The Language of ‘Risk’

Gaye FrancisWhat Is Risk Management

One of the interesting points to come out of the recent R2A event and discussions with colleagues afterwards, is the confusion regarding the meaning of the word ‘risk’.  There was a general perception that much of the SFAIRP – ALARP debate was confusion of terms rather than concepts, a proposition with which we at R2A concur.  This also flowed onto a general observation about the way in which courts interpret various terms, especially the meaning of ‘likely’.

The meanings ‘risk’ with which R2A is familiar are:

i.       A noun, especially as used in the insurance world, as in the insured ‘risk’.

ii.      Risk as a property of an activity or a process involving both likelihood and consequence – an adjective.  That is, it was a ‘risky’ investment.  This can extend to a quantified ‘scientific’ approach to risk.

iii.     Risk as a likelihood only, as in, the ‘risk’ of the hazard occurring.

iv.      Risk as a concept involving future uncertainty, good and/or bad, as part of the human condition.

v.       Risk as the antonym of reward, often used in financial terms to describe an element of net outcome as in ‘risk vs the reward’.

With regard to what’s ‘likely’, one of our colleagues, Tony Enright has noted that in NZ case law, the word “likely’ in the context of the Building Act 1991 (now Building Act 2004) is as follows:

“Likely” does not mean “probable”, as that puts the test too high. On the other hand, a mere possibility is not enough. What is required is “a reasonable consequence or [something which] could well happen”. Auckland CC v Weldon Properties Ltd 7/8/96, Judge Boshier, DC Auckland NP2627/95, [1996] DCR 635

‘Likely’, as used in [s 64(1)(a) BA91, now s 121(a)], means that there is a reasonable probability (see Dowling v South Canterbury Electric Power Board [1966] NZLR 676, 678); or that having regard to the circumstances of the case it could well happen (see Browne v Partridge [1992] 1 NZLR 220, 226).  Rotorua DC v Rua Developments Ltd 17/12/99, Judge McGuire, DC Rotorua NP1327/97

The point of all this is that it’s courageous to assume that the courts will agree with your definitions post event.  The prudent course is to use the courts meanings pre-event to ensure everyone is talking about the same thing in the same way, if it ever becomes necessary.