Introduction to Risk


All activities are risky - they have costs and benefits. The benefit of breathing is survival but the cost is a risk of infection.
There is an economic cost of drug consumption for the drug consumer and often, in the short- or long-term, a health cost. The benefit may be enjoyment and stress-relief. There is also a cost and benefit to society. Drug consumers may risk harming others (e.g. drug driving, passive smoking) or create health costs met by the taxpayer. The benefits of stress-relief may result in benefits to society in reduced health costs.
There are costs and benefits of drug supply for drug suppliers
There are costs and benefits of drug production for drug producers.
There are costs and benefits of regulation for Government. Regulation aims to maximise benefits while minimising costs. Where costs are uncertain and potentially great a Precautionary Principle of prohibition may be justified. Prohibition of an activity, both its costs and benefits. Citizens who obey the prohibition reduce the activity's cost to zero; citizens who do not comply become criminals, with the enforcement costs that brings, and the costs of the activity increase since they are not regulated.

Stages of Risk Assessment and Management:
from Strategy Unit's Risk: improving government's capability to handle uncertainty

0. At all stages below: Communicate and consult about risk and response with stakeholders and experts
1. Identify the risks: to and from all stakeholders - e.g. public, consumer, supplier, producer, regulator
2. Evaluate the risks: costs & benefits; impact and likelihood; quantity (scale) and quality (e.g. economic or health, voluntary or imposed); distributional impact (i.e. do risks impact all equally?)
3. Assess risk appetite (risk tolerance/acceptance): of those affected by risk, the public and the regulator
4. Identify response options, alternative methods of regulating the risk
5. Evaluate cost-benefit of each response and choose most cost-effective option (see also Regulation & policy-making)
6. Implement cost-effective response
7. Review response effectiveness
8. Learn and improve response