Risk Management and Risk Aversion, from Benefit to Impediment
Risk management is a critical tool for improving the probability of project success by identifying, assessing, prioritizing, and attempting to control threats to project realization. For industries that require high operational reliability due to the potential consequences of off-normal events, such as the nuclear, aerospace, and chemical sectors, a major focus of risk management is the preservation of process safety. Due to the nature of the processes or systems under consideration, the associated process safety analyses (such as risk and safety assessments) and safety features can require significant resources. These costs are typically tolerated either due to the need to satisfy regulatory requirements or based on the assumption that they generally decrease the occurrence of unwanted events and therefore improve the probability of project success. However, as the level of acceptable or tolerable risk from unwanted events decreases, the required resources necessary for ensuring and demonstrating satisfaction of these criteria can grow and in turn can become one of the dominant impediments to project success. This paper outlines a high-level theoretical framework for the consideration of dominant project risks, which includes potential project failure from both the occurrence of high consequence off-normal events and the inability to achieve project completion due to the resource needs and innovation losses associated with extreme risk aversion. Utilizing such an integrated approach permits an attempt to optimize the probability of successful project realization while also providing valuable insight into the proper level of acceptable risk. The work is presented as a first step, in hopes of spurring additional discussion and analysis regarding appropriate levels of risk tolerance and the balance of project benefits.