Risk Trade-Off Analysis
Abstract
The objective of a risk/cost trade-off analysis is to aid the decision making process as risk mitigating measures and associated costs are considered. A risk/cost trade-off analysis is most effective when used in conjunction with a process hazards analysis (PHA) that accurately focuses on critical and credible failure scenarios. Three methods are presented for determining the break-even value for risk reduction costs. Selection of one of the methods depends on the criticality of the failure scenario and the precision required. Risk reduction cost that is less than the break-even value will increase a company's annual cash flow and return on investment. Each method is outlined and associated limitations discussed. Appropriate hazards analysis and risk/cost trade-off analysis ensure that a company's resources are spent in the areas that are most important for the protection of employees, the public, and the environment while maximizing cost effectiveness.
Document Details
- Document Type
- Technical Report
- Publication Date
- Aug 21, 1996
- Accession Number
- ADA513666
Entities
People
- Robert T. Ford