Risk Management and Assessment, Essay Example

The five steps in risk management are risk identification, risk analysis, eliminating or reducing risks, financing risks, and administering the risk management process. Risk identification refers to recognizing unsafe conditions or predicting potentially unsafe acts. Identifying risks is often a systematic process that involves gathering facts and data, analyzing them to discover potential risk factors, and identifying situations in which the identified risk factors may emerge. It is also important to note that risk factors may evolve over time, thus, risk identification is an ongoing process. There are several techniques that could be utilized to identify risks such as hazard recognition, past knowledge, historical trends, and systematic techniques such as system safety. Risk analysis refers to applying qualitative or quantitative techniques to potential risks in order to reduce the uncertainties in measuring risks. Risk analysis often involves frequency which is the likelihood of an event occurring as well as severity which is the degree of the impact of an event.

Eliminating or reducing risks refers to taking practical steps to eliminate or at least reduce the risk. This step also involves deciding upon the sequence in which the identified risks may be tackled. The priority level could be set using qualitative or quantitative methods including cost-benefit analysis. The fourth step is financing risks which refers to allocating resources to tackling the risks. The organization can either allocate internal resources or buy risk insurance to protect itself. The organization may also choose not to take any action at all if it believes that the risk is either quite unlikely to occur or will only impose negligible costs. The firm may carry out cost-benefit analysis to determine whether it should finance measures to tackle the risk and if yes, then what amount of resources should be reserved for the purpose.

The fifth and the final step is administering the risk management process which refers to deciding upon acceptable levels of risk. Administering may also involve assigning resources to the process. At this stage, risks are continuously monitored and the measures taken to tackle risks may also be evaluated for their effectiveness in eliminating or reducing the risks. Administering also involves selecting methods that keep a record of the whole risk management process such as risks identified, analysis applied, and decisions made.

Risk assessment includes four steps according to the National Academy of Sciences which are hazard identification, dose-response assessment, exposure assessment, and risk characterization. Hazard identification involves methods that are using to identify risks and may include engineering failure assessment. Engineering failure assessment is the examination of different segments of a plant operation in order to determine the probability of a risk occurring. One commonly  used tool in risk assessment is Fault-tree analysis.

Dose-response assessment is done when chemicals are involved. Dose-response assessment attempts to determine the quantitative relationship between a particular amount of exposure and the resulting extent of toxic injury or disease. Regression analysis is a commonly used tool to carry out dose-response assessment. Exposure assessment involves describing the nature and size of a population exposed to a chemical agent and the magnitude and duration of the exposure. Exposures may include past, present, and future incidents. Exposure assessment covers presence of toxins in all kinds of environment including air, water, and food. The last step in risk assessment is risk characterization which integrates data and analysis to determine whether people will experience effects of exposure. Risk characterization also includes calculating the likelihood of outcomes at different stages of the entire risk assessment process.

There are different approaches to risk assessment one of which is Fine’s method. Fine’s method is used to determine the financial feasibility of a proposed course of action to tackle a risk factor. In order to determine whether a risk factor should be dealt with, we compute Risk Score and Cost Justification Value. Risk Score helps us determine the priority with which the risk should be tackled and Cost Justification Value helps us determine whether the cost justifies the benefits.

Logical Process Risk Analysis helps us efficiently allocate resources to achieve the optimum level of risk reduction across several departments in a plant. This method is a realization of the fact that resources are often limited, thus, the objective should be to allocate them where they will achieve the greatest benefits. The method could also be used to allocate funds among different plants.