Assessing Risks – So what do we really mean by risk?

Imagine that you own a warehouse distribution company.  The warehouse is an old building and the roof is in need of some repair.  You’re concerned about poor weather, since this could damage the building and its contents.

If you decided to do nothing about the roof, and one night it did rain, the extent of the damage would depend on the contents of the warehouse and their value.

In these circumstances, rain would certainly be a threat to the building and its contents. A few moments of rain, sleet or snow wouldn’t make any differences, but a long downpour would be much more of a problem.

So the question you have to ask is:  ‘How likely is it to rain?’

Let’s suppose the contents are plastic garden furniture which is designed to be outside in all weathers and can be easily dried off.  In this case there’d be little damage.

On the other hand, if the contents were television sets, they’d be completely ruined by the rain.  Stock would have to be written off at a large cost to your company.

The chance of a downpour causing damage to garden furniture is very low, but the risk of damage to a stack of television sets is much higher.

On top of that, you might conclude that the chance of a downpour happening at all is much higher in the winter than in the summer.

So, if you were trying to decide whether to fix the roof or leave it in its current condition, you’d probably ask yourself two questions:

Q1 –  what are the chances it’ll rain?

Q2 –  what could get damaged if it did?