The Three Facets of Risk

2000-01-5594

10/10/2000

Event
World Aviation Congress & Exposition
Authors Abstract
Content
Awareness of risk is probably greater today than it has ever been, and the assessment and management of risk-whether or not we think of it as risk-has become common in the lives of many of us. The first part of this paper notes that risk is never about predictable losses, or about either predictable or unpredictable gains; nor is risk a probability. Rather, risk is either a condition of, or a measure of, exposure to misfortune-more concretely, exposure to unpredictable losses. However, as a measure, risk is not one-dimensional-it has three distinct aspects or “facets” related to the anticipated values of unpredictable losses. The three facets are Expected Loss, Variability of Loss Values, and Uncertainty about the Accuracy of Mental Models intended to predict losses. This paper illustrates these three facets of risk by the use of three simple card-game “thought experiments”. An assessment of risk which does not consider all three of these facets is at least incomplete, and can be misleading. The second part of the paper presents an example of how the three-facets-of-risk concept applies specifically to a safety assessment of a mission of an engineered system. The author believes that each risk of interest should be characterized explicitly by a well-defined Risk Event-an event defined by an event assertion which clearly specifies the causes and/or loss values intended to be included within the scope of a particular risk. It is pointed out that the widely-used formula “Risk = Probability × Severity” does not even recognize the second and third facets of risk. Nor does the formula make clear how to address the many practical situations in which a variety of possible causes (Hazardous Events, Outcome Events, and Tragic Events) of losses, and/or a variety of possible resulting Loss Values, are of interest. Furthermore, “Severity” in the formula is often interpreted to mean the greatest possible Loss Value which can be caused by a Hazardous Event-and that interpretation can yield conclusions which are either significantly optimistic or pessimist.
Meta TagsDetails
DOI
https://doi.org/10.4271/2000-01-5594
Pages
16
Citation
Yellman, T., "The Three Facets of Risk," SAE Technical Paper 2000-01-5594, 2000, https://doi.org/10.4271/2000-01-5594.
Additional Details
Publisher
Published
Oct 10, 2000
Product Code
2000-01-5594
Content Type
Technical Paper
Language
English