Analytical Essay on Risk Acceptance
It indicates the standard for evaluating the risk that is adopted by decision-makers. Some risks are accepted in case it is cheaper to leave the asset unprotected due to a specific risk rather than make an effort to protect it. This decision is not made out of ignorance as all options are analyzed carefully before accepting the outcome. The most common criteria are the lower likelihood or low consequence where the data or resource is protected by laws or regulations or there is no risk to human life or safety. It is widely used and is not formally in ISO documents on risk management. Mitigating is one of the methods of lowering the threats to an acceptable level.
Any organization can respond to or treat it in any of the following ways –
- Acceptance
- Accordance
- Mitigation
- Transfer.
For example – In any kind of emergency, an organization might accept the risk associated with unfiltered connection to external communication provided for a limited time and then avoid the risk by cutting the connection and applying security controls.
Such terms are not preferred by the regulators in the US and the UK. The AICE expressed its views on it and said risk tolerance is preferred in comparison to risk acceptance. Risk can be acceptable – which means, not normally requiring further reduction, tolerable ( which means the threat is as low as reasonably practicable taking costs and benefits into account) or unacceptable (which means higher risks need stringent control and it is only permitted in exceptional circumstances).
Different levels of risks are determined by relating the term to tolerance, justifiable and negligible. The higher level is unacceptable and lower is acceptable.
Applicable definitions are divided into 4 categories–
- Individual– The hazard posed to a single person.
- Societal – The danger to the group of people often expressed, in terms of, the frequency distribution of multiple causality events.
- Voluntary – It is tolerated by someone asking to obtain the benefits of an activity.
- Involuntary – The dangers imposed on someone, who does not directly benefit from the activity.
Individual risk criteria – People are prepared to accept a wide range of perils depending on their perception and benefits from the activity. Sometimes people are exposed to situations where there is no or low control over such threats and businesses need to set criteria to handle such involuntary sources. Public transportation like airports/air travel and railroads has predetermined criteria for handling such situations.
Safety is an important objective in society but it is not the only one and allocation of resources on safety must be balanced with the societal needs. Various government regulators have principles for risk acceptance criteria and there is an international framework for liquidity risk measurement standards and monitoring.
Such factors depend on the legal framework of the society and different legal framework may yield different criteria. A comparison of such regulations in the two European countries – the UK and the Netherlands are shown in legal and historical context. There are also acceptance criteria for occupational accidents where companies with major industrial hazards need to define the acceptance criteria for both individual and societal risks.