RISK - ESTIMATION, PRESENTATION AND PERCEPTION

MEASURES OF RISK
Here we investigate various risk measures that can be used for a variety of applications. These seek to address the key areas of process related risks given in Table 1-1.

Need for Risk Measurement
The discussion so far in Chapter 1 has established the following:
• All activities are associated with some risk.
• In order to make a commercial enterprise successful, it is necessary to identify and manage the risks.
• The two-dimensional nature of risk (likelihood and consequence) has to be recognised for effective risk management.
• Not only the experts world-view of risk, but that of the non-expert should be given due consideration in the risk management process, if the latter have an input into decision making.
• A decision made based on risk assessment, followed by the implementation of a risk management process would go a long way to ensuring project success.

This raises the question:
How do we know that a risk is low enough to be acceptable? In other words, how low is low enough?

To answer this question, we need some measures of risk, so that relative risks can be compared.