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 | Risk Evaluation |
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The process of evaluating risks informs decision-making on which risks require treatment and the priorities for implementation of risk treatment. The rating of each risk is reviewed against the risk criteria established in the risk management context, to determine the need for and type of risk action to be considered.
Tolerable Risk
Tolerable risk is a concept originating in the late 1980's, whereby Sir Frank Layfield noted that:
'..although acceptable risk is often used in balancing risks and benefits, it does not adequately convey the reluctance with which possibly substantial risks and benefits may be tolerated'.
The 'As Low As Reasonably Practicable' (ALARP) concept emerged, whereby a spectrum of three broad risk bands was established to evaluate risk.
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- Lower band - risks are negligible and no risk treatment measures are required.
- Middle band - benefits are considered against potential adverse consequences.
- Upper band - adverse risks require treatment whatever their cost and regardless of the benefits the activity may bring.
A risk is characterised as 'ALARP' when there is retention of significant health, safety and environmental consequences, despite implementation of treatment measures.
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Such risks are often of an indirect nature and are consequence driven i.e. the source of risk is not within the control of the organisation, such as earthquakes and terrorism.
When a risk is close to the intolerable level, the expectation is that risk will be reduced unless the cost of doing so is grossly disproportionate to the benefits gained. Similarly, where a risk is close to the negligible level, then action may only be required to reduce the risk where the benefit exceeds the cost of reduction.
ALARP is a risk evaluation approach focused on the practicality of whether anything can be done to reduce the risk and the costs and benefits associated with taking, or not taking action to reduce the level of risk.
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