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Notes on Risk Management

Notes on Risk Management

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Published by: curlicue on Dec 18, 2008
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06/15/2011

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Notes on Risk Management
Risk management consists of - risk perception, riskanalysis, and risk preparedness.Risks may be divided into three tiers. In the lower band,the public readily accepts risks because benefits are felt tooutweigh the disadvantages. In the upper band, risks areregarded as completely unacceptable and must bereduced even at very high cost or, if not possible, theactivities must cease. The intermediate region is one inwhich decisions on risk reduction are made by trading off associated costs and benefits. Traditionally, the field of risk management has threeelements - identification of risks, risk assessment andimplementaton of solutions and plans.
Risk Assessment consists of 
identificationquantificationevaluationacceptanceaversioncontrol
 
Risk ManagementRisk AssessmentRisk DeterminationRisk Evaluation
Risk Identification
identify:- new risks- change inriskparameters
 
Risk Estimation
determine:-probabilityof occurances-magnitiudeof consequence value
 
Risk Acceptence
establish:- riskreferences- riskreferents
 
Risk Aversion
determine:- degreeof riskreduction- degreeof riskavoidance
 
RiskControl
implement:- protectionworks- non-structuralmeasures
 
Steps in Risk Management
Source: Keynote address by Roger Smookat the Risk Assessment and Management Congressin Ogaki, Japan - September 1997
Risk assessment is defined as "The overall process of riskidentification, quantification, evaluation, acceptance,aversion and management." Risk management is themanagerial response based on the resolution of variouspolicy issues such as acceptable risk. Risk managementdecisions are made by considering risk assessments withinthe context of political, social and economic realities. Suchdecisions are frequently controversial due to the difficultyin determining risks that are acceptable to the public.Risk assessment includes risk determination and riskevaluation. Risk management includes risk assessment
 
and risk control.Risk determination involves the related processes of riskidentification and risk estimation. Risk identification is theprocess of observation and recognition of new riskparameters or new relationships among existing riskparameters, or perception of a change in the magnitudesof existing risk parameters.Risk, at the general level, involves two major elements:the occurrence probability of an adverse event and theconsequences of the event. Risk estimation, consequent-ly, is an estimation process, starting from the occurrenceprobability and ending at the consequence values.Risk evaluation is a complex process of developingacceptable levels of risk to individuals, groups, or thesociety as a whole. It involves the related processes of riskacceptance and risk aversion.Risk acceptance implies that a risk taker is willing toaccept some risks to obtain a gain or benefit, if the riskcannot possibly be avoided or controlled. The acceptancelevel is a reference level against which a risk is determinedand then compared. If the determined risk level is belowthe acceptance level, the risk is deemed acceptable. If it isdeemed unacceptable and avoidable, steps may be takento control the risk or the activity should be ceased. Theperception and the acceptance of risks vary with thenature of the risks and depend upon many underlyingfactors. The risk may involve a "dread" hazard or acommon hazard, be encountered occupationally or non-occupationally, have immediate or delayed effects and

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