Hi there. In the first week of this course, we saw that risk has become a key theme in our modern world. We discussed the historical development of this concept and looked at its role in modern day society. We also saw that there are various scientific fields that study risk. We looked into the fields of security studies and safety science. In this week, we will delve into the latter field in more detail. You will see videos from experts working in the field of safety science who discuss risk, in particular subdomains of the field. But before that, let's look a little more closely at the particular way in which safety science studies risk. In this video, we will introduce you to one of the key frameworks that is used to identify, chart, evaluate, prioritize, and mitigate safety risks; risk management. So, this video is about risk management. What is risk management? Risk management is a methodological approach that can be used to identify, assess, and mitigate risks. It is the dominant paradigm of understanding risk that is used in the safety sciences. Over time, risk management has also started spreading far and wide beyond the boundaries of academia. It is now considered to be a key practice in many businesses, for example, in the world of finance and in many industries. As a matter of fact, having risk management procedures in place has come to be considered proof of good governance for all organizations, not just private companies. Public organizations also increasingly see this as a requirement to ensure that they are dealing with risks in the best way. As said, risk management originally stems from safety science. It consists of several steps or phases. Let's use a real world example to discuss these steps. What would it take to make a factory a safe workplace for its employees? When we want to increase workplace safety in a factory, the first step we need to make is to identify potential safety risks in the factory. This is done, for example, by studying accidents or near misses from the past within this particular factory. Moreover, we could use scenarios to identify novel risks. This can be done through the use of so-called fault trees or by using simulations. After specific risks have been identified, the next step is to assess them. Risk assessment means that one seeks to quantify specific risks to understand how likely it is that they will materialize and how big the consequences will be when they do. A very basic formula that could be used to calculate risk is, risk is probability times impact. On the one hand, this formula looks at how large the chances that a certain risk will materialize, and on the other, it takes into consideration how big its effect will be. The size of a risk is calculated by multiplying these two elements, likelihood and consequences. In relation to safety in the factory, one could use this formula to calculate, for instance, what the risk is of employees getting injured by using specific chemical substances during a production process. The formula would then read, the risk of getting injured is the probability of an accident with such chemicals times the impact of such an accident. Quantifying risks is useful because it helps us prioritize different risks. Responding to risks is a costly matter, not only in terms of money but also in terms of time and effort. So instead of responding to every risk we've identified, it's smarter to respond only to risks that are big enough. In a factory, for instance, it wouldn't make sense to add costly safety systems for events that are very, very unlikely to ever occur or that have insignificant consequences. A third step in risk management is to establish how to mitigate the most important risks. This means thinking through different ways of responding to the risk so that it can be reduced to an acceptable level. There are different ways in which one can mitigate risks. For example, one strategy is to avoid the risk altogether. If a risk has a very high likelihood or has a serious financial impact or leads to severe harm to humans, it's wise to ensure that it cannot materialize at all. So in relation to safety in a factory, one seeks to avoid risks that would disrupt work at the factory altogether for any period of time. Another strategy is to transfer the risk. This means that the risk is delegated to another party that is better equipped at dealing with it or responding to it. Often times, this is done with risks that cannot be avoided and that are rare but have a high impact. For instance, in a factory there's a small risk that employees come to serious bodily harm. While this risk cannot be avoided altogether, it has severe impact on these employees. One way to deal with such risks is to insure them. This means that in the event an employee gets injured in the workplace, he or she will be compensated for sick leave through insurance. Insurance is a form of transfer for risks, which cannot be eliminated altogether. A third strategy is to reduce the risk. This means that one develops mechanisms or procedures or product to ensure that the risk level goes down. In a factory, for instance, one makes sure that all employees wear protective gear to reduce the likelihood of bodily harm. A final strategy is to accept the risk. When a risk has a small impact and is not likely to occur on a regular basis, it simply doesn't pay off to try to eliminate it altogether. A factory will choose to take its losses on this kind of risk. So, the risk management process so far consists of identifying the risks, assessing and prioritizing them, and mitigating the risks with the highest priority. What is left is to monitor whether the desired risk levels for each risk are accomplished and whether new risks are popping up that require attention. This last step completes the risk management loop. In this video, we've discussed the various phases of risk management and apply them to a concrete case to explain the basic ideas behind each step. In safety science, each phase is studied in much more detail for various contexts. This will also become clear in the next videos of this week in which we will look at safety risks.