Page 122 - RISK Management IC 86

Risk Management

The collection and interpretation of information forms
are important part of risk management function.
Interpretation of data involves the use of procedures and
probability concepts.

Data is usually represented in the form for frequency
distribution. These can further be reduced to summaries.
Probability is the related frequency with which a specified
novel is can be expected to occur in the long run. For
example, in a given number of tosses, a coin can come
up with as many number of heads as tails.

Such probabilities are expressed in fractions, or
percentages, i.e ½ or 50%. The probabilities associated
with the coin tosses can be developed theoretically. They
are called prior to experience or a priori. On the other
hand, the probability of a specified car to be stolen in a
year may be 1/99 or 1.01%.

The probability that a car will be stolen within the year
cannot be deduced theoretically. It must be estimated by
studying a sample of cars and seeing what proportion
were stolen. These probabilities based solely on historical
data are often described as empirical or experimental
probabilities.

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