Quantitative Risk Assessment for Business Owners

Risk assessment is the evaluation of probability of hazards in real-life situations in the workplace.  It determines the level of risk through careful consideration of probable assumptions and some uncertainties in a given situation.  Within each aspect of the business, from production, distribution, marketing, and sales, risks are assessed on regular basis to determine and prevent potential losses.

Every industry have different hazards that they must be mindful of.  Most science, engineering, and research and development industries practice standard risk assessments to identify and rectify safety threats.  Each type of business perform very specific methods in evaluating risk.  Sometimes these assessments include a study of financial, environmental, health, and general employee safety.

Quantitative Risk Assessment Calculation

Because quantitative risk assessments present a more concrete depiction of potential business risks, business owners and investors prefer them over qualitative evaluations.  Assessors calculate two components of risk (R): potential loss (L) and probability of its occurrence (p).  After injecting numbers into the system, assessors present an objective evaluation of risks.  From there, businesses can choose to implement specific measures based on the proposed solutions of the evaluator.

Often, these quantitative risk assessments involve intricate and sophisticated systems.  Evaluations are increase in complexity whenever it involves potential threats to life, expensive machinery, and the environment, because these things involve large monetary losses.

Quantitative Risk Assessment is Not Perfect

While mostly accurate and purely objective, quantitative risk assessments are not perfect.  They also don’t rely purely on number-crunching.  To be fair, quantities for potential losses and the probability of the occurrence of threats are difficult to measure.  Such concepts are difficult to completely quantify for all cases.

While the method can provide a clear number to signify level of “risk,” not all risks are clearly the same or even equivalent to each other.  For example, a high number for potential loss and low probability might present the same risk value as a low number for potential loss and high probability of occurrence.  In an ideal world, these threats would be dealt with equally.  Yet, in the real world of limited scarcity of resources, one hazard takes precedence over another.

Mathematically, these numbers present the facts.  They help in determining specific areas in which businesses can cut down and reduce loss.  Quantitative risk assessments help manage threats to safety, efficiency, and profits in an objective manner.

Assets versus Losses

Detractors of this practice articulated their concern for the reductive and numerical quality of this type of risk assessment.  Barry Commoner, Bryan Wynne, and others charge that quantitative risk assessments do not differentiate between the qualities of every hazard.   They propose that risks are not wholly quantifiable.  There are several non-numerical values attributed to risks and should be addressed.

These critics state that assets and losses could not be clearly defined, especially in cases that involve human life.  They claim that the reductive qualities of the quantitative approach detract businesses from executing precautions and preventions.   The use of statistics also forego further classification of types of people at risk.  Quantitative analysis is too much of a numbers game.

Minimizing Risk: From the Ground, Up

Whether a business owner is for or against the practice of quantitative risk assessment, it is obvious that losses must be reduced and assets protected.  In a given situation, businesses should implement safety practices that reduce risk within their establishments.

Quantitatively and qualitatively, protecting employees, visitors, and clients should be a priority.  Risk management and prevention warrant business owners to take empowered choices in minimizing danger in their facilities.  One way to promote safety is through installing and maintaining a sufficient number of commercial floor mats within business premises.  Quantitatively, this investment indicate a low level of loss and occurrence of risks.  It is cost-effective because it requires little to no attention while reducing hazards in the workplace greatly.