Risk Assessment - Explanation

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 measurement of both of the quantities in 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 large. Risk with a large potential loss and a low probability of occurring is often treated differently from one with a low potential loss and a high likelihood of occurring. In theory, both are of nearly 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. Expressed mathematically,

Financial decisions, such as insurance, express loss in terms of dollar amounts. When risk assessment is used for public health or environmental decisions, loss can be quantified in a common metric such as a country's currency or some numerical measure of a location's quality of life. For public health and environmental decisions, loss is simply a verbal description of the outcome, such as increased cancer incidence or incidence of birth defects. In that case, the "risk" is expressed as

If the risk estimate takes into account information on the number of individuals exposed, it is termed a "population risk" and is in units of expected increased cases per a time period. If the risk estimate does not take into account the number of individuals exposed, it is termed an "individual risk" and is in units of incidence rate per a time period. Population risks are of more use for cost/benefit analysis; individual risks are of more use for evaluating whether risks to individuals are "acceptable"....