Risk is inherent in any activity: All decisions or actions may result in unwanted consequences. Thus the proper thing to do is always to consider risk and to make use of the information gained in the decision process.
Risk Management Process
Risk management is basically a managerial tool to support the decision maker.
The initial step in the process is to express the decision maker’s goals and risk policy in a set of operational risk acceptance criteria.
Through a systematic analysis based on available and achievable information all major hazards of the planned activity shall be identified and the magnitude of the risk assessed. According to the nature of the problem, more or less detailed and sophisticated risk identification and analysis methodologies may be applied.
Subsequently the acceptability of the risk shall be evaluated by comparison to the acceptance criteria.
In case the risk level is found to be unacceptable it must be decided how the risk shall be reduced. Risk mitigation may be accomplished either by altering the activity or by implementing additional safety measures. When several alternatives are possible the choice may be supported by decision analysis.
Advantages of Risk Management
It is the experience, that implementation of risk management will result in profitable decisions and improved allocation of resources.
Risk management will lead to decisions close to the decision maker’s goals.
Risk management ensures consistence and transparency in the decision process and it provides a basis for risk communication.
Risk Management Tools
The tools and information available to the risk management process include a wide variety of quantitative and semi-quantitative methods.
Results of risk management
• Profitable decisions
• Improved allocation of re-sources
• Implementation of company policy
• Consistent and transparent decisions
• Basis for risk communication