Risk Management and Risk

ALARP

The concept of as little as reasonably practical (ALARP) is often used in developing methods of evaluating and addressing risk in the workplace. The concept derives from the reality that risk cannot be reduced to absolute zero, so safety provisions must take that reality into account and aim for the next best thing, which is ALARP (Manuele, 2008). There are, however, some pitfalls in applying the ALARP concept. The first pitfall is that the determination of acceptable risk levels is largely judgmental. Probability data on specific events or scenarios is unlikely to be available, so there is a certain amount of judgment that is required to determine what constitutes "acceptable" within the framework of ALARP. Standards can be set to help define "acceptable risk" but these are also going to be arbitrary in nature, in the absence of a statistically-significant data set.

Often, there is the temptation to apply the legal standards of safety as the ALARP, which is not a good approach. In many cases, the legal standards are not as rigorous as ALARP, so following them will lead to an unacceptable amount of risk and incidents. Thus, it is important to design safety with an eye to superseding the legal requirements. The problem, of course, is that there is a link between legal requirements and the firm's financial situation. There are high costs associated with reducing risk beyond a certain point, so that often once the legal threshold has been met, the company has already passed the point of diminishing returns with respect to risk management. The cost of further risk reduction is not a proposition that enhances shareholder value. Further, once the legal behinds have been covered, the financial outcomes from legal actions taken against the company are likely to be much lower. All of this could create conflict between the pursuit of profit and the pursuit of ALARP.

Thus, the concept of acceptable risk is often not the same thing as ALARP. The organization will often define 'acceptable risk' in financial terms, rather than strictly in risk terms. While ALARP is supposed to reflect "reasonably practical," this also means that if an investment can be made to increase safety it should be, whereas "acceptable risk" often reflects a desire only to reduce risk where doing so enhances shareholder value.