Chapter 9. Risk Management Defining Risk Management Risk is defined as the probability and possible severity of accident or loss from exposure to various hazards, including injury to people and loss of resources. [Figure 9-1] All Federal Aviation Administration (FAA) operations in the United States involve risk and require decisions that include risk assessment and risk management. Risk management, a formalized way of thinking about these topics, is the logical process of weighing the potential costs of risks against the possible benefits of allowing those risks to stand uncontrolled. Risk management is a decision-making process designed to identify hazards systematically, assess the degree of risk, and determine the best course of action. Key terms are: Hazard—a present condition, event, object, or circumstance that could lead to or contribute to an unplanned or undesired event, such as an accident. It is a source of danger. For example, a nick in the propeller represents a hazard. Risk—the future impact of a hazard that is not controlled or eliminated. It is the possibility of loss or injury. The level of risk is measured by the number of people or resources affected (exposure); the extent of possible loss (severity); and likelihood of loss (probability). Safety—freedom from those conditions that can cause death, injury, occupational illness, or damage to or loss of equipment or property, or damage to the environment. Note that absolute safety is not possible because complete freedom from all hazardous conditions is not possible. Therefore, safety is a relative term that implies a level of risk that is both perceived and accepted.

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