Decision-making process cost/benefit assessments

Risk management is the decision-making process that follows the completion of a risk assessment. The risk assessment provides important information that supports decision-making and is integrated with other factors, including economic, feasibility, and cost-benefit analysis, in the risk management process. 

It is probably safe to say that the more people or interior area a building protection system saves from exposure to a release, the better the system is. It is not plausible to say unequivocally that the cheaper the system, the more desirable it is, or vice versa. For cost to be used as a criterion for evaluation, it has to be considered in terms of benefits received. This is known as cost-benefit analysis and is used frequently in the decision-making process by federal agencies (White House, 1992). A detailed discussion of cost and its role in risk assessment, risk management, and decision making can be found in Chapter 6. 

The FSA approach is a standardized holistic approach, and consists of five steps (IMO 2002) 1) Hazard Identification, 2) Risk Assessment, 3) Estabhsh Safety Measures, 4) Cost-Benefit Assessment, and 5) Recommendation for decision making. It is mandated that in order to be consistently appUed by different parties, the process must be clearly documented and formally recorded in a uniform and systematic manner (IMO 2002). In general, the availability of suitable data for all steps in the analysis is vital. If not readily available, these may be estimated through models, expert judgment and simulations. 

Enable ALARP assessments and cost benefit analyses to be carried out (i) to assist in the decision making process regarding the merits of technical changes or modifications, and new infrastructure investment and (ii) to assist in the development of safety justifications for proposed changes to RGS. 

The assessment of ship safety has become an increasingly important issue. The techniques of risk and cost-benefit assessments are used in the ship-safety decision-making process. The approach is called a formal safety assessment (FSA) and is composed of the following five steps [17] ... 

It should be noted that there can be significant uncertainties in the information and factors that are used in the decision making process. These may include uncertainties in estimates of the costs, time-scales, risks, safety benefits, the assessment of stakeholder views and perceptions, etc. There is a need to apply common sense and ensure that any uncertainties are recognised and addressed. 

The SMH also ties in with a relatively recent view of risk assessment where it is suggested that there are two forms of risk-based decision making (Slovic et al., 2004). The first is referred to as affect heuristics and is similar to the SMH in that it refers to learnt, fast and automatic gut emotional reactions used to guide decision making. The second form of decision making is referred to as analytic and is seen as the more traditional, slow, deliberate subjective utility maximisation process where the benefits and costs of a particular behaviour are weighed up. 

The next step in the risk analysis is responding to the risk. Result of the risk assessment process is used to make a decision on acceptance, minimization, avoidance or reducing risk. On this basis cost and benefits analyzes and strategies as well as responding to the risk plans are created. 

Early safety and health assessment will not only benefit from the safety and health performance but also contribute to lowering the overall plant costs (Edwards and Lawrence, 1993 Kletz, 1998 Shah et al., 2003). Besides, the cost of fixing a problem (e.g., making changes or modifications on the process) is lower when done at the earlier phases of the process lifecycle. Analyses made by Kletz (1988) revealed that the cost increases tenfold as one progresses through each phase. This is because hazard and risk assessments will eventually lead to decisions that require necessary preventive actions to either eliminate or reduce the hazards and risks as low as reasonably practicable (ALARP). The decisions cover diverse elements including alternative process routes, plant layout, and plant... 

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