The risk with a large potential loss and a low probability of occurrence is often treated differently from one with a low potential loss and a high likelihood of occurrence. The chance of error in measuring these two concepts is high. Part of the difficulty in managing risk is that both the quantities by which risk assessment is concerned-potential loss and probability of occurrence-can be very difficult to measure. usually because the cost or difficulty of implementing an effective countermeasure for the associated vulnerability exceeds the expectation of loss." Sometimes risks can be deemed acceptable, meaning the risk "is understood and tolerated. Optimally, it also involves documentation of the risk assessment and its findings, implementation of mitigation methods, and review of the assessment (or risk management plan), coupled with updates when necessary. This involves identification of risk (what can happen and why), the potential consequences, the probability of occurrence, the tolerability or acceptability of the risk, and ways to mitigate or reduce the probability of the risk. Risk assessment consists of an objective evaluation of risk in which assumptions and uncertainties are clearly considered and presented. As such, risk assessments become increasingly critical in mitigating accidents, improving safety, and improving outcomes. Rapid technological change, increasing scale of industrial complexes, increased system integration, market competition, and other factors have been shown to increase societal risk in the past few decades. Methods for assessment of risk may differ between industries and whether it pertains to general financial decisions or environmental, ecological, or public health risk assessment. Also, medical, hospital, social service, and food industries control risks and perform risk assessments on a continual basis.
The agriculture, nuclear, aerospace, oil, railroad, and military industries have a long history of dealing with risk assessment.
In the engineering of complex systems, sophisticated risk assessments are often made within safety engineering and reliability engineering when it concerns threats to life, environment, or machine functioning. As such, risk assessments of non-linear/complex systems tend to be more challenging. Systems may be defined as linear and nonlinear (or complex), where linear systems are predictable and relatively easy to understand given a change in input, and non-linear systems unpredictable when inputs are changed. Risk assessment can also be made on a much larger "systems" scale, for example assessing the risks of a nuclear power plant (an interactively complex mechanical, electronic, nuclear, and human system) or a hurricane (a complex meteorological and geographical system). For example, a fatality rate may be interpreted as less benign than the corresponding survival rate. The ways statistics are expressed and communicated, both through words and numerically also impact the interpretation of benefit and harm. A 2017 systematic review from the Cochrane collaboration suggests "well-documented decision aids" are helpful in reducing effects of such tendencies or biases. There is also a tendency to underestimate risks that are voluntary or where the individual sees themselves as being in control, such as smoking. There is a tendency for individuals to be less rational when risks and exposures concern themselves as opposed to others. Ī systematic review of patients and doctors from 2017 found that overstatement of benefits and understatement of risks occurred more often than the alternative. Individual judgements or assessments of risk may be affected by psychological, ideological, religious or otherwise subjective factors, which impact rationality of the process. Risk assessment is necessary in individual cases, including patient and physician interactions.