Page 209 - RISK Management IC 86

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of reserves established for risk retention, and selecting
from among alternative risk management techniques on
the basis of the probable impact on an organisation's
profit or efficiency.

(b) Subjective Probability - Though sometimes
probabilities attached to possible outcomes from a
decision are based upon statistical observation, this
is not always possible. In these circumstances, the
tendency is usually to disregard the situation as one
of pure uncertainty. However often subjective data
is available in such a way that some estimate of the
probability can be made.

The subjective data often consists of personal
judgements, and hence its value varies according to
the training, experience and common sense of the
person involved. Also, often in risk management
decision making situations, there is a lack of statistical
data, and the use of subjective probability estimates,
or the subjective modification of scant statistical
data, is necessary.

However, before subjective judgements are made,

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