What to read first: Worst case analysis: When, why, and how
The main post discussed ‘cases’ for risks. There is always a reasonable worst case, and usually some other cases, each milder or more extreme.
The staircase injury risk example has just two cases: a reasonable worst case, and an ‘extreme’ case. The two cases are each a single incident with differing consequences.
In the example scenario, stairs are in frequent daily use in a site with more than 1000 workers. In any given year, some minor injuries are virtually certain, given the existing situation. There are options to reduce the risk of such injuries by closing the stairs to non-emergency use, or by moving workers to a building that does not invite frequent use of stairs.
|Risk: Staircase accidents.|
|Case||Consequence||Assessed Likelihood||Consequence level (for workplace injuries)|
|Unthinkable case||Someone dies from a staircase accident.||Nil (0%)||Worst imaginable|
|Extreme case||Someone suffers a bone fracture from a staircase accident, resulting in some level of permanent disability.||Very low (indicatively, 2%)||Bad|
|Reasonable worst case||Someone has a staircase accident, suffers a bone fracture injury, and recovers within a reasonable time.||Low (indicatively, 15%)||Disappointing|
The ‘most likely case’ for a staircase accident is no injury at all. As there is no consequence from such an accident, that ‘case’ isn’t a risk case. The next ‘most likely case’ is something like a minor bruise or sprain injury. Such events can (and will) happen multiple times during a year. A small number of minor injuries would match planned success, not a deviation to be rated as a risk consequence. For repeating minor events, it’s the number of such events that define the risk consequence. ‘Cases’ are made up of number ranges, and risk analysis for those needs a different approach.
Case likelihoods are shown with an indicative single percentage value. No likelihood percentage value is a numerical fact. Likelihood percentages should never be interpreted as either precise or factual. In the table above, the indicative likelihood percentages represent the assessment’s best guess of the case likelihood, taking into account any available data, plausibility, and allowances for uncertainty arising from the lack of data and knowledge. There are other ways of representing likelihoods, and of representing the uncertainty around likelihoods. In practice I prefer to keep a distance between realistic risk assessment and illusory numbers, but likelihoods are unavoidably tied to numbers. My solution is to keep saying this over and over: No likelihood percentage value is a numerical fact. Likelihood percentages should never be interpreted as either precise or factual. Risk decisions always rely on assumptions as well as facts. Precisely calculated probabilities based on extensive factual data have a legitimate specialised place in risk management. Likelihoods are not probabilities.
The consequence scale for the staircase example covers all types of workplace injury. It is based on the size of the enterprise and its capacity, appetite, and tolerance for workplace injuries. Each consequence level is defined in terms of an annual total for injury incidents, not the severity of separate incidents. The acceptable likelihood of each annual consequence would be decided by the board or by very senior management, based on enterprise capacity, appetite and tolerance for workplace injury risk, independently of risk assessment.
This example is based on risk management theory. In the real world of workplace injury risk, regulators and insurers also have a major say, and may be that no-one spells out an ‘acceptable injury level’.
|Consequence type: Workplace injuries.|
|Designation||End-point effect on injury avoidance objective for the year||Acceptable likelihood in one year|
|Worst imaginable||A death from injury, more than one case of permanent disability from injury, more than five injuries with resulting in temporary disability, and/or more than 200 minor injuries.||Below 0.5%|
|Bad||A case of permanent disability from injury, two or more injuries resulting in temporary disability, and/or 50 or more minor injuries.||Below 2%|
|Disappointing||An injury resulting in temporary disability, or 25-49 minor injuries.||Below 20%|
|Qualified success||20-24 minor injuries.||Below 50%|
|Planned (success)||10-19 minor injuries, matching industry norms.||—|
|Good||5-9 minor injuries.||Above 10%|
|Excellent||Fewer than five minor injuries.||Not specified|