Risk analysis

Systematic use of information to determine the probability of an occurrence and the severity of its consequences. This leads to informed decisions as to how particular risks should be managed. Risk mapping facilitates the process.

Risk assessment

1. Collective reference to: risk identification, risk analysis and risk evaluation, i.e. an overall process in risk management. 2. Legal requirement under health and safety regulations. See MANAGEMENT OF HEALTH AND SAFETY AT WORK REGULATIONS 1999; COSHH.

Risk assumption

An informed decision to accept the likelihood and consequences of a particular risk. This is planned risk assumption. A supermarket chain may choose to carry the risk of loss or damage to plate glass windows given that it has a spread of risk and the maximum possible loss is small relative to their resources. Deductibles and self-insurance are forms of risk assumption.

Risk aversion/risk averter

An attitude of an individual or organisation with a preference for avoiding risk whenever possible. A risk averter prefers a definite premium, even though it may exceed the loss expectancy, to unknown losses. If the loss expectancy’s monetary amount is £50, a risk averter will pay, say, £75 when the loss possibility range is £0-£5,000.