Selection of countermeasure portfolio for shipping safety with consideration of investment risk aversion

This paper proposes optimization models to select shipping safety countermeasure portfolios with consideration of the investment risk preferences of decision-makers. The formulation is extended from the basic economic safety model, where losses are scenario-specific and are expressed as a function of the countermeasure selection variables based on analysing the chain of events along accident paths. Conditional value-at-risk is introduced to measure the investment risk represented by the worst-case cost. Several single -objective programming models are formulated first to optimize the safety-related costs using either the expectation criterion in risk-neutral environments or the conditional value-at-risk criterion in risk-averse environments. Then a bi-objective model is presented by combining those two criteria. Simulation results indicate that the best countermeasures for the expectation objectives are different from those for the conditional value-at-risk objectives. Such findings provide shipping safety investment planners insights in balancing not only the active investment and the accident loss but the return and the risk of the investment, to achieve a selection of countermeasures that is cost-effective as well as leads to low costs in extreme situations.