Lecture2 - Risk Assessment and Management Lecture 2: Risk...

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1 Risk Assessment and Management Lecture 2: Risk Definitions and Concepts Reading Material of the Week s Shodell, Risky Business (From Reading Materials) s Bernstein, Against the Gods (From Reading Materials) s Morgan, Probing the Question of Technology Induced Risk (From Text Book) s Morgan, Choosing and Managing Technology Induced Risk (From Text Book)
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2 Outline s What is risk ? s How do we describe risk ? s How does risk changed over time ? s Why should risk assessment and management be important to modern societies ? s What is the history of risk ? Outline s Risk Abatement s Risk Assessment s Risk Management As described by Morgan Article
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3 Definitions of Risk s Risk Watch: The Odds of Life “The probability that something bad will happen” s Rowe, Anatomy of Risk “Potential for realization of unwanted, negative consequences of an event” s Webster’s Dictionary “Risk: the chance of injury, damage or loss, dangerous chance, hazard” Definitions of Risk s Risk and Insurance Management Society “(1) Possibility of loss or exposure to loss” “(2) Probability or chance of loss” “(3) Peril which may cause loss” “(4) Hazard or condition which increases the likely frequency or severity of loss” “(5) Property or person exposed to loss” “(6) Potential dollar amount of loss” “(7) Variation in actual losses” “(8) Probability that actual losses will vary from expected losses” “(9) Psychological uncertainty concerning loss”
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4 Definitions of Risk s De Groot, Optimal Statistical Decisions Ω = ) ( ) , ( ) , ( ϕ dP d L d P p Risk associated with an event Loss Probability distribution of an event taking place Definitions of Risk s Nuclear Regulatory Commission (1975) Events per unit time Consequences per event Risk = Frequency x Magnitude Chance of some event occurring ( probability ). Loss that occurs as a result of that event ( hazard ) which when combined yield probability distribution of possible loss, and expected loss from a particular probability-hazard combination. The above definitions include all of the following:
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5 Definitions of Risk Occurrence Of Event Exposure Magnitude of Consequences Occurrence: •Fire in a structure •Arrival of earthquake •Experience of flood •Failure of equipment •Release of radioactive substances or toxics Exposure: •Response of building or dam to natural forces •Transport of toxics or radioactive material Consequences: •Death due to exposure •Illness or onset of cancer due to exposure •Loss of life due to partial or complete building collapse What is Risk Assessment? s Risk Estimation Using Historical Data Easy to understand and perceived as accurate. Only works if accidents have occurred at a sufficient rate over sufficient time to allow estimation of their frequency. s
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This note was uploaded on 01/07/2011 for the course ECONOMICS 101 taught by Professor Fernando during the Spring '10 term at Middle East Technical University.

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Lecture2 - Risk Assessment and Management Lecture 2: Risk...

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