Intro to Risk Management

Risk = Probability + Severity

Defining Risk

In a risk management context, the risk associated with a specific hazard is defined as the probability of an accident occurring as a result of that hazard in combination with the expected severity of the harm resulting from such an accident. This relationship can be plotted conceptually in two dimensions as shown below.

Risk Diagram

While we might accept a moderate probability of a minor injury, the probability of a more severe injury such as a fatality must be very low to be deemed acceptable.

Risk Management

An organization generally has a responsibility to assure that risks are within acceptable limits. This first requires defining acceptance limits and then applying mitigation until remaining (or ‘residual’) risk is within those acceptance limits. The mitigations can take many forms.

Risk Reduction Diagram