Acceptable risk

Acceptable Risk is a concept in risk management that refers to the level of potential loss that an entity is prepared to accept without taking additional measures to control the probability and/or impact of a risk. The acceptable risk is often influenced by legal, regulatory, and societal expectations, and can vary significantly between different organizations, industries, and countries.

Definition

The term acceptable risk is often used in the context of risk assessment and risk management. It refers to the level of risk that is deemed acceptable or tolerable by an organization, individual, or society. This level of risk is typically determined based on a variety of factors, including the potential benefits of the activity or decision that is associated with the risk, the potential consequences of the risk, and the resources available to manage the risk.

Determining Acceptable Risk

Determining what constitutes an acceptable risk can be a complex process. It often involves a detailed risk analysis to understand the potential impacts and probabilities of different risks, as well as a consideration of the organization's risk appetite and tolerance. The process may also involve consultation with stakeholders, including employees, customers, regulators, and the public.

Acceptable Risk in Different Contexts

The concept of acceptable risk is used in many different contexts, including business, healthcare, environmental management, and public policy. In each of these contexts, the definition of acceptable risk and the methods used to determine it can vary significantly.

In business, for example, acceptable risk might be determined based on the potential financial impact of a risk and the organization's financial capacity to absorb such a loss. In healthcare, acceptable risk might be determined based on the potential impact on patient safety and the organization's ethical obligations to protect patients.

Criticisms and Controversies

The concept of acceptable risk has been criticized for its subjectivity and the potential for it to be used to justify risky activities or decisions. Critics argue that what is deemed "acceptable" often reflects power dynamics and societal inequalities, and that the concept can be used to downplay or ignore the potential harms of certain activities or decisions.

See Also

• Risk management
• Risk assessment
• Risk analysis
• Risk appetite
• Risk tolerance