1.1 What is Risk
Risk is defined as the likelihood of an adverse outcome. It is a combination of probability of occurrence and severity of the effect on events considered. These are then incorporated to formulate some index that will indicate the extent of risk involved. Mathematically, the index, conveniently termed as Risk, can be expressed by the following relationships:
Risk = Severity x Likelihood
Severity is the extent of damage incurred following the accident. It can be in the form of fatality, injury, material loss or environmental degradation. To estimate the severity on an incident, detailed mathematical models are often used. Many softwares are available in the market to facilitate the effort. Severity is expressed as probability of fatality (0 to 1), or RM XXX Million of Losses incurred or some other measures depending on the nature of the assessment. Further information is available here.
Likelihood is the chance of an event to occur. It is estimated based on historical data on failure frequency of individual units or components. For example, there are failure data available for gasket failure, pipe rupture, pump switch failure etc. These data have been surveyed and collected over the years and published. Likelihood is normally expressed in terms of frequency of occurrence (per year).Two methods are typically used, these are Fault-Tree Analysis and Event-Tree Analysis.
If risk is quantified, it is expressed as Fatality per year, or RMXXX Million lost per year etc. Otherwise, it can take qualitative measures as risk category. This typically done using approach commonly known as risk ranking.
There are several classes of risk assessments currently employed in the world. Some of these have been incorporated within safety legislation in Malaysia. These are Quantitative Risk Assessment (QRA) , Chemical Health Risk Assessment (CHRA) and Hazard Identification, Risk Assessment and Risk Control (HIRARC)
2. Qualitative Risk Assessment
2.1 Risk Ranking
Risk ranking is a common methodology for making risk based decisions without conducting quantitative risk analysis. The basis for risk ranking is the risk matrix that has both a consequence and frequency axis. The product of consequence and frequency provides a measure of risk. Each consequence /frequency pair on the risk matrix is assigned a risk ranking that includes risk levels that are tolerable and others that are intolerable. The intolerable risk levels may be further divided into higher and lower risks to prioritize mitigation actions.