Magic Numbers (10E-9 and Other Myths)

31/07/2010

Why is the probability of one in a million for a catastrophic accident an acceptable risk? The answer may be simpler than we think

One of the central tenets of risk management is the assignment of an acceptable chance to an event (usually catastrophic). But how do we arrive at this number? Why, for example, is the  chance of 1 in a million over twenty five operating years for a ‘bad’ industrial accident acceptable but a 1 in a thousand chance not? What do these numbers really mean to us? The answer may lie, not with a value judgement system but simply with how we have traditionally assessed risk as human beings. That is the emotional affect heuristic or what our ‘gut’ thinks about risk.

In the case of low probabilities human beings have difficulty understanding ‘big numbers’, one can understand 1, 10, 100 and so on because we can see and manipulate these numbers easily, they have concrete meaning. But the larger a number gets the less we can understand it as a ‘real’ object. Instead it becomes an abstraction. When we attach such an abstract number to a risk, that risk in turn becomes an abstraction. Once we have ‘abstracted’ risk it becomes much more difficult for the emotional aspect of risk assessment to trigger and therefore much easier for us to accept high consequence but very low probability events. This loss of ‘affect’ may is the reason why, in industry after industry, acceptable risk is predicated as being in the ‘ per millions’ or greater and may also be why it seems not to matter so much as to what the unit of exposure is be it life span, operating hour or cycle.