Techniques of Risk Analysis (IM 313)

Risk analysis

1. Techniques of Risk Analysis PRESENTATION Group 5

2. What is Risk Analysis? A risk assessment is the process of identifying and collecting information about potential threats to an organization. Within this process, risk analysis plays a key role by examining the gathered data to evaluate the likelihood and impact of these risks , ultimately generating insights that guide decision-making and action. Risk analysis is essential because it enables organizations to prioritize risks based on their significance. It provides management with guidance on how much resources should be allocated for protection, quantifies both the likelihood and potential impact of threats, and ensures that controls are implemented in a cost-effective manner aligned with the organization’s risk exposure.

3. Is it worth investing in safety measures?

4. COMPANY NM A risk premium is the extra money or resources needed when people face more danger. it’s the additional cost the employer pays to compensate for or reduce risks. Hazard pay for high-risk jobs. Added budget for safety training or protective equipment. 07/20 01 Risk Premium

5. For example: There are two jobs one is in a safe office, another is on a construction site with danger of falling objects. The construction job must pay extra (hazard pay) to attract workers → this extra is the risk premium. Companies can also think of it as the extra money invested in safety equipment or insurance to reduce risk. 14/20

6. It helps quantify the extra cost or effort needed to address workplace risks. Guides employers in budgeting for safety measures and compensating for higher-risk tasks. Encourages investment in prevention by showing the trade-off between risk and cost. Supports fair decision-making in allocating resources to protect workers Importance 02/20

7. COMPANY NM Generally defined as a technique used to determine how different variables (inputs) affect the outcome of a decision or model. It shows which factors are most influential in changing the results it’s the additional cost the employer pays to compensate for or reduce risks. Involves changing certain assumptions, hazard levels, or control measures to see how much they affect the level of risk to workers. It helps safety officers understand which hazards or conditions have the biggest impact on safety outcomes. 07/20 02 Sensitivity Testing

8. For example: Imagine a construction site with the hazard of workers falling from heights: Baseline risk: Fall from scaffold without safety harness → High Risk . Sensitivity testing: Scenario A: Workers use harnesses 50% of the time. Scenario B: Workers use harnesses 100% of the time. Scenario C: Guardrails + harnesses + toolbox meetings. Result: Sensitivity testing shows that even a 10–20% increase in harness compliance drastically lowers accident probability. This reveals that compliance with harness use is the most critical variable to control risk.

9. It shows which hazards or safety controls have the biggest impact on worker safety. Helps management prioritize resources on the most effective risk controls. Makes it easier to communicate risks and convince workers or employers of needed changes. Supports compliance with OSH laws (e.g., RA 11058, DOLE DO 198-18). Importance 02/20

10. COMPANY NM Generally defined as statistical technique used to calculate the average expected outcome when the future includes scenarios that may or may not happen. It is computed as: EMV is used to put a monetary value on safety risks by combining the likelihood of accidents with their financial consequences (e.g., medical costs, lost productivity, legal fines). 07/20 03 Expected monetary value (EMV) EMV=∑(Probability of each  outcome×Monetary  impact of each outcome)

11. HOW EMV IS APPLIED 03/20 Identify Hazards Example: Risk of electrical accidents in a manufacturing plant. 2. Assign Probabilities Chance of accident in a year = 5%. 3. Estimate Costs (Impact) If accident occurs: ₱2,000,000 (medical expenses, penalties, downtime). 4. Calculate EMV EMV=0.05×2,000,000=₱100,000 → This ₱100,000 represents the expected yearly financial burden from this hazard. By comparing the EMV with the cost of preventive measures (say, ₱50,000 for better equipment and training), management can see that prevention is economically justified.

12. It helps translate workplace risks into financial terms, making it easier for management to understand. Supports cost-benefit decisions on safety investments. Encourages proactive prevention by showing the hidden costs of accidents. Strengthens compliance with RA 11058 and DOLE DO 198-18, which require employers to provide safe workplaces. Importance 02/20

13. COMPANY NM Generally defined as the average of possible Net Present Values (NPV) across different scenarios, each weighted by its probability. It shows the expected long-term value of a project or decision considering uncertainty. A method of evaluating whether a safety investment or program is financially worthwhile by comparing its initial cost with the future savings or benefits (such as reduced accident costs, fewer penalties, and higher productivity), all adjusted to their present value. ENPV evaluates the long-term financial impact of safety investments by accounting for risks, accident costs, and time value of money. formula: 07/20 4 Expected N et Present V alue (ENPV) ENPV=∑(Probability of  scenario×NPV  of scenario)

14. HOW ENPV IS APPLIED 03/20 Identify safety Investment/ project Example: New Fire Suppression System. Define Scenarios ( example.., Scenarios ) Estimate NPVs for each scenario (costs vs. savings, discounted to present value). Scenario A (70% chance): Reduces fire accidents, saving ₱5,000,000 over 10 years → NPV = ₱3,500,000. Scenario B (30% chance): Limited effectiveness → Savings only ₱1,000,000 → NPV = ₱700,000. 4. Multiply by probability of each scenario and sum = ENPV. ENPV=(0.7×3,500,000)+(0.3×700,000)=2,450,000+210,000=₱2,660,000 Since ENPV is positive, the investment is justified.

15. It shows the long-term economic value of safety programs. Helps employers prioritize high-value safety investments. Considers future savings from avoided accidents and compliance penalties. Encourages a proactive, cost-justified approach to worker protection. Importance 02/20

16. OVERALL SUMMARY COMPANY NAME 09/20

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