Risk-Tolerant or Control-Deprived?
R
By Dave Rebbitt
isk is not something we can do
to manage risk are the most common and
vary on your performance just as it does
away with entirely. The first
most widely discussed.
for a company, whether that is property
and easiest way to manage risk is to transfer the risk to
However, there is a third way in which corporations manage risk. They accept
insurance or workers’ compensation insurance rates.
someone else. This can take the form of
it. This is often called residual risk or
insurance or subcontractor. Insurance
acceptable risk. This is where we see the
often is that there is no acceptable risk,
would transfer some of the risks, but
term risk tolerance used. How much risk
but that is not right. Decisions are made
getting someone else to perform the
will a company or workplace accept?
every day to accept risk. So when it comes
work can transfer the risk entirely. If
In terms of insurance, it means setting
When it comes to safety, the impression
to risk tolerance, the question often is, “Do
the company undertakes the work or
the deductible on the policy along with
operation, then it can use the second
the upper limits. We do much the same
method, which is to mitigate the risk
with car insurance. The cost for the
exposure, probability of an incident and
using a standard methodology.
insurance is based on the probability of
potential severity of the outcome. We
you having an incident based on research
recognize hazards and assess the risk using
does not matter all that much. Financial
by insurance companies, but another
these criteria.
and operational risk can be identified and
function of the cost is the deductible.
mitigated in much the same way as what
A high deductible will get you a much
with first. But as we work down the scale,
we often term safety risk. These two ways
cheaper policy. The insurance rate will
when does a risk become acceptable? That
Interestingly enough, the type of risk
16 Construction Connections
we understand the risk?” Risk is a function of the frequency of
Any high-rated risks will get dealt
