ABSTRACT
Recently, the concept of black swans has gained increased attention in the fields of risk assessment and risk management. Different types of black swans have been suggested, distinguishing between unknown unknowns (nothing in the past can convincingly point to its occurrence), unknown knowns (known to some, but not to relevant analysts), or known knowns where the probability of occurrence is judged as negligible. Traditional risk assessments have been questioned, as their standard probabilistic methods may not be capable of predicting or even identifying these rare and extreme events, thus creating a source of possible black swans. In this article, we show how a simulation model can be used to identify previously unknown potentially extreme events that if not identified and treated could occur as black swans. We show that by manipulating a verified and validated model used to predict the impacts of hazards on a system of interest, we can identify hazard conditions not previously experienced that could lead to impacts much larger than any previous level of impact. This makes these potential black swan events known and allows risk managers to more fully consider them. We demonstrate this method using a model developed to evaluate the effect of hurricanes on energy systems in the United States; we identify hurricanes with potentially extreme impacts, storms well beyond what the historic record suggests is possible in terms of impacts.
