Forward View
4 Everybody today talks about risk, but do we really understand it? And what level of risk is acceptable? To find out, Jon Severn discussed risk management with James Catmur, a director and the global head of the risk practice at Arthur D Little, and co-author of System Safety: HAZOP and Software HAZOP.
How do you manage risk when you do not understand it?
G
iven that it is unfeasible to make anything 100 per cent safe, residual risks posed by products and systems must be acceptably low. But what is an acceptable level of risk, and
how do you manage the risks? James Catmur says that the first step in risk management is to recognise that you do not understand risk. “Almost nobody understands risk, as it is a fairly
difficult concept. We are also all poor at estimating risk day-to-day and in our work. I have worked in the field of risk assessment and risk management for over 20 years and I know I still get risk estimation wrong, both in day-to-day life and professionally. The only advantage I have is that I often spot myself doing it and can tell myself why I did it.” There are several reasons why people do not
understand risk and either over- or underestimate risk levels, as Catmur explains: “Risk judgement is often based on ‘gut feeling’ so that any formal risk assessment process usually ends up justifying the
gut feeling rather than being totally objective. Also the ‘example rule’ says that when people estimate risk they will overestimate the risk of events that they have witnessed and underestimate risks they have not witnessed (so engineers in a company with a good safety record will tend to underestimate risk while experienced risk experts will err the other way). There is also the ‘anchoring’ effect: for example, if you think about something totally unrelated that involves low numbers (giving a low ‘anchor point’) when you try to estimate something you will subconsciously pitch low.” Other reasons behind poor estimates for risk
include the ‘rule of typical things’ that leads to misjudgements of the likelihood of events that people think are more plausible, and the ‘Good-bad rule’ that says people rank good things as low risk but bad things as high risk. Another point is the confusion that exists between
hazards and risks. “People often use the term ‘risk’ when they talk about hazards (such as moving
Fig. 1. We rely on designers of nuclear power stations not taking short cuts with risk assessments, but even they are under pressure to cut costs.
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