Risk assessment

INTRODUCTION

To the layman, risk is often quantified in terms of probabilities, whereby it might be said that gambling on any event with a “low probability” of occurring is a risky proposition. Or, the mere existence of a “catastrophic” event with non-zero probability exposes those involved to risk. The risk of nuclear plant failure, global warming, or the depletion of the ozone layer are examples. We might say that the risk of not carrying an automobile insurance policy is not worth the risk. One result of these simple considerations is that the standard components of risk are the chance of a loss, the possible magnitude of the loss, and the exposure to that loss.

Public interest in the field of risk analysis has grown and expanded in leaps and bounds during the last decade. Furthermore, during the last two decades, risk analysis has emerged as an effective and comprehensive procedure that supplements and complements the overall management of almost all aspects of our lives. Managers...