Risk assessment may be the most important step in the risk management process, and may also be the most difficult and prone to error. Once risks have been identified and assessed, the steps to properly deal with them are much more programmatical.
Part of the difficulty of risk management is that measurement of both of the quantities in which risk assessment is concerned can be very difficult itself. Uncertainty in the measurement is often large in both cases. Also, risk management would be simpler if a single metric could embody all of the information in the measurement. However, since two quantities are being measured, this is not possible. A risk with a large potential loss and a low probability of occurring must be treated differently than one with a low potential loss but a high likelihood of occurring. In theory both are of nearly equal priority in dealing with first, but in practice it can be very difficult to manage when faced with the scarcity of resources, especially time, in which to conduct the risk management process. Expressed mathematically,
Financial decisions, such as insurance, often express loss terms in dollars. When risk assessment is used for public health or environmental decisions, there are differences of opinions as to whether the loss can be quantified in a common metric such as dollar values or some numerical measure of quality of life. Often for public health and environmental decisions, the loss term is simply a verbal description of the outcome, such as increased cancer incidence or incidence of birth defects. In that case, the "risk" is expressed as:
If the risk estimate takes into account information on the number of individuals exposed, it is termed a "population risk" and is in units of expected increased cases per a time period. If the risk estimate does not take into account the number of individuals exposed, it is termed an "individual risk" and is in units of incidence rate per a time period. Population risks are of more use for cost/benefit analysis; individual risks are of more use for evaluating whether risks to individuals are "acceptable".
