Risk and Risk Management

Loss prevention and risk management measures must contribute towards making the residual risk acceptable. What is meant by the terms "residual risk" and "risk"? In the techno-scientific sense, the risk R is described by the following probability statement: occurrence probability H multiplied by extent of loss K, i.e. R = H x K.

This formula represents a constant that takes the form of a is reduced by 2 x 10-2 if fire suppression systems are in hyperbola. The graph shows that there is no place. absolute certainty of a zero risk (since the avoidance of unmanageable risks may harbour the risk of missed oppor- This means that sprinkler systems not only tunities).

A residual risk is the risk which, based on the curhave a positive influence on the extent of rent state of science, is still inherent in an activity, method, losses and the occurrence probability of procedure, or process even if all theoretically possible precautions (scientifically feasible precautions) have beenproperty damage, they are also very suitable taken. As extent of loss and occurrence probability areas a means of preventing bodily injury and quite minimal in many areas, a borderline risk is definedsaving human life. for the majority of activities, methods, procedures, and processes (economically reasonable precautions).

Different interpretation of risk

The interpretation of risk is, however, an individual matter number of fatalities declined rapidly when, at the begin-and varies from region to region. In the Netherlands and ning of the 1970s, sprinklers were made obligatory in Anglo-Saxon countries, for example, there are politically hotels, hospitals, and nursing homes, and again from the accepted individual risks of 1.0 x 10-6 per event group.

This 1990s when they were also prescribed for new residential "social threshold" is used to define a rare or very improbbuildings. able event. If the frequency of an undesired event i assessed to be lower, the event becomes socially accept- Risk and risk management able. One principle that is often used is the ALARP (as low as reasonably practical) principle, which involves weighing up Loss prevention and risk management measures must technical and operating options, economic efficiency, and contribute towards making the residual risk acceptable. ecological compatibility, i.e. the risks and opportunities.

What is meant by the terms "residual risk" and "risk"? In the techno-scientific sense, the risk R is described by the Only with sufficient knowledge of the risk R and its qualitafollowing probability statement: occurrence probability tive and quantitative factors is it possible to develop risk H multiplied by extent of loss K, i.e. R = H x K control strategies and risk management methods.

The qualitative and in particular quantitative risk assessment of loss prevention measures is a challenge, but it helps in gaining knowledge in the context of holistic risk management.

Furthermore, risk management should constitute a prevention strategy — in the sense of anticipating and avoiding dangers — and not simply crisis management in response to loss events.

Companies will be called upon in the future to further develop their risk culture in the context of loss prevention and risk management — topics that are also relevant in terms of Solvency II.

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