Terje Aven 
Foundations of Risk Analysis 

Foundations of Risk Analysis presents the issues core to
risk analysis – understanding what risk means, expressing
risk, building risk models, addressing uncertainty, and
applying probability models to real problems. The author provides
the readers with the knowledge and basic thinking they require to
successfully manage risk and uncertainty to support decision
making. This updated edition reflects recent developments on
risk and uncertainty concepts, representations and treatment.

New material in Foundations of Risk Analysis
includes:

* An up to date presentation of how to understand, define and
describe risk based on research carried out in recent
years.

* A new definition of the concept of vulnerability consistent
with the understanding of risk.

* Reflections on the need for seeing beyond probabilities to
measure/describe uncertainties.

* A presentation and discussion of a method for assessing
the importance of assumptions (uncertainty factors) in the
background knowledge that the subjective probabilities are based
on

* A brief introduction to approaches that produce interval
(imprecise) probabilities instead of exact probabilities.

In addition the new version provides a number of other
improvements, for example, concerning the use of cost-benefit
analyses and the As Low As Reasonably Practicable (ALARP)
principle.

Foundations of Risk Analysis provides a framework for
understanding, conducting and using risk analysis suitable for
advanced undergraduates, graduates, analysts and researchers from
statistics, engineering, finance, medicine and the physical
sciences, as well as for managers facing decision making problems
involving risk and uncertainty.

Inhoudsopgave

Preface to the Second Edition

Preface

1 Introduction 1

1.1 THE IMPORTANCE OF RISK AND UNCERTAINTY ASSESSMENTS 1

1.2 THE NEED TO DEVELOP A PROPER RISK ANALYSIS FRAMEWORK 3

2 Common Thinking about Risk and Risk Analysis 7

2.1 ACCIDENT RISK 7

2.1.1 Accident Statistics 7

2.1.2 Risk Analysis 11

2.1.3 Reliability Analysis 22

2.2 ECONOMIC RISK 26

2.2.1 General Definitions of Economic Risk in Business and Project

Management 26

2.2.2 A Cost Risk Analysis 28

2.2.3 Finance and Portfolio Theory 29

2.2.4 Treatment of Risk in Project Discounted Cash Flow Analysis 31

2.3 DISCUSSION AND CONCLUSIONS 33

2.3.1 The Classical Approach 33

2.3.2 The Bayesian Paradigm 34

2.3.3 Economic Risk and Rational Decision-Making 36

2.3.4 Other Perspectives and Applications 37

2.3.5 Conclusions 39

Over de auteur

Terje Aven, University of Stavanger, Norway.