a baseline for the construction project to track variances, validate assumptions based on objective information and the potential probability, and the impact of the risk of events.
The structural approach of the risk management plan involves project cost control and project management reporting systems for a certain construction project. Professionals in the construction industry define a risk as any event that is likely to adversely affect the projects ability to achieve its defined objectives, which is completing the project on time, within budget, at high quality, and with a satisfied client who is willing to give the construction managergeneral contractor (CMGC) repeat business and a good reference (Lambeck Eschemuller 2008, p.23).
It is clearly manifested in the existing literatures regarding project management that dealing with a risk takes more than an art and science and it entails the fusion of various rational choices and tools that guide the decision-making procedure.
VI. The Fusion of Art and Science in the Industrys Risk Management Cycle
To further the discussion on the risk management being more than just a mere science and a mere art is but an in-depth fusion of both subjects, it is important to note some scientific and art points of a certain construction project management.
Scientific points
Various methodologies and frameworks
Standard procedures and knowledge areas
Application of accepted best practices and strategies
Languages spoken
Metrics that measure several project categories
Application of work templates
Art points
Applying the right procedure for the right project strategically
Formulating good and sound decisions on the project
Assuring that all specifications and requirements that apply to the scope of the project are available
Centering on the priorities, features, goals, and tasks of the project
Application of options when things go wrong
Reaching a successful end promptly and within budget limit
Executing effective and strategic meetings
Advancing the project through strategic transactions with politics and bureaucracy of an organization
In the two categories, the science and art categories, it clearly seen that both science and art run a certain project and this can be translated to the notion that risk management should be defined as the fusion of the two inseparable subjects. It is vividly manifested that art and science is a system and a cycle that makes up the whole risk management process and therefore the lack of either science or art, will disrupt the process and it is most likely that risk management will not continue. As such is said because the process of dealing with risks and uncertainties is occupied by a systematic and holistic cycle involving science and art to be able to produce an outcome which comes from goal setting. Risk management flowchart in a specific major project is illustrated below.
SHAPE MERGEFORMAT
Risk Management Flowchart by Lambeck Eschemuller (2008)
In the diagram, Lambeck Eschemuller (2008) analyze risk management as a systematic cycle comprising of art and science and producing an outcome that goes beyond scientific and artistic explanation. The diagram explicates that in order to properly manage the potential risks to the project, a risk management plan needs to developed to formally identify, quantify, assess, and mitigate the risks during the execution of the project (Lambeck Eschemuller 2008, p. 23). The utilization of the risk management system (CRMS) model is widely used in the construction industry for it provides an effective systematic framework for quantitatively, identifying evaluating, and responding to risks in construction projects (Lambeck Eschemuller 2008, p. 23).
It could be said that the risk procedure is not a subject which can only be considered as science because, as viewed by the diagram, risk management strategies fall under the realm of art category in which professionals who are involved in a decision-making procedure in risk management are required to think and analyze ways and options to effectively implement, control, and monitor risks. The diagram below explains that risk management is neither a science nor an art but a systematic cycle with a fusion of different elements.
SHAPE MERGEFORMAT
B. Illustrative View of Risk Management Cycle
The diagram briefly explains why risk management is neither a science nor an art because it is a systematic cycle of approach to dealing with risks involves more than just art and science but also various philosophies and scholarly queries imposed as the risk management process evolves into something new.
It is viewed that the infinite cycle which reaches across various disciplines conjuring with the term interdisciplinary work of science and art is the main framework and constituent of risk management process that is why it cannot be called a science or an art because risk management is definitely the combination of the two and a product of continuous research and development in the field of risk analysis and assessment which draw insights and ideas from the convergence of science and art and from the unlimited access to the whole facet of life.
As risk management is a finite process and bares no concrete solution that is universal for all of the industrys risks, it is perceived to be an adventuresome process that doesnt stop within the bounds of science and art. This conception is in line with the notion that risk management is not focused on technique versus knowledge but a systematic procedure of applying a certain skill, technique, and knack to an area of study or body of knowledge. It is in this position that the right question regarding objectivity and subjectivity of risks should be greatly emphasized.
VII. Subjectivity and Objectivity in Risk Management
The question should not be Is risk management a science or an art but should be To what extent the organization is applying scientific method and strategies to risk management In this query, it is vividly manifested that there is a spectrum of linkage between objectivity and subjectivity because it validates this papers notion that science and art form a systematic cycle as a pattern of approach to dealing with risks.
Subjectivity maybe identified as the establishment of a belief statement based from what the eyes and minds can perceive without the application of analytic rigor. Objectivity is exactly the analytic rigor that the previous statement signified. Applying both spectrum between the subjectivity and objectivity in managing risks for a major project, it can be said that putting analytic rigor to calculate the effectiveness of the formulated belief statement mirrors out the relationship between identifying risks, choosing what strategy to be utilized and putting that strategy to action to gain analytical results.
It is noted that the main goal of the rigorous analysis and science in applying risk management techniques is to measure the validity of a perceived technique deemed to be subjective. The topic on the subjectivity which can be referred to as art and objectivity considered as the scientific aspect in applying risk management technique has been cited by Harding (1998) who says that inevitable subjectivity does not mean that risk analysis fails to provide a useful input for environmental decision-making and management (Harding 1998).
He also writes
Risk analysis, and especially quantitative risk analysis is often portrayed as providing a rigorous and objective analysis of the relative risks facing humans and the environment and through this assisting in minimizing those risks in a cost-efficient way. There is however growing recognition that risk analysis is far from objective and that subjectivity is present from the first stage of hazard or risk identification through to the much more obvious subjectivity inherent in risk assessment. (Harding 1998, p. 183)
Harding (1998) says that the risk analysis is invaluable in providing a structured procedure for the chosen risk management technique as such procedure is centered on thinking through causes and effects. It is also noted that risk analysis is also deemed invaluable in the aspect of designing solutions and measures capable of minimizing risks to humans, organizations, and to the environment. Harding (1998) stresses that it is highly essential that uncertainty, assumptions and subjectivity are unmistakably acknowledged in risk management to be able to obtain the best possible strategy.
Another scholar who embraces the spectrum between subjectivity and objectivity is W. Ken Muhlbauer (2004) who poses the idea that subjective models surely utilize objective data to construct or support judgments or belief statements that may lead to better acquisition of risk management strategy. It is said that
In theory, a purely objective model will strictly adhere to scientific practice and will have no opinion data. A purely subjective model implies complete reliance on expert opinionObjectivity cannot be purely maintained while dealing with the real-world situation of missing data and variables that are highly confounded. (Muhlbauer 2004, p. 16)
Muhlbauer (2004) embraces the notion that science, art and philosophical facets that make up models for the planning and implementation of risk strategies must be all incorporated to achieve a complete, comprehensive and holistic risk picture. This conception strengthens the musing which says that risk management is neither an art nor science but a complete and systematic process extending up to the limits of what science and art can explain.
In choosing a risk management technique, Muhlbauer (2004) also renders several questions that may impact the choice of risk assessment technique and these are
What date do you have
What is the level of your confidence in the predictive value of data gathered
What resources are available in terms of money, manpower, and time
What benefits do you expect to accrue in the aspects of cost savings, regulatory burdens, public support and operational efficiency
The questions formulated by the scholar are indeed important for the identification of risk management techniques and will highlight specific deficiencies and point to appropriate mitigation capabilities. As risk management techniques can be called as the building blocks that support risk management, it can be assumed that the techniques overhaul management models making it efficient to render input for risk management.
The aspect of subjectivity and objectivity within risk management is regarded by Smith, Merna Jobling (2006) as part of the approaches to the management of risks which come in two types informal and the formal approach. The informal approach to the management of risk according Smith, Merna Jobling (2006) is a method which views the risks in a subjective manner. The informal approach involves having discussions with industry experts and professionals and simultaneously assessing their perspectives concerning the possible risks in a project. Afterwards, an in-depth review of the project in line with the predicted risks is executed. Smith, Merna Jobling (2006) explains that contingency funds can also be used as a technique in managing risks because it represents the cost of risks that are ought to occur in a certain project. In this specific technique, the merge between subjective and objective types is seen not in the sense that funds are in line with numerical values but such contingency funds as a technique entails a creative and justified manner of execution.
Smith, Merna Jobling (2006) describe the formalized procedure to the management or risk as structured and consisting of guidelines to be followed so that they can be utilized by the organizational members. The formal approach to management of risk serves to suit the demands of a specific organization and assures that the procedure is more of objective type than the informal approach. Scholars commonly emphasize that objectivity is an integral characteristic of risk management procedure. Even though there is no single methodology used in this kind of approach, it is noted that there frameworks for formalized risk management process which do not expound on the methods to be utilized but allow the user scope for picking the right appropriate techniques (Smith, Merna Jobling 2006). The general quality of the formal approach to the management of risks is signified below.
The quality of a formal process of risk management is generally accepted to be dependent upon management awareness, motivation among project personnel, a methodical approach, the information available which is often linked to the project phase, the assumptions and limitations upon which the risk analysis is based, the qualifications and knowledge within the project and the experience and personality of the risk analysts leading the process. (Smith, Merna Jobling 2006, p.39).
VIII. The Impact of the Complexity of Human Behavior in Risk Assessment
The implicit connotations regarding risks are explored by Hood Jones (1996) who explicates the fact the first widely held tacit assumption made by the industry is that risks can be treated as though they were steadfast and concrete physical constituents that can be accurately defined and perceptibly measured in objective terms. Hood Jones (1996) have argued that the complexity of human behavior in general and human errors in particular can be pre-specified and reduced to a simple unitary numerical representation (Hood Jones 1996, p. 104).
It is noted that the authors mentioned the complexity of the human behavior which impacts the use of probabilities risk analysis methodology. It is discussed in this paper that the results of risk management is a never-ending process that requires further studies. This notion validates Hood Jones (1996) argument which indirectly suggests that the risk management cannot be quantified in terms of numerical results and therefore, risk management is suggestive of the notion that dealing with risks is entails more than a combination of art and science due to human complexity that not even theories and numbers cannot signify.
Remarkably, this papers treatise that risk management is neither a science nor an art can also be supported by the work of Hood Jones (1996) which is grounded on the idea that there is no publicly available model that can accurately forecast human behavior, let alone predict the probability and types of errors that different people might commit under diverse, and in some cases extremely dangerous, circumstances (cited in Hood Jones 1996, p.104).
With the finite capabilities that underlie the process for the acquisition of risk management strategies, the legitimacy of numerical expression as the outcome of a risk analysis and assessment is being put to question even if there is a qualitative characteristics to support such outcome.
The strength of analytical character is then damaged by the questioned legitimacy of the quantifying and qualifying human behavior as risk management tries to become as complex as it can be as technological innovation progresses. This position is related to the saying that risk management goes beyond the capacities of science and art and requires a holistic approach on answering uncertainties.
There are literatures which explain why the risk management can never be a form of science or art because the main composites that drive the progression of a specified risk management project are finite dynamic and changing composites that necessitate an unlimited knowledge that goes beyond the horizon of science and art.
As risk management strategy is all about planning and execution, unrealized and plans can encourage a culture of defeat and consequently, without proper action the intentions of the industry may decay and be rotten with uncertainties. It is an acceptable fact that to be able achieve industry success through the execution of risk management strategy, it is required that a full analysis of risks that encompasses the boundaries of art and science must be done apart from reviewing studies and literatures which focus on the strategic planning aiming at profitability, productivity and the like.
IX. Dynamic Nature of the Industry
It is known that projects in done within the construction industry are basically completed through the efforts of several specialty contractors that enter into performance agreements with the prime contractor (Smith Hinze 2009). At present, the industry is shifting towards a measure involving contractors that began to demand changes, demand information, make decisions and insist pf rewriting the agentsbrokers role to include education (Palmer, Maloney Heffron 1996, p.2). The said paradigm shift has created new opportunities such as risk management profit institutions, contractor-controlled insurance programs, group captives and other highly specialized profit techniques that provide the contractors avenues for creating new methods on managing risks.
This idea reflects the dynamic nature of the industry that translates to the reality that philosophies which involve risk management and technique are also moving forward to a new sophistication that recognizes the fusion of art, science and various theories. It is being stressed that areas such as capacity, rate hikes, and insolvency have provided sophistication to the buying philosophy within the construction industry which in itself requires a cutting-edge creativity by service providers, and they will continue to revolutionize every facet of this business (Palmer, Maloney Heffron 1996, p. 2)
Upon mentioning the term creativity, the application of art in the aspect of identifying risk management techniques is considered to be a changing facet in the philosophy of risk management as the industry leaps forward to widening innovation. Palmer, Maloney Heffron (1996) describe the said paradigm shift as the Cost of Risk Engineering (CORE).
In the attempt to identify proper risk management techniques, it is recommended that a review of risk categories and the elements must be done prior to starting a risk management plan. The idea of information gathering must be done first in order to understand and fully comprehend the differences in the observed techniques and when to use them (Heldman 2005).
This paper validates the conception that risk management is neither a science nor an art because of several factors that redefine the management of risk as the industry leaps forward to a new level of sophistication. Risk management process is being defined in this paper as a holistic and systematic approach towards uncertainties extending beyond the scope of science and art. The procedure in dealing with risks is being considered as a finite quest to procure solutions for calculating and managing uncertainties which cannot be accurately predicted due to the complexity of the industry. The management of risks is purely grounded on the cycle involving science, art and several philosophies that maybe considered as catalysts for the evolution of risk management.
The aspect of objectivity and subjectivity is tackled in this essay because it translates to the fact that the industry is a dynamic and ever-changing system that produces an outcome which is not finalized and therefore, necessitates further studies due to the legitimacy of objective and subjective risk assessment which is being put to question. This essay upholds the fact that the management of risks and the identification of management techniques are deeply influenced by multi-disciplinary approach to various uncertainties concerning human complexity. It was in this notion that the paper was able to fill in the gap between the legitimacy of numerical outcomes and the accuracy of risk assessment results. Human complexity was tackled in the paper because such aspect requires more than an explanation of science, art and philosophical literatures focusing on risk management.
This essay explicates that the integrity of analytical character was being stained by the questioned legitimacy of the quantifying and qualifying human behavior as risk management tries to become as sophisticated as the industry progresses to a highly advanced technological direction. It was confirmed that risk management goes beyond the capacities of science and art and necessitates a holistic approach on assessing project uncertainties.
The focus on subjectivity and objectivity within risk management is being validated by legit forms of literatures that introduce two types of approaches to the management of risks which are the informal and the formal approach. This paper discussed the two types of risk management because it related to the aspect of the subjectivity and objectivity of risk management procedure. Proper risk management techniques could become an outcome of an in-depth review of risk categories and the elements surrounding a risk management plan. The concept of information gathering must be done in addition to the in-depth review of factors in order to learn how to creatively apply certain techniques or strategy together with the other essential constituents of a holistic approach towards answering uncertainties.
Risk management strategy is all about planning and execution that entails a richer analysis of risks that extends beyond the jurisdiction of art, science and philosophy to be able to identify an effective approach to the management of risks.
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