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risk

Page history last edited by Andrew Alder 3 years ago

Risk is very well defined mathematically. It is the product of the probability of an event with the loss that will result.

 

If the probability of a project failing owing to some foreseeable event is only 10%, but the loss is a million dollars, then the risk is a hundred grand. And if you can fix that problem for only ten grand then you should.  And if you don't then there is a very good case for the shareholders later saying that you should have done so if it does go sour. 

 

One consequence of this is that in the extreme case that the probability is non-zero and the loss is very large, the exact magnitude of the probability doesn't matter very much. 

 

Another example. The probability that a high-speed train will come along the track just as you cross it may be very small. But the loss is death. So you still don't do it, and you tell your kids that to do so would be stark raving bonkers.

 

See the film Fireproof for some excellent and thought-provoking examples where the hero assesses and acts on very big risks regularly and very well in his professional life, but has some rude awakenings when it comes to his personal life. Plot warning: It is a religious film. But that's not the only reason I like it. And I'm not the only one. The critics panned it but it was a box-office hit. The performances didn't win or probably deserve any Oscars but they have their moments., as does the screenplay. 

 

(My favourite line comes at almost the end: Nothing to see here. Brilliant screenplay writing IMO.) 

 

And similarly, it seems agreed that the probability of disaster from carbon emissions is non-zero. And note that word disaster. The loss is enormous.

 

So regardless of the exact probability, which is controversial, we are still stark raving bonkers not to make reducing carbon emissions a very high priority indeed. 

 

A page on energy issues

 

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