7.8 Risk Management (Step 6)
185
• Safety measures should be designed so that a simple error cannot lead to an event
with severe consequences.
• The benefits of a risk analysis are highly dependent on the careful implementation and subsequent preservation of the selected protective measures.
• The goal of safety measures also includes consideration of a cost-benefit ratio
(see Sect. 7.8.1).
After the implementation of safety measures, the level of risk should be assessed
once again to determine if additional safety measures are required.
7.8.1 Decision-Making During Risk Management
The decisions made during the risk management step are subjective and depend
on factors such as the set protection goals, the corporate safety culture, existing
legislation, technical safety norms, the current state of technology, and cost-benefit
considerations of treating the risk.
A common approach for decision-making is the “as low as reasonably practicable” (ALARP) criteria system, which consists of dividing risks into three bands: (1)
an upper band where the level of risk is considered unacceptable independently of
the benefits associated with the activity, and risk treatment is required independently
of the costs, (2) a middle band (or “gray” area) where the costs and benefits of
increasing safety and of accepting risk are compared through a cost-benefit ratio,
and (3) a lower band where the level of risk is considered to be low enough that no
risk treatment measures are needed (ISO, 2009).
The concept of a cost-benefit ratio is illustrated in Fig. 7.9. It shows that
reducing a risk through safety measures results in lowering the annual expected
damage costs. However, it also results in an exponential increase in costs for safety
measures. All costs are expressed in monetary amounts [$/year]. An economically
optimal level is reached when the sum of avoided damage costs and the costs
for safety measures reaches a minimum. The damage costs decrease linearly;
however, the increase in costs for implementing safety measures is not linear. The
marginal utility of implementing safety measures to reduce risks and avoid damage
costs (
Damage Costs
Costs for Safety Measures ) therefore steadily decreases with increasing
demand for safety. Eventually, one dollar invested in improving safety will result
in significantly less than one dollar worth of reductions in damage costs.
7.8.2 Residual Risk
Even after the implementation of safety measures to reduce the risk, a certain
amount of risk will always remain. This is known as residual risk and includes:
• risks that are accepted as a result of cost-benefit considerations
185
• Safety measures should be designed so that a simple error cannot lead to an event
with severe consequences.
• The benefits of a risk analysis are highly dependent on the careful implementation and subsequent preservation of the selected protective measures.
• The goal of safety measures also includes consideration of a cost-benefit ratio
(see Sect. 7.8.1).
After the implementation of safety measures, the level of risk should be assessed
once again to determine if additional safety measures are required.
7.8.1 Decision-Making During Risk Management
The decisions made during the risk management step are subjective and depend
on factors such as the set protection goals, the corporate safety culture, existing
legislation, technical safety norms, the current state of technology, and cost-benefit
considerations of treating the risk.
A common approach for decision-making is the “as low as reasonably practicable” (ALARP) criteria system, which consists of dividing risks into three bands: (1)
an upper band where the level of risk is considered unacceptable independently of
the benefits associated with the activity, and risk treatment is required independently
of the costs, (2) a middle band (or “gray” area) where the costs and benefits of
increasing safety and of accepting risk are compared through a cost-benefit ratio,
and (3) a lower band where the level of risk is considered to be low enough that no
risk treatment measures are needed (ISO, 2009).
The concept of a cost-benefit ratio is illustrated in Fig. 7.9. It shows that
reducing a risk through safety measures results in lowering the annual expected
damage costs. However, it also results in an exponential increase in costs for safety
measures. All costs are expressed in monetary amounts [$/year]. An economically
optimal level is reached when the sum of avoided damage costs and the costs
for safety measures reaches a minimum. The damage costs decrease linearly;
however, the increase in costs for implementing safety measures is not linear. The
marginal utility of implementing safety measures to reduce risks and avoid damage
costs (
Damage Costs
Costs for Safety Measures ) therefore steadily decreases with increasing
demand for safety. Eventually, one dollar invested in improving safety will result
in significantly less than one dollar worth of reductions in damage costs.
7.8.2 Residual Risk
Even after the implementation of safety measures to reduce the risk, a certain
amount of risk will always remain. This is known as residual risk and includes:
• risks that are accepted as a result of cost-benefit considerations