Risk Assessment

Risk assessment is a step in a risk management procedure.  Risk assessment is the determination of Quantitative or Qualitative value of risk related to a concrete situation and a recognized threat (also called hazard). Quantitative risk assessment requires calculations of two components of risk: R, the magnitude of the potential loss L, and the probability p, that the loss will occur.

Methods may differ whether it is about general financial decisions or environmental or public health risk assessment.

Content Table

• Explanation
• Risk Assessment in Public Health
  • How the Risk is Determined
  • Small subpopulations
  • Acceptable Risk Increase
• Risk Assessment in Auditing
• Risk Assessment and Human Health
• Risk Assessment in Information Security
• Risk Assessment in Project Management
• Risk Assessment for Mega-projects
• Quantitative Risk Assessment
• Criticisms of Quantitative Risk Assessment
• References
• See also

Explanation

Risk assessment consists in an objective evaluation of risk in which assumptions and uncertainties are clearly considered and presented. Part of the difficulty of 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 the measurement of these two concepts is large.  A 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 in dealing with first, 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"....

Risk Assessment in Public Health

In the context of public health, risk assessment is the process of quantifying the probability of a harmful effect to individuals or populations from certain human activities. In most countries, the use of specific chemicals, or the operations of specific facilities (e.g. power plants, manufacturing plants) is not allowed unless it can be shown that they do not increase the risk of death or illness above a specific threshold. For example, the American Food and Drug Administration (FDA) regulates food safety through risk assessment.¹ The FDA required in 1973 that cancer-causing compounds must not be present in meat at concentrations that would cause a cancer risk greater than 1 in a million lifetimes. The US Environmental Protection Agency provides basic information about environmental risk assessments for the public via its risk assessment portal².

How the Risk is Determined

In the estimation of the risks, three or more steps are involved, requiring the inputs of different disciplines:

• Hazard Identification, aims to determine the qualitative nature of the potential adverse consequences of the contaminant (chemical, radiation, noise, etc.) and the strength of the evidence it can have that effect. This is done, for chemical hazards, by drawing from the results of the sciences of toxicology and epidemiology. For other kinds of hazard, engineering or other disciplines are involved.
• Dose-Response Analysis, is determining the relationship between dose and the probability or the incidence of effect (dose-response assessment). The complexity of this step in many contexts derives mainly from the need to extrapolate results from experimental animals (e.g. mouse, rat) to humans, and/or from high to lower doses. In addition, the differences between individuals due to genetica or other factors mean that the hazard may be higher for particular groups, called susceptible populations. An alternative to dose-response estimation is to determine an effect unlikely to yield observable effects, that is, a no effect concentration. In developing such a dose, to account for the largely unknown effects of animal to human extrapolations, increased variability in humans, or missing data, a prudent approach is often adopted by including safety factors in the estimate of the "safe" dose, typically a factor of 10 for each unknown step.
• Exposure Quantification, aims to determine the amount of a contaminant (dose) that individuals and populations will receive. This is done by examining the results of the discipline of exposure assessment . As different location, lifestyles and other factors likely influence the amount of contaminant that is received, a range or distribution of possible values is generated in this step. Particular care is taken to determine the exposure of the susceptible population(s). 

Finally, the results of the three steps above are then combined to produce an estimate of risk. Because of the different susceptibilities and exposures, this risk will vary within a population.

Small subpopulations

When risks apply mainly to small subpopulations, there is uncertainty at which point intervention is necessary. What if a risk is very low for everyone but 0.1% of the population? A difference exists whether this 0.1% is represented by  *all infants younger than ''X'' days or *recreational users of a particular product. If the risk is higher for a particular sub-population because of abnormal exposure rather than susceptibility, there is a potential to consider strategies to further reduce the exposure of that subgroup.  If an identifiable sub-population is more susceptible due to inherent genetic or other factors, there is a policy choice whether to set policies for protecting the general population that are protective of such groups (as is currently done for children when data exists, or is done under the Clean Air Act for populations such as asthmatics) or whether if the group is too small, or the costs to high.  Sometimes, a more specific calculation can be applied whether it is more important to analyze each method specifically the changes of the risk assessment method in containing all problems that each of us people could replace.

Acceptable Risk Increase

The idea of not increasing lifetime risk by more than one in a million has become common place in public health discourse and policy. How consensus settled on this particular figure is unclear. In some respects, this figure has the characteristics of a mythical number. In another sense, the figure provides a numerical basis for what to consider a negligible increase in risk. Some current environmental decision making allows some discretion to deem individual risks potentially "acceptable" if below one in ten thousand increased lifetime risk.  Low risk criteria such as these do provide some protection for the case that individuals may be exposed to multiple chemicals (whether pollutants or food additives, or other chemicals). But both of these benchmarks are clearly small relative to the typical one in four lifetime risk of death by cancer (due to all causes combined) in developed countries. On the other hand, adoption of a zero-risk policy could be motivated by the fact that the 1 in a million policy still would cause the death of hundreds or thousands of people in a large enough population. In practice however, a true zero-risk is possible only with the suppression of the risk-causing activity. More stringent requirements, or even the 1 in a million one, may not be technologically feasible at a given time, or so expensive as to render the risk-causing activity unsustainable, resulting in the optimal degree of intervention being a balance between risks vs. benefit. For example, it might well be that the emissions from hospital incinerators result in a certain number of deaths per year. However, this risk must be balanced against the available alternatives.  In some unusual cases, there are significant public health risks, as well as economic costs, associated with all options. For example, there are risks associated with no incineration (with the potential risk for spread of infectious diseases)  or even no hospitals. But, often further investigation identifies further options, such as separating noninfectious from infectious wastes, or air pollution controls on a medical incinerator, that provide a broad range of options of acceptable risk - though with varying practical implications and varying economic costs.  Intelligent thought about a reasonably full set of options is essential.  Thus, it is not unusual for there to be an iterative process between analysis, consideration of options, and then further analysis.

Risk Assessment in Auditing

In auditing, risk assessment is a very crucial stage before accepting an audit engagement. According to ISA315 ''Understanding the Entity and its Environment and Assessing the Risks of Material Misstatement'', "the auditor should perform risk assessment procedures to obtain an understanding of the entity and its environment, including its internal control."<evidence relating to the auditor’s risk assessment of a material misstatement in the client’s financial statements. Then, auditor obtains initial evidence regarding the classes of transactions at the client and the operating effectiveness of the client’s internal controls.In auditing, audit risk includes inherent risk, control risk, and detection risk.

Risk Assessment and Human Health

There are many resources that provide health risk information.
The National Library of Medicine provides risk assessment and regulation information tools for a varied audience³. These include TOXNET (databases on hazardous chemicals, environmental health, and toxic releases)⁴, the Household Products Database (potential health effects of chemicals in over 10,000 common household products)⁵, and TOXMAP (maps of US Environmental Agency and Superfund and Toxics Release Inventory data). The United States Environmental Protection Agency provides basic information about environmental risk assessments for the public⁶.

Risk Assessment in Information Security

IT risk assessment can be performed by a qualitative or quantitative approach, following different methodologies.

Risk Assessment in Project Management

In project management , risk assessment is an integral part of the risk management plan, studying the probability, the impact, and the effect of every known risk on the project, as well as the corrective action to take should that risk occur⁷.

Risk Assessment for Mega-projects

Megaprojects (sometimes also called "major programs") are extremely large-scale investment projects, typically costing more than US$1 billion per project. Megaprojects include bridges, tunnels, highways, railways, airports, seaports, power plants, dams, wastewater projects, coastal flood protection, oil and natural gas extraction projects, public buildings, information technology systems, aerospace projects, and defence systems. Megaprojects have been shown to be particularly risky in terms of finance, safety, and social and environmental impacts. Risk assessment is therefore particularly pertinent for megaprojects and special methods and special education have been developed for such risk assessment.⁸⁹

Quantitative Risk Assessment

Quantitative risk assessments include a calculation of the single loss expectancy (SLE) of an asset. The single loss expectancy can be defined as the loss of value to asset based on a single security incident. The team then calculates the Annualized Rate of Occurrence (ARO) of the threat to the asset. The ARO is an estimate based on the data of how often a threat would be successful in exploiting a vulnerability. From this information, the Annualized Loss Expectancy (ALE) can be calculated. The annualized loss expectancy is a calculation of the single loss expectancy multiplied by the annual rate of occurrence, or how much an organization could estimate to lose from an asset based on the risks, threats, and vulnerabilities. It then becomes possible from a financial perspective to justify expenditures to implement countermeasures to protect the asset.

Criticisms of Quantitative Risk Assessment

Barry Commoner, Bryan Wynne and other critics have expressed concerns that risk assessment tends to be overly quantitative and reductive. For example, they argue that risk assessments ignore qualitative differences among risks. Some charge that assessments may drop out important non-quantifiable or inaccessible information, such as variations among the classes of people exposed to hazards. Furthermore, Commoner and O'Brien claim that quantitative approaches divert attention from precautionary or preventative measures.^{10 1112}

References

1. ^ Merrill, Richard A. "Food Safety Regulation: Reforming the Delaney Clause" in ''Annual Review of Public Health'', 1997, 18:313-40. This source includes a useful historical survey of prior food safety regulation.
2. ^ [http://www.epa.gov/risk/]
3. ^ [http://sis.nlm.nih.gov/enviro/riskinformation.html]
4. ^ [http://toxnet.nlm.nih.gov]
5. ^ [http://hpd.nlm.nih.gov/]
6. ^ [http://www.epa.gov/risk/].
7. ^ [http://www.pmhut.com/managing-project-risks Managing Project Risks] - Retrieved May 20th, 2010]
8. ^ [Bent Flyvbjerg, Nils Bruzelius, and Werner Rothengatter, 2003,  An Anatomy of Ambition (Cambridge University Press).]
9. ^ Oxford BT Centre for Major Programme Management
10. ^ Commoner, Barry. O'Brien, Mary. Shrader-Frechette and Westra 1997.
11. ^ Others, like Nassim Nicholas Taleb consider risk managers little more than "blind users" of statistical tools and methods.
12. ^ THE FOURTH QUADRANT: A MAP OF THE LIMITS OF STATISTICS [9.15.08]Nassim Nicholas Taleb An Edge Original Essay

See also

• Library of Congress. Congressional Research Service. & United States. Congress. House. Committee on Science and Technology. Subcommittee on Science, Research, and Technology (1983), A Review of risk assessment methodologies, Washington: U.S: report / prepared by the Congressional Research Service, Library of Congress for the Subcommittee on Science, Research, and Technology; transmitted to the Committee on Science and Technology, U.S. House of Representatives, Ninety-eighth Congress, first session
• Deborah G. Mayo. “Sociological versus metascientific views of technological risk assessment” in Shrader-Frechette and Westra.

• Nyholm, J, 2009 "Persistency, bioaccumulation and toxicity assessment of selected brominated flame retardants"

• O’Brien, Mary (2002), Making better environmental decisions: an alternative to risk assessment, Cambridge, Massachusetts: MIT Press, ISBN 0-262-15051-4, retrieved 27 September 2010  Paperback ISBN 0-262-65053-3

• Shrader-Frechette, Kristin; Westra, Laura, eds. (1997), Technology and values, Lanham, Maryland: Rowman & Littlefield, ISBN 0-8476-8631-0, retrieved 27 September 2010

Article taken form Wikipedia. original Article: Risk Asessment