Risk Versus Cost

Workplaces have hazards that present a risk of injury or illness from the dangers that exist. At times, the hazards cannot be removed and the dangers exist and can result in an accident. Risk is the probability of an accident occurring. The amount of risk you deem as acceptable will do much to define the extent of your injury prevention effort. Risk related to safety and health is often a jndg-ment call. However, even a jndgment call can be quantified if you develop criteria and place value upon them. W. Fine has provided a mathematical model for conducting a risk assessment that results in a numerical value, which can be used to compare potential risks from accidents as well as determine if the amount of fix justifies the cost involved to fix or remove the hazard. Fine s approach for this book has been simplified and updated. Most of his basic components are present, which will allow you to assess the risk of a hazard as well as make decisions on whether it is logical and economically feasible to fix the hazard. 

In determining risk we will need to assess a consequence value for the existing hazard, which indicates its effect on workers if contacted, as well as a value for the exposure potential that denotes how many times during any period workers could come into contact with the hazard. We also need to assess the probability that woikers would be injured, become ill, or be killed if they contacted the hazard. 

Risk assessment factor = Consequence x exposure x probability 

Select the consequence that is most likely for the hazard, based on experience and injury/ illness data. 

Very serious injury or illness (permanent disabling) 6 

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The railway industry s interpretation of reasonable practicability as applied to investment decisions, described above, has been used across the industry for some years. However, it is not without its critics - some suggest, for example, that the railway industry s interpretation of the ALARP principle places too much emphasis on CBA and the quantitative comparison of risks versus costs. Moreover, recent developments have raised serious issues about the tenability of this approach. 

The willingness to pay approach to establishing decision criteria assumes that it is only the risk versus cost equation that matters. In practice, people have other concerns as well. For example, there is a question of involvement in process - have the kind of people affected by risk been involved in making decisions about it Is it really the level of risk that worries people, or is it concern about the competence of the industry in managing safety Is it the perceived motivation for decisions (whether taken by industry or by Government) that concerns people ... 

There appears to be desire for railways to reflect the state of the art . For example, some people may believe that in the 21 Century trains simply should not go through red signals - whatever the risk versus cost equation may be. 

One useful tool of risk assessment is to compare the risk before and after prevention or mitigation to determine the difference in risk. A cost benefit analysis can be completed that determines the cost of the mitigation versus the amount of risk reduction. All costs need to be calculated to determine a cost per year. These costs would include fire damage, injury or fatality, insurance cost increases, loss of profits, etc. The cost of the mitigation, including capital and maintenance costs, needs to be determined. 

R. W. Hahn, Risks, Costs, and Lives Saved Getting Better Results from Regulation (New York Oxford University Press and Washington, D.C. AEI Press, 1996) J. Graham and J. Wiener, eds., Risk versus Risk Tradeoffs in Protecting Health and the Environment (Cambridge, Mass. Harvard University Press, 1995). 

The decision of which regimen to use depends on the perceived risk versus benefit. For example, a 2-week course of gentamicin in an elderly patient with renal impairment may be associated with ototoxicity, worsening renal function, or both. Furthermore, the 2-week regimen is not recommended for patients with complications such as extracardiac foci. On the other hand, a 4-week course of penicillin alone generally entails greater expense, especially if the patient remains in the hospital. Monotherapy with once-daily ceftriaxone offers ease of administration, facilitates home health care treatment, and may be cost-effective. ... 

The safety and loss prevention professional should specifically show the risk versus return in regard to the efforts and time of middle-level managers or supervisors and the specific amount of work required to achieve the requested results. Using the above eye-protection program as an example, the safety and loss prevention professional could provide an approximate amount of time each day the manager or supervisor will be required to address eye protection and correlate the costs and benefits of the expenditure of a few minutes each day. 

A. Cost Uncertainties and Perceived Risk versus Engineering Status... 

In other words, the greater the risk the more likely that it is reasonably practicable to go to substantial expense, trouble and invention to remove or reduce it. However, in arriving at this assessment the financial situation of the company is not taken as a relevant parametei but the degree of risk versus the cost of removing it (in all ways) is considered in isolation. This, then, will be the same whether the company is a large multi-national or merely has a few employees. In many ways, duties which are qualified by a phrase containing the word practicable present more of a problem than an absolute requirement where the duty is precisely defined. All qualified duties require employers, for instance, to consider carefully whether they are doing... 

The RBI approach can be used to evaluate the risk reduction associated with alternative alloys. Coupled with appropriate alloy cost information, the replacement alloy selection can be optimized on a risk reduction versus cost basis. Used in this manner, the RBI program becomes a valuable tool for the corrosion engineer. This type of output from an RBI program can be used when communicating with management about the justification of the added cost of a material upgrade [3]. 

In summary, many aspects of hazards must be analyzed for a variety of reasons. Thus, you will need to learn to use a myriad of tools to achieve your goals related to hazards. If your goal is to analyze hazards, there are all kinds of tools available from the simple to the complex. If you are attempting to determine the effects of hazards on your accident record, you must analyze your acddeut data. If you are trying to determine risk and the risk acceptable to your company based on the potential cost incurred, then you must analyze the risk versus the cost. As you can see, analysis is an integral part of your safety and health initiative. 

There is no magic number for how much to invest in system safety or to spend on an SSP. Complex, safety-critical, and high-consequence systems should understandably receive more system safety budget than simple and benign systems. Risk versus mishap costs and losses should be the determining factor. 

Industrial fire protection and safety engineers attempt to eliminate hazards at their source or to reduce their intensity with protective systems. Hazard elimination may typically require the use of alternative and less toxic materials, changes in the process, spacing or guarding, improved ventilation or, spill control or inventory reduction measures, fire and explosion protective measures - both active and passive mechanisms, protective clothing, etc. The level or protection is dependent on the risk prevalent at the facility versus the cost to implement safety measures. 

The use of cost-benefit analysis plays an important role in the decision-making process for fire protection systems. A cost-benefit analysis sums the expected benefits and is divided by the sum of the expected costs. A challenge often lies in determining what "expected" means and estimating the value of money over the time period the fire protection is in use. In fire protection, the expected benefits can be defined as the difference between the cost of a loss without protection and the cost of a loss with protection. The exported costs include the initial costs of the fire protection as well as any annual testing and maintenance costs. The likelihood of an incident is factored in to obtain residual risk. This residual risk is compared to the benefit to determine what benefit is available each year versus the annualized cost. 

In order to understand the effect of each term on the overall objective function of the system, different values of 0i and 02 are evaluated to construct the efficient frontier of expected cost versus risk measured by standard deviation. This will be demonstrated in the illustrative case studies. 

The factors that affect the technical and economic performance of ChemTech soil treatment process technology include the following soil type (sand versus clay) contaminant (metals, petroleum compounds, particulate metals, etc.) type, form, and concentration cleanup objectives (residential, industrial, or risk-based) and the scale of the project. These factors determine optimum operating conditions, process kinetics, the quantity of residuals, and the operating costs (D177360, p. 9). 

During the development of the proposal, the process owner should consider requesting subject matter experts to assist with the development of the problem statement, risk assessment, and cost avoidance or savings. Many times a process owner s core competencies align closely with the process but may lack business or project management skills. The process owner may need assistance to clearly articulate to the leadership what the benefits are to accept the proposed change versus the risks for not adopting the proposal. 

The need to decide requires many decisions, not just one. For each standard in development or soon to be in development, a decision is needed. An organization need not and in fact should not decide on a single uniform level of involvement for each and every standard that has or will have an effect on it. There are a large number of standards and a wide spectrum of possible levels of involvement and their respective amounts of effort. This document makes no recommendation of whether such involvement and the decisions that support those levels are centralized in an organization or those decisions are made individually by the members and managers most effected by the benefits and risk of such involvement. Each decision ought to be the result of careful consideration of each development effort, the importance of the possible result, the risks involve, and the cost of involvement versus the less easily determined cost of not being involved. 

Analyze and review impact for alternatives— What are the impacts on time to market, investment cost, and product cost for each alternative Financial analysis is a key element of this step because senior management uses financials as a critical business indicator. Therefore, each alternative needs to be evaluated versus a financial model. What are the risks and tradeoffs to consider for each alternative ... 

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