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RISK MANAGEMENT TERMINOLOGY

2.1 Horizontal Perspective

One of the key aims of the Working Group on Risk Management1 was to explore horizontal aspects of risk management in government, i.e., elements of risk and procedures for dealing with risk which are common to various government policy responsibilities. Accordingly, in this report, risk management refers to the process for dealing with uncertainty within a public policy environment.2

As a discipline, risk management has existed for a long time and has applications in numerous sectors (e.g. financial, transportation safety, health and environmental protection), and consequently there are many variations in the nomenclature. Over time, significant effort has been expended by agencies, scientists and standards organizations to develop clear definitions of the sometimes philosophical and sometimes scientific concepts surrounding risk, its measurement and management.

Through a review of such efforts, and the various models used in different sectors to describe risk management, it became evident that regardless of the labels applied in different sectors, significant commonalities exist in terms of the process for dealing with risk in the various models.

Accordingly, while it was determined that a common understanding of key terms would be necessary to pursue a horizontal perspective, it was also agreed that the use of accessible, rather than specific, technical language would best advance the development of a platform for the discussion of public risk management.

2.2 Key Terms

The following definitions of key terms were agreed upon by the Working Group:

Risk

A function of the probability (chance, likelihood) of an adverse or unwanted event, and the severity or magnitude of the consequences of that event.

Hazard

A source of harm or action (situation) which is known to, or has the potential of, causing an adverse effect.

Hazard Identification

The identification, recognition or definition of potential agents or scenarios capable of, or known to cause, adverse effects or events.

Risk Communication

The interactive (two way) exchange of information and opinions on risk and risk-related factors (including the existence, nature, form, severity, or acceptability of risk and how they should be managed) among risk assessors, risk managers, consumers and other interested parties (stakeholders) in order to achieve a better understanding of risk, risk management, risk-related issues and decisions.

2.3 Contextual Concepts

In addition to the key terms outlined above, there are several important contextual aspects to bear in mind when considering risk in public policy decision-making:

  • Risk exists throughout society and affects each person/entity at several levels (personal, professional, individual, group, etc.), often in competing ways. Much depends upon the perspective from which a given risk is viewed.
  • Government, in serving the public interest, often deals with risk in various roles, e.g. as protector of rights and quality of life for its citizens or as a source of economic development, and typically has multi-dimensional concerns or viewpoints to consider.
  • A key aspect of such multi-dimensional concerns is the economic overlay. It is a fact that limited resources will affect the range of options available. Moreover, it must be recognized that there is an economic relationship between the cost of any particular action and the cost of not acting, i.e., actions to avoid or minimize risks cannot be taken "at whatever the cost". In practical terms, the implications of a given risk must be measured against the cost of addressing that risk, or directing resources to other priorities.
  • Risk is often undertaken voluntarily (direct risk), but much is imposed or results from a spillover effect (third-party risk, e.g. second-hand smoke). This distinction is important because the ability to control a given risk will affect the means chosen to manage the risk.
  • In a free and democratic society, where Ministers are accountable to Parliament, and thereby, to the public, societal values and the public’s willingness to accept or tolerate risk are relevant and legitimate considerations for public decision-making, whether or not they are consistent with a scientific assessment of the risk.
  • Tolerance for risk and the perception of control over the activity generating a given risk appear to be linked (e.g. there is a relatively high tolerance for risk in the case of automobile travel where an individual is in control, versus airline travel where there is less direct control).
  • Risk typically has a negative connotation, but there are also positive opportunities arising from risk-taking -- innovation and risk co-exist frequently.

1 See Annex B for background on the Working Group.

2  It should be noted that this is a general definition and while it includes the assessment of risk as a function of the decision-making process, it is not intended to prescribe a system for prioritizing specific risks.

Also of note is that in many international fora, risk analysis is used as the more comprehensive label, referring to an overall process for dealing with risk, including identification, assessment and implementation of measures. The use of management rather than analysis in this report is intended to reflect the general applicability of the concepts to be developed, not only in technical or science-based sectors, but also in other public policy areas.

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