Companies and government agencies use such calculations to decide whether they are prepared to accept involved risk in a venture.
Examples: Vice President Dick Cheney was reported to have said, in reference to the war on terror, that as long as there was a 1 percent chance of the unimaginable coming due, we should act as if it is a certainty. In other words, in at least Cheney's mind, a 1 percent risk factor in terms of attack probabilities is a reasonable threshold for taking defensive measures to protect the population.
Another well-known example: Several years ago, NASA determined the risk of a catastrophic space shuttle failure was 1 in 145, or about .7 percent. NASA accepted that risk of failure as being reasonable, given the importance of their overall mission.
Couple the Risk with the Objective to Arrive at a Decision
Simply stated, risk is a measure of probability and magnitude of an adverse effect. (Note that probability is a function of time.)
Here are a few other examples of risk as assessed by William Allman in "Staying Alive in the Twentieth Century" (1985).
Activities Estimated to Increase Your Chances of Dying in any Given Year by
1 in 1 Million
Activity - Resulting Death Risk
Smoking 1.4 cigarettes - Cancer, heart disease
Drinking 0.5 liter of wine - Cirrhosis of the liver
Spending 1 hour in a coal mine - Black lung disease
Living 2 days in New York or Boston - Air pollution
Traveling 6 minutes by canoe - Accident
Traveling 10 miles by bicycle - Accident
Traveling 150 miles by car- Accident
Flying 1000 miles by jet- Accident
Flying 6000 miles by jet- Cancer caused by cosmic radiation
Living 2 months in Denver - Cancer caused by cosmic radiation
Living 2 months in a stone or brick building - Cancer caused by natural radioactivity
One chest X ray - Cancer caused by radiation
Living 2 months with a cigarette smoker - Cancer, heart disease
Eating 40 tablespoons of peanut butter- Cancer from aflatoxin
Living 5 years at the site boundary of a typical nuclear power plant - Cancer caused by radiation from routine leaks
Living 50 years 5 miles from a nuclear power plant - Cancer caused by accidental radiation release
Eating 100 charcoal-broiled steaks - Cancer from benzopyrene
It's very important to note that ALL behavior contains some inherent level of risk. Even behavior required to sustain life, such as eating, is inherently risky to some degree.
Traditionally, and still in the vast majority of households, risk perception is quite simply an emotional judgment. But there are a number of non-scientific factors that enter into one's risk perception ... and indeed to some degree, these factors must often be considered even within groups that rely upon the latest mathematical tools.
How we perceive a given risk involves such things as how much we enjoy an activity, how much experience we have with an activity, and whether we are able to discern that news media accounts of risk are often exaggerated. The bottom line is that emotion is a far more persuasive element in a risk/reward decision than statistics.
Virtually every decision we make can be boiled down to a risk/reward quotient. If we cared to go that far, we could easily become bogged down in the numbers for everything from which side of the bed to get out of, to what to have for breakfast, to where to invest that $4.52 in change you'll receive at the convenience store after paying for your milk, bologna, and latest issue of Monster Trucks Illustrated.
What's the Point?
Someday soon, I expect some of those proprietary actuarial formulas that are today helping the big guys make the big bucks for their big decisions will be available on the internet to the average Joe. In other words, we'll all be able to instantly calculate our personal exposure to risk--at least for the greatest risks out there--given our personal circumstances and habits. Of course, for many risks, location is the number one factor to feed into the grinder.
But until that time, most of us need to simply realize that mitigating household risk has to be about common sense and keeping an anchored and well-balanced perspective on reality and probabilities.
Personal Preparedness Should Not Be Emotional
Crisis preparedness is all about being ready for the likeliest worst-case scenarios that can impact you and your household. Some scenarios are within your control to mitigate. Others are well beyond any mortal man's control. All are capable of causing fear and over-reaction before they ever actually occur.
Although most of us are not about to attempt to work out the personalized risk-reward ratios for preparations for hurricanes or tornadoes or a local terror attack, it's worth keeping in mind that the risks are always going to be minutely fractional. So although it makes all the sense in the world to be prepared, just in case, no risk is worth losing sight of your greater objectives in this life--whatever they may be.
Get Ready, Seriously ... www.safecastle.com