Page 185 - SBL Integrated Workbook STUDENT 2018

Identification, assessment and measurement of risk

1.3 Why incur risk?

Incur risk?

Gain
competitive Increase

advantage financial return

 To generate higher returns a business may have to take more risk
in order to be competitive

 Not accepting risk tends to make a business less dynamic, and
implies a ‘follow the leader’ strategy

 Incurring risk also implies that the returns from different activities
will be higher – ‘benefit’ being the return for accepting risk

Benefits can be:

 financial – decreased costs

 intangible – better quality information.

In both cases, these will lead to the business being able to gain competitive
advantage.

1.4 The “as low as reasonably practicable” principles (ALARP)

 The ALARP principle expresses a point at which the cost of additional risk
reduction would be grossly disproportionate to the benefits achieved

 The ALARP principle is usually applied to safety critical, high integrity systems
where health and safety risks cannot be eliminated e.g. Oil rigs.

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