# Risk Management. What is Risk ?

## Risk Management. What is Risk ?

WHAT IS RISK ?

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 , modelling and methods used to asses risks in a system and finally the subjective perception of risk by individuals

RISK & PROBABILITY

Probability is in mathematical terms the mathematically expressed chance of an event taking place , normally as a fraction of (1) . Usually probabilities are conditional and have time limitations . For example the probability of a car accident happening varies between differently populated areas and different times of the day . When the same road is busier during rush-hour there is a higher probability of an accident happening . It is known from statistics that probabilities are usually approximated by frequencies , so the frequency of an event happening in the past is our guide to the prediction of the same event happening in the future . But it is not 100% certain that it will repeat it self as before .For example in an experiment tossing a coin one hundred times might give fifty times to tails and fifty times heads , giving us (.5) probability happening each way . But even if we have this information we cannot be certain that the next one hundred tosses of the coin will produce the same result .In the same sense the sun has a slight probability not to appear in the sky again although it had been doing so for several billions years . Therefore probability estimates are quite subjective .

IDENTIFYING HAZARDS

Most of the time we relate risks with the probability of a hazard taking place .

'Hazard' is an inherit capacity to cause damage - an intrinsic property .For example 'Arsenic' (a chemical substance) is hazardous ,which is a property and so is not probabilistic ,therefore not risky- risk is applied to events not properties . Hazards need to be quantified , observe their probability and therefore partially predicted.

Hazards and therefore risk s can be under three categories , economic , safety and environmental . The ...