Acceptable risk refers to the level of risk deemed acceptable in a particular situation or context. The concept of acceptable risk is subjective and can vary depending on various factors, such as personal values, cultural norms, and the potential consequences of the risk.
In many cases, determining the level of acceptable risk involves balancing the potential benefits of an activity against the potential harm it could cause. Individuals and organizations often use risk management strategies to identify potential risks and reduce them to an acceptable level. This may involve implementing safety measures or creating contingency plans to minimize the potential impact of a risk.
For example, companies may conduct regular safety audits, provide training to employees, and invest in protective equipment to reduce the risk of workplace accidents. Similarly, individuals may wear seat belts while driving, install smoke detectors in their homes, and obtain health insurance to protect themselves against unforeseen risks. The acceptable level of risk can also depend on the context in which a risk is taken. For instance, risks that are taken voluntarily, such as extreme sports or entrepreneurship, may be considered more acceptable than risks that are forced upon individuals, such as exposure to environmental hazards or workplace risks. Overall, the concept of acceptable risk is integral to decision-making and risk management. By taking the time to understand and assess risk factors, individuals and organizations can make informed decisions that minimize harm while maximizing benefits.
Factors Linked with Risk
Risk is an unavoidable aspect. Despite the best safety measures adopted, there always remains some element of risk, inherent to the business and industrial practices. These risks can result from a number of factors, including human error, normal wear and tear of physical assets, faults in equipment or force majeure. These factors, therefore, require the decision-makers to provide some acceptable or tolerable level of risk. The level of acceptable to tolerable risks generally differs from situation to situation, and event to event. Thus, a reasonable level of risk assessment is needed to determine the amount of acceptable risk, after analysing the potential benefits and costs associated.
In a general sense, acceptable risk can be defined as the likelihood of any event, such that the probability of its occurrence is very small, such that its consequences are meagre and/or whose perceived or real benefits are significant, which induce the individual willing to take the risk. In medical terms, the risks for which the benefits of a particular medical procedure are considered to outweigh the potential hazards is known as an acceptable risk.
One of the approaches to define acceptable risk is the revealed-preference approach, which assumes that society, by undertaking the trial-and-error method, tends to attain an optimal level after providing for balance between the risks and benefits. The precise level of an acceptable level of risk is generally determined in the order of lifetime risks, like one in a million is an acceptable risk from the lens of regulatory authorities. Thus, it can be defined as the level of potential loss that is acceptable by any society or community, in the light of specific social, political, economic, environmental and cultural factors. It is also defined in terms of the structural and non-structural measures required to reduce the harm to the physical and human assets, up to a tolerable level, as defined by any pre-defined code of practice.