When assessing the risks associated with a particular event, there is the potential for a range of outcomes (consequences) and their associated likelihoods. For example, if you were to be involved in a motor vehicle accident at work, the potential consequences could range from minor property damage or a few bruises, right through to multiple fatalities. Typically (and thankfully), the minor accidents are much more common than the fatalities, but the associated costs in repairs and lost time can still add up. So when it comes to conducting a risk assessment for the use of a motor vehicle, we have several choices as to what we are actually assessing. Do we assess the lower consequence event with the higher likelihood, the higher consequence event with the lower likelihood, or something in-between? This important decision opens up a lot of argument and conjecture.
In some cases it’s appropriate to focus on events with potentially catastrophic outcomes, as these are the ones that pose the largest threats and are often of greatest concern to managers. In other cases, it may be important to identify and analyse both ‘everyday problems’ and ‘catastrophes’ as separate risks. For example, a frequent but low-impact (or chronic) problem may have large cumulative or long-term effects that are at least as important as those for a rare but high-consequence (or acute) event. In addition, the treatment actions for dealing with these two distinct kinds of risk are often quite different, so it is sensible to distinguish between them and to record them both.
The key to assessing risks that might produce different consequences is to apply a consistent assessment methodology.
The supporting Handbook for ISO31000:2018 Risk Management Guidelines Standard provides little guidance here, stating in its most basic form that:
Risk = Consequence x Likelihood
Remembering back to high school maths, when it comes to multiplication, the order of the items being multiplied together does not matter. However, as you can see from the driving example above, the order in which these components are considered significantly impacts the outcome of the risk assessment! As a result, organisations have advocated the consequence first approach as detailed in ISO 31000 (and the WHS Risk Management Code of Practice), followed by the application of a likelihood rating for the selected consequence occurring. By doing this, the risk assessment process prompts the consideration of what the potential consequence will be.
This highlights the needs to be consistent in terms of the order in which the elements of the risk are considered. Further, there is a need to be consistent in terms of the type of consequence being considered – are we focussing on the most likely consequence, a worst case consequence or something in between with a most credible worst-case? (It doesn’t matter which one is applied as long as it is applied consistently.)
Consider the driving example above…not every car accident results in a fatality. In fact, due to the prevalence of a long list of risk control measures in place such as seat belts, airbags and now, even automatic obstacle detection technology for newer vehicles, the most credible worst-case scenario is that there will be vehicle damage and minor personal injury. Applying a likelihood rating to this selected consequence then delivers a more realistic and appropriate risk assessment outcome. Isn’t this what we are actually wanting to assess?
Let the arguments begin!
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