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decisions where choices must be made and the options involve different types and levels of risk.” Think of this as looking closer at the hazards, for example, ‘yeah, this house is in an area that appears to have a lot of crime, but when we look at the crime map closer, those are all identity thefts,’ or ‘the house is close to the river, but looks like its only in the
500 year flood zone, not the 100 year.’ The ANSI standard sums this up saying “risk analysis involves consideration of the causes and sources
of risk, their positive and negative consequences,
and the likelihood that
those consequences can occur. Factors that affect consequences and likelihood should be identified. Risk
is analyzed by determining consequences and their likelihood, and other attributes of the risk.”
This is also where we look at
all of the potential solutions to our risks. The house is close to the river, so the possible fixes range from re-routing the river to getting really awesome flood insurance and hoping for the best. An interesting note about risk analysis is that different experts will analyze in different ways. Some may do a “charm” analysis, while others will analyze cost per square foot; this all depends on the expertise of the analyst.
The third and final step of risk assessment is risk evaluation. According to ANSI’s risk management standard
“risk evaluation is to assist in making decisions, based on the outcomes of the risk analysis... Risk evaluation
involves comparing the level of risk found during the analysis process...” Once you find
that house right on the river bank, in the crime-infested neighborhood, that’s $50,000 over budget, but is chock full of “charm, “ risk evaluation is how you make the decisions. Your final decision will be based on a combination of risk evaluation and what’s important to you. The ANSI standard says that “decisions will be based on the risk attitude and risk criteria that have been established.” Meaning, perhaps you’re like me, and your wife has already determined that the right amount of “charm” and a great formal dining room (that might get used once a year) is worth any amount of financial and other life-altering risk.
Ultimately, these are all just tools to determine risk. Its up to the end user, customer, consumer or buyer to determine an acceptable amount of risk. For some that may mean buying the house with a river in the back yard in a crime
riddled neighborhood but getting a huge gun and paying astronomical flood insurance rates; for others it may
mean buying
a home free
of crime due to its isolation in a
desert. It all depends on what is considered “acceptable.” ANSI says that “decisions should be made in accordance with legal, regulatory and other and other requirements,” which helps us to assess risk at work, but what about on our own time? Ask yourself what is an acceptable amount of risk? Driving 15
miles per hour over the posted speed? Taking shortcuts of established procedures? Buying a “charming” house boat with a hole in it? The author of this article took an unacceptable amount of risk by writing this even though
his identification, analysis
and evaluation told him that he would probably be in big trouble for dishing on the house with charm in such a public format. I wonder if ANSI has a standard on evading an irritated spouse.
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