Risk Management

Management of risk relies on the ability to reduce either:

• the probability of the event occurring,
  or
  
• the severity of the consequences.

The circumstances under which a risk analysis may be indicated include:

• pre-feasibility appraisal
• excessive risk exposure
• marginal project analysis
• unusual risks or uncertainties
• choices between alternatives
• tactical decision making

The benefits of risk analysis include:

• definite perception of risks
• improved contingency planning
• feedback into design and planning
• formulation of procedures
• overall reduction in project risk
• improved insight into project risks
• documentation and defensibility

In the context of environmental and engineering projects, risk is the likely overall consequences which will result from the occurrence of any hazards (or threats) during the life of the project. The overall risk to the project is evaluated from assessments of the probability (or frequency) of each failure mode and the expected consequences of each occurrence. These individual consequences can then be summed over the life of the project.

In the various stages of the analysis process, risk can be determined by either a qualitative or a quantitative assessment. A qualitative analysis uses a classification system (rather than detailed probabilities) to asses the likelihoods and consequences of each threat. The categories (high , medium etc.) are defined according to the scale of the project and the consequences to be examined. A quantitative analysis uses probabilistic techniques (and Monte Carlo simulation) to quantify the risks. The processes and factors which lead to unwanted events are assessed for likelihood and consequence, using probabilistic distributions. Dependencies and relationships are taken into account when the overall risk to the project is summed for each consequence.