Assumed risk

The RP is the maximum and only reimbursement for all the drugs in the same subgroup (the insurer limits the assumed risk). 

Assumed Risk— A risk that has been identified, analyzed, and accepted at the appropriate management level, unanalyzed or unknown risks fall under oversight and omissions by default. 

What is useful to bear in mind is that very few people are willing to assume leadership in the sense of being prepared to assume risks and assume responsibility. Many of course desire the fruits of leadership but only a tiny proportion of people are willing to expose themselves to the risk of failure. An even smaller proportion truly wish to have responsibility. The hard truth is that the vast majority, notwithstanding their almost universal desire for recognition and the fruits of success, are not chosen, or they hang back, because they are not well-equipped for leadership. ... 

A second issue that apparently elevates public anxiety about industrial products to a high level concerns the fact that people feel they have little or no personal control over those products. Tobacco and alcohol usage, diet, reproductive and sexual habits, and sunlight exposure are to greater or lesser degrees within people s personal controls, or at least they take personal responsibility for them, while they are involuntarily exposed to many industrial chemicals. As we shall show in our later chapter on Managing , people do not readily tolerate involuntarily-assumed risks, even if these risks are small. 

To the extent owners continue to contract with financially strong suppliers and contractors that properly evaluate the risks they are assuming with the rewards they may achieve, then the system stays in balance. However, when an engineering contractor assumes risks that it cannot effectively mitigate, or when it undervalues the risk premium necessary to address such risk, the delicate balance between risk and reward becomes out of balance. 

A problem statement of this type is known as a decision under risk because the underlying probability distribution for the future scenarios, or stales of nature, is known or can be assumed. Risk, in the previous section, was used in a more general sense to characterize the absence of certainty. The term was used analogously to rtmdomness or uncertainty. Here, in a more limited sense, a problem statement in which the underlying distribution for the sfs is not known or assumed is a decision under uncertainty. 

Recalling that Mill claimed that only the most favored workers would receive compensation for assuming risk, we can consider the two published attempts to combine labor market segmentation and hedonic wage regression. The first of these was conducted by Robinson (1984),... 

Assumed Risk of Cancer Induction Following an Acute Radiation Dose... 

This database focuses on work-related personal injury and illness and property damage (including that due to the operation of motor vehicles). There is a general tabular breakdown relative to individual contractors however, there is no detail as to the specific types of work or the assumed risk inherent in these particular types of work. This is an old database which was established to collect statistics for the U.S. Department of Labor. An important aspect is that the data is reported on a normalized per unit of work (200,000 person hours) basis which facilitates gross comparisons between and within industries. To emphasize the general nature of the CAIRS database, Total Injury and Illness Incidences Rates and Lost Workday Incidence Rates are depicted in Figures 4 and 5, respectively. 

Most option pricing models use one of two methodologies, both of which are based on essentially identical assumptions. The first method, used in the Black-Scholes model, resolves the asset-price model s partial differential equation corresponding to the expected payoff of the option. The second is the martingale method, first introduced in Harrison and Kreps (1979) and Harrison and Pliska (1981). This derives the price of an asset at time 0 from its discounted expected future payoffs assuming risk-neutral probability. A third methodology assumes lognormal distribution of asset returns but follows the two-step binomial process described in chapter 11. 

Important developments with assumed risk-reducing effect... 

Risk transfers are found in two places. They are found next to undeveloped terminal events, and they are found near the top of the chart as assumed risks. The implied logic is that barriers, controls, or evasive actions are not possible or practical in those areas where there are undeveloped terminal events. If activity is continued under these circumstances, then some risk is assumed or accepted. The small assumed risk transfers are used to denote a transfer up to the small ovals under the assumed risk portion of the MORT chart. 

Figure 18-3 Transfers In addition to the triangle commonly used as the transfer symbol for analytical trees, the MORT chart also uses large capital letters as drafting break transfers and small ellipses as transfer symbols for assumed risks.

A key MORT definition is that of accepted or assumed risk. An assumed risk is a very specific risk that has been identified, analyzed, quantified to the maximum practical degree, and accepted by the appropriate level of management after proper evaluation. 

Figure 18-5 Top Events. The top tiers of the MORT chart indicate that the losses resulting from the accident being investigated result from oversights and omissions or assumed risks or both.

The oversights and omissions and assumed (accepted) risks tier of the tree is relatively academic and generally adds to the analysis. A formal accident investigation is unlikely to be performed on losses that result from assumed risks only. Losses from assumed risks are normally those from earthquakes, tornados, hurricanes, and other acts of nature. (Of course, exceptions exist, as do situations in which certain losses due to even remote acts of nature are not acceptable.)... 

Assumed risk A specific, analyzed residual risk accepted at an appropriate level of management. Ideally, the risk has had analysis of alternatives for increasing control and evaluation of significance of consequences (SSDC). 

Fortunately, the Bayesian approach allows incorporation of all available relevant information into the assessment of probabilities, ft allows quantification of both epistemic as well as aleatory imcertainties, and the combination of their effects into a single probability value of an undesirable event, or into a single probability distribution for the consequences of assumed risk. Once the uncertainties are determined, they can be propagated through the risk model using techniques such as Monte Carlo simulation. 

Does the corrective action introduce new risks Are the assumed risks clearly stated (The safety of other systems must not be degraded by the proposed corrective action.)... 

NOTE 1 ANSI/ISA-84.00.01-2004-1, Clause 9, limits the assumed risk reduction to less than or equal to 10 (PFDavg 0.1). For ease of calculation, LOPA often uses a PFDavg of 0.1. 

The following should be pointed out for the sake of completeness in principle there is a claim to uniform distribution of the expected risk-burden to all citizens. However, for moral and inevitable pragmatic reasons (women and children, respectively, important public servants, etc.) this principle can be restricted or become impracticable due to the force of circumstances. This is demonstrated by the previously cited example of military service. In the case of technical risks it does not, as a matter of course, seem ethically objectionable if, for example, the neighbors or employees of a major technical plant are expected to bear a higher risk—quite aside from a higher acceptance-expectation in the case of freely assumed risks. 

Have assumed risks been clearly stated ... 

Construction and layout at this level depicts the main tree branches as Specific and Management (S/M) Oversights and Omissions on the left side of the tree, and Assumed Risks (R), on the right. MORT dictates that risk factors are defined as only... 

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