Risk assessment is the determination of quantitative or qualitative estimate of risk related to a well-defined situation and a recognized threat (also called hazard). Quantitative risk assessment requires calculations of two components of risk (R): the magnitude of the potential loss (L), and the probability (p) that the loss will occur. An acceptable risk is a risk that is understood and tolerated usually because the cost or difficulty of implementing an effective countermeasure for the associated vulnerability exceeds the expectation of loss.[1] “Health risk assessment” includes variations, such as risk as the type and severity of response, with or without a probabilistic context.
In all types of engineering of complex systems sophisticated risk assessments are often made within safety engineering and reliability engineering when it concerns threats to life, environment or machine functioning. The agriculture, nuclear, aerospace, oil, rail and military industries have a long history of dealing with risk assessment. Also, medical, hospital, social service[2] and food industries control risks and perform risk assessments on a continual basis. Methods for assessment of risk may differ between industries and whether it pertains to general financial decisions or environmental, ecological, or public health risk assessment.
Explanation
Risk assessment consists of an objective evaluation of risk in which assumptions and uncertainties are clearly considered and presented. Part of the difficulty in risk management is that both the quantities by which risk assessment is concerned – potential loss and probability of occurrence – can be very difficult to measure. The chance of error in measuring these two concepts is high. Risk with a large potential loss and a low probability of occurrence is often treated differently from one with a low potential loss and a high likelihood of occurrence. In theory, both are of near equal priority, but in practice it can be very difficult to manage when faced with the scarcity of resources, especially time, in which to conduct the risk management process.
Step by Step process in risk assessment and management
Risk assessment and management process.
Establish the context —> understand the operating context and environment
Identify the risks / hazards —> identify the internal and external risks / hazards that poses threat
Analyze the risks —> systematic analysis of various contributing and leading factors (e.g. extent of the exposure, multiple exposures, vulnerability characteristics of the population or system being assessed)
Evaluate and prioritize the risks —> characterize and prioritize the list of risks for further action.
Tackle the risks —> Identify the range of options to tackle the risk & implement the best choice using available resources.