Thursday, January 24, 2013

Assessing risk

In the operational risk course I am teaching this quarter at the University of Washington, one of my students noted that the risk matrix table I had posted was remarkably like that used by the U.S. Army (above).  He showed me the Army matrix during our break time, and I am posting it here for a couple of reasons.

First, it indicates that there are two vectors to consider when thinking about risk:  frequency (how often is it likely an event will take place?) and magnitude (how severe will the event be?).

Second, it reminded me that many of my former staff were military officers.  I only wish that they had credited their source when they presented the matrix as a basis for determining risk.

Third, I know that, if I took the time to track this all the way down,  I would find that some Army officer found this table in another context and incorporated it into the Army training manual.  Without crediting its source.

Irrespective of such concerns, the matrix works.  As we note in Chapter 1 of the book, no matter what part of the country you live in, you can calculate likelihood and impact of events.  When you do so, and then when you back your analysis up with a survival kit and a family plan, you've suddenly become part of a unique group of citizens.  Now you can go back to living your life with the confidence that you are prepared for whatever Mother Nature wants to throw at you.

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