Risk benefit analysis & Reducing Risk.ppt
- 1. Risk Benefit Analysis- Reducing Risk
- 2. Risk analysis The study of risk analysis covers the following areas: risk identification, risk assessment, risk rating, suggestions on risk control and risk mitigation. In fact, risk analysis can be deeply discussed with a view on risk management study. The risk management study also includes residual risk transfer, risk financing, etc.
- 4. Risk identification Risk identification is the process of determining risks that could potentially prevent the program, enterprise, or investment from achieving its objectives. It includes documenting and communicating the concern.
- 5. Risk assessment Risk assessment is a term used to describe the overall process or method where you: •Identify hazards and risk factors that have the potential to cause harm (hazard identification). •Analyze and evaluate the risk associated with that hazard (risk analysis, and risk evaluation). •Determine appropriate ways to eliminate the hazard, or control the risk when the hazard cannot be eliminated (risk control). A risk assessment is a thorough look at your workplace to identify those things, situations, processes, etc. that may cause harm, particularly to people. After identification is made, you analyze and evaluate how likely and severe the risk is. When this determination is made, you can next, decide what measures should be in place to effectively eliminate or control the harm from happening.
- 6. Risk Rating • Risk Rating is assessing the risks involved in the daily activities of a business and classifying them (low, medium, high risk) on the basis of the impact on business. • Risk is rated on the impact on the business which can be economic or reputational and its likelihood of occurring in the near future. This is the common pattern of risk across businesses.
- 7. Risk control • Risk control is a step in the hazard management process. It involves finding a way to neutralize or reduce an identified risk. • In many cases, a controlled risk is still a potential threat to employees, but the dangers associate with it have been significantly reduced. • Risk control is also known as hazard control. Methods to control risk:- •Elimination: removing the risk entirely •Substitution: swapping an item or work process for a safer one •Engineering controls: modifications to the environment or equipment that poses the risk (such as installing mirrors in warehouses or machine guards on circular saws) •Administrative controls: modifications to the workflow or work process (for example, rotating employees through several different work tasks to prevent repetitive stress injuries) •Personal protective equipment: safety gear worn by the workers, such as hard hats, safety glasses, and chemical-resistant gloves
- 8. Risk Mitigation • Risk mitigation can be defined as taking steps to reduce adverse effects. • There are four types of risk mitigation strategies that hold unique to Business Continuity and Disaster Recovery. • When mitigating risk, it’s important to develop a strategy that closely relates to and matches your company’s profile.
- 9. Risk analysis A step-wise risk analysis includes − • Hazards identification • Failure modes and frequencies evaluation from established sources and best practices. • Selection of credible scenarios and risks. • Fault and event trees for various scenarios. • Consequences-effect calculations with work out from models. • Individual and societal risks. • ISO risk contours superimposed on layouts for various scenarios. • Probability and frequency analysis. • Established risk criteria of countries, bodies, standards. • Comparison of risk against defined risk criteria. • Identification of risk beyond the location boundary, if any. • Risk mitigation measures. All of these again depend on how the risk is compared with the benefit in doing the work with some risk. How far it is beneficial to risk also counts the actions of a person while coming out of the safety bounds.
- 10. Risk Benefit Analysis • Risk-benefit analysis is the comparison of the risk of a situation to its related benefits. • Exposure to personal risk is recognized as a normal aspect of everyday life. • We accept a certain level of risk in our lives as necessary to achieve certain benefits. • In most of these risks we feel as though we have some sort of control over the situation. • Example - The most common risk we all take is driving an automobile in a traffic. Though we are not sure about the perfect functionality of the brake system and the timings of other drivers’ responses, we take risk. The controlling factor appears to be their perception of their individual ability to manage the risk-creating situation.
- 11. Example In this picture, people mostly calculate the ratios of risk to benefit, while accepting the risks.
- 12. Risk analysis The risk to benefit analysis is made depending on the following types: (i)Real future risk:- The risk to be occurred in future is completely known after it gets fully developed. (ii)Statistical risk:- The risk which is determined by currently available data. (iii)Projected risk:- The risk which is analytically based on system models structured from historical studies (iv)Perceived risk:- The risk which is intuitively seen by individuals
- 13. Air transportation as an example Risks of traveling on an air-plane is considered for observation Flight insurance company can observe it as a statistical risk the passenger faces Perceived Risk the Federal aviation administration, faces a Projected risk. Hence, the view of accepting the risk and the idea of risk to benefit ratio motivates the individual.
- 14. Risk Reduction Risk reduction is one of the four main risk management techniques to be used in conjunction with other techniques to help an individual or organization effectively manage the risk of loss. Risk reduction refers to the way an insurance company or organization can reduce its financial losses by implementing measures that reduce the financial impacts of potential losses. Techniques can be things that will prevent certain risks from arising, minimizing the frequency or number of times that risk can actually happen, or even minimizing the damage caused when a loss inevitably does occur.
- 15. Risk Reduction Some examples of common and effective risk reduction practices include: •Installing security systems or alarms to reduce the frequency of crime losses. •Installing sprinklers and smoke detectors to reduce the amount of damage a fire loss can cause. •Risk reduction is also sometimes called loss mitigation.
- 16. Risk Reduction The risks we generally face can be reduced to a great extent by proper analysis with the following steps: • Define the Problem. • Generate Several Solutions. • Analyze each solution to determine the pros and cons of each. • Test the solutions. • Select the best solution. • Implement the chosen solution. • Analyze the risk in the chosen solution. • Try to solve or move to next solution.
- 17. The Government’s Approach •The risk management has to be viewed in a wider angle at times when sudden disasters occur due to lack of proper care and assessment. •The government which has the responsibility to take care of all the public needs to take some risk. •The government’s approach towards the public lies in saving as many lives as possible. The two major approaches of the government are − Lay person − Wants to protect himself or herself from risk. The government regulator − Wants as much assurance as possible that the public is not being exposed to unexpected harm. Risk Reduction
- 18. Example •At the times of flood or some fire accident, the government of any place should aim at protecting as many lives as possible rather than looking for a benefit or protecting some property. •It will count as a successful attempt towards facing risk if the authority is able to protect its people even after the destruction of property. Risk Reduction