Managing and Mitigating Risk

Question: Discuss the relative benefits and drawbacks of these two tools for risk assessment? Answer: Risk Management Risk management should be adopted and practiced at regular intervals by any organization to ensure its safety from any unpredictable hazard. Risk management and mitigation can be evaluated and measured both qualitatively and quantitatively (Cooperberg, 2005) by the efficient use of various varied tools and techniques. Two of the prime and most commonly used tools for qualitative risk assessment are likelihood/ consequence matrix and risk nomogram. Each of the tool has its own pros and cons and are likely to affect the organization in different terms. Both the tools and approaches are valid in the practical environment with risk nomogram being less used in the industry due to its complexity but the selection of each of the tool would solely depend upon the culture and structure of the company (Ni, 2003) and the quality of risk assessment desired by it. They may vary in terms of ownership, ability, efficiency, cost applied in terms of cost and time and clear prioritization of risks. Th e company is mitigating risk by the use of matrix but are having some drawbacks when it comes to efficiency and speed. Therefore, the objective of the report is to compare the two tools in the background of the company and to conclude the effectiveness of one tool over another. Likelihood/ Consequence Matrix Likelihood is the chance of event occurring in context of risk management. Consequence on the other hand is the measure of expected severity after occurring of the hazard or the accident. The risk likelihood matrix can be used to list the hazards and the top (Clarke, 2004) and help the management to take necessary actions. This risk matrix can also be used in a semi-quantitative format by placing some numbers in each of the box of the matrix which will help in providing a greater resolution for ranking the risk. With the help of this approach, it will be easier to assess cumulative risks (Liu, 1999). The company has been using this technique but has failed to achieve cumulative results required for an analysis concerning broad and clear perspective. The steps required to mitigate the risks were not taken clearly as the decision making was delayed due to the matric approach. Also an individualized approach (Bowling, 2010) for each accident in the hazard was not able to be tracked and analyzed using this matrix. Risk Nomogram The risk nomogram however is much complex to develop and assess but undertakes various roles for risk management and mitigation. It is a graphical device that designed to allow some approximate risk calculations in a graphical manner. It undergoes some of the steps for efficient decision making in the risk assessment. It assesses the likelihood for each particular accident happening for each hazard and the result is stored in likelihood column. The exposure to risk is assessed and entered into the column specified for exposure range giving a measure of how often person does something which makes him vulnerable for risk. A straight line connecting these two is drawn extending to the tie line (Steadman et.al, 2000). Consequences are considered and entered into the respective column. Another line is drawn to assess the consequences. This line when is passes through the risk score gives a complete indication of the action that should be taken up for risk mitigation. The nomogram can also be used for providing guidance for justification of the cost that would be incurred for reducing the risk of a hazard. This risk assessment tool provides one of the most objective, individualized and evidence based risk estimation (Zsidisin, 2004). It should be kept in mind that while using this nomogram it is essential to define each of the individual accidents on a regular basis so that it is easier to assess comparable events or scenarios. But in case there is a failure to comply with such requirements then, results would not be able to be compared with each other resulting into limited utilization and use of this technique. After gaining results from the other company it was evident that the tool was costly for analysis and it failed in giving accurate results in some situations requiring to the point output for the risk mitigation plan. Comparison of Risk Matrix and Risk Nomogram One of the major advantage of using a risk nomogram over the technique of likelihood/ consequence risk matrix is that the risk reduction value which is delivered by some additional risk control techniques and measures can be more accurately measured because risk is presented on a continuous scale instead of presenting it in a form of discrete cells when it comes to risk matrix. The technique of nomogram provides with an individualized prediction of all the accidents pertaining to an event. It is substantially easier and efficient to understand and operationalize the risk assessment which is done on a scale basis (Grey, 1995). Nomograms help in better decision making and provide consistent, reliable and standardized predictions. The comparisons between the two approaches and the results out of both techniques convince the businessmen about the superiority of the nomogram based risk mitigation approach. The utilization of risk matrix is flexible as it can be constructed in a number of formats like 5X5, 4X5, 7X7 etc. It is most common used tool in the industry with every risk manager having deep knowledge and long experience regarding the same. Risk matrix are beneficial in identifying the event outcomes that should be made prioritized or grouped for analyzing the matter further. As far as cost of the tools and techniques used are concerned, this tool provides a quick and comparatively inexpensive methodologies (Jttner, 2005) for analyzing risk. For some high risk areas, and proportional analysis risk matrix provide detailed information and evaluation methods. But development and assessment of risk nomogram is quite complex and is not at all straightforward therefore, users must ensure that they clearly understand the inherent concepts and applications of principles and theories involved in its development before adopting such approach for the company for tasks of risk management. The matter of fact is that the accuracy of the nomogram is limited by the precision with which the physical markings (Singh, 2011) are drawn, viewed or aligned for analysis. Therefore the most common application of nomogram is when an approximate answer is required and is used appropriately. Accuracy is one of the greatest disadvantage of this tool for risk assessment. It is not used easily to donate the different hazards which will lead to major accidents as they are designed to perform some specific calculations. Risk matrix sometimes provide a disadvantage of scale limitation when the scenario is of frequency reduction (Miller, 1992). It fails in providing an accurate frequency reduction raking. Case Studies The company is presently using likelihood/ consequence matrix for evaluation of risk and assessing them in a qualitative manner. As suggested by the boss the need is to dwell deeper into the concept of risk nomogram and to select the most suitable of the both tools suggested. If the company choses to resort to the new technique of risk nomogram then it is likely that the cost incurred would increase but it would provide cumulative data along with individual analysis too (Reason, 1997). On the other hand, the results quoted would be approximate giving a rough draft of the risks and the actions that need to be taken accordingly. Though the risk matrix was working well but due to inclusion of an innovative alternative, it was wise to assess its pros and cons too. The case studies provided a chance for analysis by which we were able to decide the choice of the tool that should have been used in the company for risk management and mitigation. For multiple fatalities from a terrorist attack that has never happened but it is possible, it is best to use the likelihood/ consequence matrix having rare chances of catastrophic effect. Accurate information is required which cannot be given by another tool of nomogram. Similarly, for the single fatality at the Companys head office (one person fell into the stairwell and died, the only fatality since the company started over 35 years ago) can be judged effectively by the present matrix approach having same dimensions. But for a severe irreversible injury from a specific incident that has happened twice in the organization in the last 12 years, it is required to gain cumulative impact and further devise strategies including either correction, awareness, planning or implementing. For other severe case which happens frequently like a manual handling LTI across business, 18 recorded in last 10 years too require nomogram approach. A first aid injury in the head office where there have b een 6 incidents reported in the last 5 years also requires an approximate insight of cumulative data in a quick manner requiring steps for risk assessment too. Conclusion It can be concluded that risk nomogram should be adopted as the new tool but with the requirement of extra cost and extra skills of the employees to do approximate analysis (Grey, 1995) of some major risks accompanied by the risk value and strategies to overcome it. As a result, risk nomogram should be used for risk assessment because of its quickness, transparency, objectivity, clarity (Miller, 1992) and comprehensive framework. References 1. Cooperberg, M. R., Pasta, D. J., Elkin, E. P., Litwin, M. S., Latini, D. M., Du Chane, J., Carroll, P. R. (2005). 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