Scope, Context and Criteria

This chapter is the first of three chapters describing how to implement a quantitative approach to risk management. This chapter focuses on the scope, context and criteria of risk management, and, in particular, the agreement of appropriate risk criteria for the organisation. Two risk criteria are specifically discussed: how much stakeholders are willing to pay to reduce the likelihood of extreme events, and how much stakeholders are willing to pay to reduce variability in outcomes. The importance of applying these risk criteria consistently at all levels throughout the organisation is also highlighted. The chapter concludes with a preliminary discussion of how one sets about justifying an appropriate level of resources for a risk management programme.