Risk Management
Risk management is the consideration of social, economical and
political factors in the decision-making process of controlling risks. The basic task
of a risk manager is to take a risk assessment and integrate it with the best
available sociological, economical and political information.
In reality, the reliability of the data on which risk and cost
calcualtions are based on often leads risk management to cross the line of
risk assessment. Theoretically, however, a risk assessor should stick to his
or her scientific approach and present the reliable and objective
information to the risk manager while the risk manager should take the assessment at its face value for integrating other factors and making decisions.
A risk manager should start with setting priorities on the factors below:
- the degree to which the risk can be controlled;
- the costs of control;
- the social and political feasibility and acceptibility of the
control;
- the benefits of the product;
- the degree to which the risk-taking activities is voluntary or
involuntary.
Usually, the law, the nature of the regulator, public perceptions
and external pressures determine the extent whether the risk manager is
able to control the agenda.
Control techniques can be:
- a ban on the manufacture or a limit on the product's use. It
can be accomplished by setting a de minimis risk level below
which risk is considered trivial even with insignificant cost. Examples
of which are the emission level and the cost limit per case avoided or
per life saved etc..
- a technological control of the manufacture or use. This is usually
accomplished by the Best Available Technology (BAT). Examples of
which are the Safe Drinking Water Act and the Clean Air
Act.
Since the process of transmitting scientific information from
data base to decision-making involves a complex balancing of positive and
negative factors, the more explicit the decision, the better. Risks,
benefits and costs can be expressed quantitively (industrial cost or profit,
consumer cost or saving, job or lives saved or lost) or qualitatively
(environmental benefit or losses).
In general, the outcomes of risk management usually depend on the
individual personalities, philosophies and experiences.
Compiled by
Christine Leung
cwl1@cec.wustl.edu Last updated 10/8/94