Courtesy: Risk Assessment service
Small sub-populations
When risks apply mainly to small sub-populations, it can be difficult to determine when intervention is necessary. For example, there may be a risk that is very low for everyone, other than 0.1% of the population. It is necessary to determine whether this 0.1% is represented by:
- all infants younger than X days or
- recreational users of a particular product.
If the risk is higher for a particular sub-population because of abnormal exposure rather than susceptibility, strategies to further reduce the exposure of that subgroup are considered. If an identifiable sub-population is more susceptible due to inherent genetic or other factors, public policy choices must be made. The choices are:
- to set policies for protecting the general population that are protective of such groups, e.g. for children when data exists, the Clean Air Act for populations such as asthmatics or
- not to set policies, because the group is too small, or the costs too high.
- Acceptable risk is a risk that is understood and tolerated usually because the cost or difficulty of implementing an effective countermeasure for the associated vulnerability exceeds the expectation of loss.
- The idea of not increasing lifetime risk by more than one in a million has become commonplace in public health discourse and policy. It is a heuristic measure. It provides a numerical basis for establishing a negligible increase in risk.
- Environmental decision making allows some discretion for deeming individual risks potentially “acceptable” if less than one in ten thousand chance of increased lifetime risk. Low risk criteria such as these provide some protection for a case where individuals may be exposed to multiple chemicals e.g. pollutants, food additives, or other chemicals.
- In practice, a true zero-risk is possible only with the suppression of the risk-causing activity.
- Stringent requirements of 1 in a million may not be technologically feasible or may be so prohibitively expensive as to render the risk-causing activity unsustainable, resulting in the optimal degree of intervention being a balance between risks vs. benefit. For example, emissions from hospital incinerators result in a certain number of deaths per year. However, this risk must be balanced against the alternatives. There are public health risks, as well as economic costs, associated with all options. The risk associated with no incineration is the potential spread of infectious diseases or even no hospitals. Further investigation identifies options such as separating noninfectious from infectious wastes, or air pollution controls on a medical incinerator.
- Intelligent thought about a reasonably full set of options is essential. Thus, it is not unusual for there to be an iterative process between analysis, consideration of options, and follow up analysis.
- Auditing
- For audits performed by an outside audit firm, risk assessment is a crucial stage before accepting an audit engagement. According to ISA315 Understanding the Entity and its Environment and Assessing the Risks of Material Misstatement, “the auditor should perform risk assessment procedures to obtain an understanding of the entity and its environment, including its internal control”. Evidence relating to the auditor’s risk assessment of a material misstatement in the client’s financial statements. Then, the auditor obtains initial evidence regarding the classes of transactions at the client and the operating effectiveness of the client’s internal controls. Audit risk is defined as the risk that the auditor will issue a clean unmodified opinion regarding the financial statements, when in fact the financial statements are materially misstated, and therefore do not qualify for a clean unmodified opinion. As a formula, audit risk is the product of two other risks: Risk of Material Misstatement and Detection Risk. This formula can be further broken down as follows: inherent risk × control risk × detection risk.