Monday, April 11, 2011

As Low as Reasonably Practicable (ALARP)

ALARP is one of the fundamental principles of risk management. We neither need nor want to manage risk to the point where we eliminate it, because doing so is simply not a good use of resources.  The ALARP concept is illustrated below and is the point where risk is negligible, or at least at a level where it can be managed by routine procedures.
Cost / Benefit of Risk Mitigations
The majority of risks we face are already at this ALARP level and we accept them relatively unconsciously. For most of us in our everyday lives, the risk of being pick-pocketed is so low, that we don’t feel the need to carry cash in separate pockets or hidden moneybelts. We similarly manage slightly higher risks, such as crossing the road, by routine procedures that we were taught as children.
ALARP as low as reasonably practicable
ALARP – Trade-off between resources and risk
Another view of the ALARP principle can be seen in the illustration above where the balance point or trade-off between risk mitigations and risk exposures, produces a point of equilibrium. ALARP is the level of risk that is tolerable and cannot be reduced further without expenditure of costs disproportionate to the benefit gained or where the solution is impractical to implement.

Of course, ALARP only tells half the story.... Whenever we manage risk, we also want to optimize the benefits or positive outcomes. It might therefore be time to update ALARP to AHLARP (As High/Low As Reasonably Practicable). More on this at AHLARP where we look at what it means to manage the positive outcomes (benefits) to be HIGH, while minimizing the negative outcomes (losses). What do you think? Is AHLARP, the better concept? How do we get to AHLARP? Ie. How do we benchmark and measure the benefits of risk management?

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