Defining and determining risk requires the creation of a “catalogue” with possible risks and its sources (causes). This procedure entails the categorization of risks into groups where each source of risk has similar causes and effects with other risks in the same group. We can actually gather a great number of information about risks by using different sources. These sources can provide us with information ranging from qualitative data (descriptions and estimations about vulnerable areas of the organization) to numerical descriptions (like frequency and possibility of appearance).  The four basic approaches to track down risks are the following: 

  1. Brainstorming: A procedure during which participants express ideas and thoughts about possible risks and/or threats the company is about to face and the means to solve them.
  2. Statistics: Statistical sources can be historical records, public statistics and insurance agencies.
  3. Information analysis: The three main sources of analysis are the electronic programs, calculations by experts, questionnaires etc.
  4. Touring: Touring the physical space where there might be a risk.  By visiting the physical space (i.e. storage room etc.) other risks might be revealed. 

Risk control

Risk control is the process by which an organization reduces the likelihood of a risk event occurring or mitigates the effects that risk should it occur.  One way to do this is to use the four T’s Process:

Transferring Risk can be achieved through the use of various forms of insurance, or the payment to third parties who are prepared to take the risk on behalf of the organization

Tolerating Risk is where no action is taken to mitigate or reduce a risk. This may be because the cost of instituting risk reduction or mitigation activity is not cost-effective or the risks of impact are at so low that they are deemed acceptable to the business.  Even when these risks are tolerated they should be monitored because future changes may make it no longer tolerable.

Treating Risk is a method of controlling risk through actions that reduce the likelihood of the risk occurring or minimize its impact prior to its occurrence.  Also, there are contingent measures that can be developed to reduce the impact of an event once it has occurred.

Terminating Risk is the simplest and most often ignored method of dealing with risk. It is the approach that should be most favored where possible and simply involves risk elimination. This can be done by altering an inherently risky process or practice to remove the risk. The same can be used when reviewing practices and processes in all areas of the business. If an item presents a risk and can be changed or removed without it materially affecting the business, then removing the risk should be the first option considered; rather than attempting the treat, tolerate or transfer it.

The economic cost of human life

Human life cannot be estimated with economic terms. It would be wrong to try to estimate the loss of a human life with strictly economic price. For these reasons the only approach we can make has to do with economic value of the person and its consequences to the economy.

To be precise we can estimate the value of the expected sources of income of the deceased person.

This estimation can be made following the formula:

C1(1+r)  – (t-T)


t :  expected life of the person. 

Τ : The age of the person at the time where he/she lost his/her life.

Yt : Expected gross income of the person during the t time period including his/her income by other sources (i.e. rents, stocks etc.).

Ρ : The possibility of the person to survive for the t time  period.

r : The social capitalthrough which the future income is estimated and it is expected to last during the t time.

In this estimation there should be included a compensation for the relatives of the person deceased.

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