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Once the risk profile is established, the administrative, management and supervisory body must set up the risk management strategy of the company through the following elements: The risk appetite; The risk tolerances; The risk appetite is the maximum aggregated level of risk that a company wishes to take.
Risk appetite is the amount and type of risk an organization is willing to pursue, retain, or take. According to the Risk Appetite and Risk Attitude (RARA) Model, these two concepts "act as mediating factors between a wide range of inputs and key outcomes," which aids in decision-making.
Risk assessment determines possible mishaps, their likelihood and consequences, and the tolerances for such events. [1] [2] The results of this process may be expressed in a quantitative or qualitative fashion. Risk assessment is an inherent part of a broader risk management strategy to help reduce any potential risk-related consequences. [1] [3]
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Example of risk assessment: A NASA model showing areas at high risk from impact for the International Space Station. Risk management is the identification, evaluation, and prioritization of risks, [1] followed by the minimization, monitoring, and control of the impact or probability of those risks occurring. [2]
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LOPA is a risk assessment undertaken on a 'one cause–one consequence' pair. The steps of a LOPA risk assessment are: [4] Identify the consequences, using a risk matrix; Define the risk tolerance criteria (RTC), based on the tolerable/intolerable regions on the risk matrix; Define the relevant accident scenario, e.g. mechanical or human failure