What are the Chances of That Happening?
We presented last week a brief article on the dangers of Risk Tolerance. Many companies invest a good deal of time and effort on hazard recognition and risk perception. However not much attention is given to the decision making process, which within time can lead to risk tolerance. Many companies have developed a process of accounting and mitigating loss, making risk tolerance less of an issue. The process provides a system that measures risk in two dimensions and presents tools allowing us to prioritize risk which leads to more attention to mitigation of actual hazards. For Wachs utilizing such a system will allow us to focus our time and effort on elimination and/or mitigation the most likely hazards that could result in a loss. Following the process consistently helps to provide a decision based upon structure no matter what the project or task. This essentially is Risk Management.
Risk Management is an increasingly important function in organizations today. As Wachs undertakes increasingly complex and ambitious projects, our projects must be executed successfully, often in an uncertain and risky, chaotic environment. A loss in any area, safety, process, equipment, or environment can be catastrophic on many levels. Being part of a project team, you need to be aware of these risks and have a consistent means to measure and mitigate the risk on each project. As with a JSA, this is a team effort, every perspective is worthy of note. However, does this mean that you should try to address each and every risk you could possibly face? Probably not in all, but in the most critical environments this can be overwhelming. The key is to recognize and prioritize risks. The classification can be divided into three domains: watch, mitigation, and problem domain. A risk that falls into the “Problem Domain” will present critical/catastrophic events and require additional input and/or resources to either eliminate or mitigate. Once you have prioritized the risk then it becomes easier to eliminate or mitigate potential loss and you can focus the majority of your time and effort on the more likely risks.
The Risk Impact/Probability Chart provides a useful framework that helps you decide which risks need your attention.
How to Use the Tool
The Risk Impact/Probability Chart is based on the principle that a risk has two primary dimensions
1. Probability – A risk is an event that "may" occur. The probability of it occurring can range anywhere from just above 0 percent to just below 100 percent. (Note: It can't be exactly 100 percent, because then it would be a certainty, not a risk. And it can't be exactly 0 percent, or it wouldn't be a risk.)
2. Impact – A risk, by its very nature, always has a negative impact. However, the size of the impact varies in terms of cost and impact on health, human life, or some other critical factor.
Happy Thanksgiving from Wachs
Make sure your holiday season is a safe one!