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Limitation of Risk Assessment

As individuals we naturally conduct risk assessment to varying degrees of competence. In organisations this doesn’t tend to happen naturally and needs to be orchestrated by a management system. But do we question whether risk assessment always adds value and is it applicable to the situation?

Risk is the combination of loss or harm and the likelihood of its realisation. But in order to make meaningful and valuable assessments we need relevant knowledge and experience to identify potential hazards or threats and to assess the risk likelihood and severity components. The easiest to assess are things like slips, trips and falls that happen relatively frequently because data is plentiful. Contrast this with major nuclear power plant disasters that are very high in consequence but relatively rare. For these situations we need to undertake complex analysis and scenario modelling to achieve the best-informed estimate of the likelihood of events occurring. This happens in an environment where the overall methodology may never be fully validated because such disasters are so rare.

Beyond these high and low frequency events, there are things outside of the capability of systematic risk assessment that can present all manner of potential harm to individuals, organisations and society. They are the situations where knowledge and experience are extremely limited making foreseeing and assessing future potential negative events extremely difficult, eg novel technologies such as genetically modified organisms and complex evolving systems , for example socio-economic.

We should not use risk assessment in a ritualistic way without intelligent and informed thinking – the only justification for using risk assessment is that it can make us more successful than not using it. We should constantly question whether our actions are appropriate and be able to justify using it and not using it.

Featured in Insight (January 2016)