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Unit-06Risk Management
 
 
Risk has been defined as a measure of probability,the severity, and the exposure of all hazards of anactivity. (Osama Jannadi)
Hertz and Thomos (1983) defined risk as uncertaintyand result of uncertainty. It refers to lack of probabilityabout the structure, outcome or consequences inplanning or decision or situation.
Risk analysis involves estimating the probabilitiesneeded as input data for the evaluation of decisionalternatives. (Lifson and Shaifar 1982)
Risk= Probability of an accident x Losses per accident.(or)
Probability of an event occurring x Impact of eventoccurring
 
 
Risk versus uncertainty
Uncertainty
: The lack of complete certainty, that is,the existence of more than one possibility. The "true"outcome/state/result/value is not known.
Measurement of uncertainty
: A set of probabilitiesassigned to a set of possibilities. Example: "There isa 60% chance this market will double in five years"
Risk
: A state of uncertainty where some of thepossibilities involve a loss, catastrophe, or other undesirable outcome.
Measurement of risk
: A set of possibilities each withquantified probabilities and quantified losses.Example: "There is a 40% chance the proposed oilwell will be dry with a loss of 12 million Rs. inexploratory drilling costs".
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