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Risk Management. What is Risk ?

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Introduction

Risk Management. What is Risk ? WHAT IS RISK ? Table Of Contents Introduction Risk & probability Identifying Risk Procedure Of Modelling Risk Methods Subjective Assessment Of Risk Conclusion References INTRODUCTION 'Risk : (i) the possibility of meeting danger or suffering the harm or loss ' (Oxford reference dictionary). This is the general definition of risk. The faulty perception of meeting danger or suffering harm or loss would lead to misjudged actions to be taken . When these actions are taken for large scale projects ,for instance concerning the future of a big company or public protection , it could have devastating effects . For a number of dangers there are a lot of statistical data ,such as car accidents ,but for other it is difficult to have an actual number . For example it is impossible to have an exact figure of the number of people died from smoking cigarettes . So the help of hard facts ,statistics and probabilities, is useful up to a point in taking decisions concerning risks , and subjective judgement is required . In this essay we will try to identify the relationship of risks with probabilities , the association of risks with particular events ...read more.

Middle

METHODS In the last three decades in particular ,there where many methods developed especially where the analysis of risk is used for decision analysis .This was in a big part of it due to the increase of available computer power and the constant development of computational procedures . Some of these methods as taken from (C.B.CHAPMAN ,Risk Analysis , a view from 1990) , are presented below . ....first is the O.R.method in table 1 steps of the O.R. method : 1 Problem description . 4 Model and solution testing . 2 Model formulation . 5 Solution implementation . 3 Model solution . table 1 ....then is the CPM/PERT method which is similar to the O.R. method but is offering a series of steps which the decision maker can use to implement their models efficiently and effectively , particular to the problems they are considering and the models they are using , table 2 steps of the CPM/PERT method : 1 List of activities . 2 Estimate activity duration . 3 Asses precedence relationships . 4 Diagram activity . 5 Compute project duration and floats . ...read more.

Conclusion

But when the decision has to be taken ,there is a number of factors influencing the decision maker ,away from absolute probabilities , affected by personal experiences , attitudes and beliefs . These factors vary between people . This fact makes it difficult to asses a risk in an 'objective' way . At that point the danger, of not taking a positive decision for the whole , arises . Probably the only way of taking a positive decision for the whole(company, environment, public safety) will be to consider all relevant information to the hazard involved and asses it in the most 'objective' way possible ,taking also under consideration the needs of the people involved . Probably the only way to achieve this is by starting to use methods including all possibly identified risks that could be calculated arithmetically , then harmonising these methods ,to be accepted by the whole of those involved in taking the risks. And finally take a decision based on these calculations and common ideas beliefs attitudes of those involved in the risk to be taken .This would result in a common tolerance of the risk and future acceptance if a danger occurs .In few words all information available about a risk is necessary to be obtained before taking this risk. References .. ...read more.

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