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  Management
  Alternatives Pty Ltd
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4. Tools

In developing a risk management process some of the the useful tools include:

  • Likelihood scale
  • Consequences scale
  • Level of risk scale
  • Risk matrix
  • Scale for evaluating risk

Likelihood scale

One key task in analysing risks is to estimate the likelihood of an event. To do this you will need a likelihood scale. Likelihood scales will need to be tailored to the risk management process.

An example of a likelihood scale is:

Level Likelihood Description
A Almost certain eg. will occur at least once a year or more often
B Likely  
C Possible  
D Unlikely  
E Rare  
F Very rare  
G Almost incredible eg. once in 100,000 years

You will need to describe the likelihood in terms of a rate, for example, 'almost certain' could mean 'will occur at least once a year or more often' and 'almost incredible' could mean 'once in 100,000 years.

The likelihood scale and the way it is described may vary with the type of risk.

Consequences scale

Is is useful to have a consequences scale for a given category or risk. An example of a consequences scale for health and safety is:

Level Health and safety
1. No medical treatment required
2. Minor medical treatment required
3. Hospitalisation required
4. Minor disability resulted
5. Major disability resulted
6. Death resulted
7. Multiple deaths resulted

The consequence scale will vary with each type of risk.

Level of risk scale

A scale for the level of risk is very useful for prioritising risks. For example.

Level of risk
Very high
High
Medium
Low
Very low
Negligible

Level of risk matrix

The level of risk is the combination of the consequences and the likelihood for a specific risk.

Examples of low risks include:

  • An event that is likely to occur but has minimal consequences
  • An event that is extraordinarily unlikely to occur but has moderately severe consequences.

Examples of high risks include:

  • An event that is likely to occur and has moderately severe consequences
  • An event that is extraordinarily unlikely to occur but has catastrophic consequences.

The following table is a risk matrix and shows the relationship between Likelihood, Consequence and Level of risk.

In the table:

  • A1 is certain to happen but has small consequences so is a low risk.
  • A7 is certain to happen and has very large consequences so is a very high risk
  • G1 is very rare and has small consequences so is a negligible risk
  • G7 is very rare but has large consequences so is a medium risk.
 
Likelihood (Certain to very rare)

Consequence

(small to large)
A
B
C
D
E
F
G
1
Low
 Low
 Low
 Low
 Low
 Very Low
Negligible
2
 Medium
 Medium
 Medium
  Low
  Low
Very Low
 Very Low
3
 High
 Medium
 Medium
 Medium
  Low
  Low
Very Low
4
 High
 High
 Medium
 Medium
 Medium
  Low
 Very Low
5
  Very high
  High
 High
 Medium
 Medium
 Medium
  Low
6
  Very high
  Very high
  High
High
 Medium
 Medium
 Medium
7
 Very high
  Very high
  Very high
  High
 High
 Medium
 Medium

Specific risks can be located on the matrix. Risks can be compared with each other so they can be prioritised for treatment.

For example:

  • Risk of fire burning a building down could be located at E7 (rare but very significant consequences and so a high risk
  • Violence during home visits could be located at B4 (likely with serious consequences and so a high risk).

Scale for evaluating risk

When evaluating the level of risk, ie deciding whether it is an acceptable risk or not it is useful to have a scale on which to base judgments, for example:

   Level of risk  Description
 i) Broadly acceptable level of risk  The situation is not of concern
ii)  Best achievable level of risk  Achieved with best practice
iii)  As low as reasonably practicable(ALARP)  Must be achieved (minimum standard)
iv)  Generally intolerable level of risk  Not tolerated

For a given risk one will need to make a judgment of where the cut off points are for levels i) to iv) in the table. When is an occupational health and safety risk broadly acceptable? When is it intolerable? What is the level or risk the organisation wants to achieve? As low as reasonably practicable? Best achievable?