Monday, November 24, 2008

Environmental Risk Assessment - Simplified Process To Incorporate Risk Into Assessments

Whether intended to address regulatory compliance, or potential environmental / human health impacts, most assessments will ultimately strive to characterize “risk”. There are many possible definitions for “risk”; however, in its simplest form risk could be characterized as:

“How Bad” x “How Likely”

Considered independently, neither of these elements of risk is particularly useful. Considered together, the assessment will place the issues identified into context and allow for informed decisions on urgency and priority of individual issues.

Risk Assessment” as a practice can be highly technical and requires specialized skills. Risk assessments performed to evaluate potential environmental or human health impacts require significant time and resources. However, on a smaller scale, the basic principles of risk assessment can be easily applied to other types of assessments and can be very useful in communicating results to management and to set priorities. Here we consider the key steps to characterize risk in its most basic form.

Develop an Inventory. The initial step in the process is to extract specific issues from the assessment. The nature of these issues will depend on the type of assessment performed, the goals of the assessment, and the level of detail of the assessment.

As an example, individual “findings” from a regulatory compliance audit might become elements of this inventory. In many cases, the inventory represents the end result of the assessment, and no further evaluation of “risk” is considered. Risk can also be considered separately from the process of developing an inventory, using the assessment report as an input.

Consider Potential Consequences. For each element of the inventory, potential consequences need to be determined. For individual elements, there may be multiple potential consequences. For example, for a hypothetical issue involving lack of required spill control measures at a chemical receiving dock, potential consequences might include:
Capital improvements to come into compliance
Clean up costs associated with potential future spills
Fines and enforcement action

Consider Potential Severity of Consequences. This evaluation addresses “How Bad” in the basic risk equation. For many cases, the severity needs to be translated into a common unit of measurement, which is usually COST. The evaluation can be quantitative (e.g., “low cost”, “high cost”), or can be quantitative, where projected cost values are assigned to different consequences.

Both qualitative & quantitative approaches can work very well. Qualitative approaches have the advantage that they take less time and tend to highlight the criteria issues. These few issues might then be carried forward for more quantitative evaluation.

Consider the Likelihood of Consequences. Here the “How Likely” portion of the risk equation is considered. Once again, both qualitative & quantitative approaches can work well. However, the qualitative approach has the strong advantage. Qualitative evaluation might assign values ranging from “High Likelihood” to “Very Unlikely”.

In considering likelihood, the evaluation may include some assumptions which will affect the results. For example, for our hypothetical example above in which a chemical receiving dock lacked spill control measures required by regulations, the evaluation could assume that the company has a policy to be in compliance with regulations. Therefore, it could be assumed that the required controls will be installed (i.e., “high likelihood”) and therefore the potential for incurring costs associated with future spills will be reduced.

By incorporating RISK into the assessment, it becomes easier to communicate the results and to prioritize follow up actions.

For further information contact Caltha LLP at
Caltha LLP Website

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