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Extending Simulation Decomposition Analysis into Systemic Risk Planning for Domino-Like Cascading Effects in Environmental Systems

M. Kozlova1, and J. S. Yeomans2 *

  1. School of Business and Management, LUT University, Yliopistonkatu 34, Lappeenranta 53850, Finland
  2. OMIS Area, Schulich School of Business, York University, 4700 Keele Street Toronto, ON M3J 1P3, Canada

*Corresponding author. Email:


In interconnected environmental systems, the innocuous failure of one component can sometimes trigger a subsequent domino-like effect resulting in a cascading collapse of the entire system. Risk analysis in “real world” contexts frequently requires the need to simultaneously contrast numerous uncertain factors and difficult-to-capture dimensions. Monte Carlo simulation modelling has often been employed to integrate uncertain inputs and to construct probability distributions of the resulting outputs. Visual analytics and data visualization can be used to support the processing, analyzing, and communicating of the influence of multi-variable uncertainties on the decision-making process. In this paper, the novel Simulation Decomposition (SimDec) analytical technique is extended into complex assessments of cascading risk analysis and used to quantitatively examine situations involving potentially catastrophic, dominolike collapses of an entire system. SimDec analysis proves to be beneficial due to its ability to reveal interdependencies in complex models, its ease of decision-maker perception, its visualizable analytic capabilities, and its significantly lower computational burdens. The case example visually demonstrates that when a system collapse is a low-probability/high-impact event, more expensive, reactive policies minimize the overall value loss under conditions of system survival, while more proactive policies enable better loss prevention under system survival. However, proactive approaches significantly decrease the likelihoods and magnitudes of losses for scenarios resulting from the collapse of the system. Such findings would not have been revealed without the visualization provided by SimDec.

Keywords: cascading risk, domino effect, environmental risk management, monte carlo simulation, simulation decomposition, visual analytics

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