Dynamic risk

Dynamic risk
See also

Dynamic risk is a risk that results from changes in the economic, social, political, economic or technological environment. It depends on external variables such as competitiveness or economics, and internal variables such as consumer requirements and specific organization decisions. This type of risks usually applies to a larger group of people and the difficulty of anticipation is associated with a lower incidence. An example of such risk may be technological changes related to the launch of a better quality product at a lower price, which will result in a decrease in sales among previous industry leaders “Dynamic risks are the results of adjustments to misallocation of resources, and thus bring gains to the society to the long run”[1]. To fully present the characteristics of dynamic risk, it was compared with the static risk in Table 1. Speaking of dynamic risks, it is important to present static risks due to their opposite nature.

Comparison of dynamic and static risk

Dynamic risk[2] Static risk[3]
mainly speculative risks maily pure risks
“dynamic risk could affect a great number of persons and they would believe to be less predictable than static risks, because they don’t occur with any extent of regularity”[4] “unlike dynamic, static risks are predictable and would occur with some regularity”[5]in addition they affect individuals or small groups of people.
depending on external and internal factors “static risks would be those risks that would be not dependable on the evaluation of the competitive environment in which the organization operates, , but would rest merely on the internal factors of the entity”[6]
“these type of risks would not be insurable since they would involve a speculative process behind”[7] insurable
“normally benefit society over the long run, since they are the results of adjustment to the misallocation of resources”[8] they are usually harmful and do not benefit society

Dynamic risk assessment

Dynamic risk assessment is used to deal with uncertainties and unidentified threats in situations that are constantly changing. “The traditional risk assessment models, which assess risks based on their individual impact or likelihood have been widely applied by many organizations. The existing models, however, fail to recognize the interconnections among the risks which may reveal enhanced assessment dimensions and more pertinent risk mitigating actions. In response to this, the Dynamic Risk Assessment (DRA) has been developed (…)”[9].

Examples of using the dynamic risk model

The application of dynamic risk model has brought many benefits in various areas of life. An example would be research conducted in the field of medicine (diabetes). “Dynamic risk models, which incorporate disease-free survival and repeated measurements over time, might yield more accurate predictions of future health status compared to static models”[10]. Road infrastructure is another area in which the dynamic risk model has been successfully applied. An example would be research to improve safety on highways located nearby or within hydrotechnical dams.

The application of hazard analysis model, allowed among others[11]:

  • “to predict the dangers of simple and complex technical systems, using established and systematic methods;
  • to carry out the ranking of the component “machine” systems by hazard classes in the conditions of strong uncertainty;
  • to rank all types of the “Man-Machine-Environment system” according to hazard criteria and compliance with regulatory documentation”.

Footnotes

  1. Sethi J., Bhatia N. 2012
  2. Cienfuegos Spikin I. 2013 p.98
  3. Cienfuegos Spikin I. 2013 p.98
  4. Cienfuegos Spikin I. 2013 p.98
  5. Cienfuegos Spikin I. 2013 p. 98
  6. Cienfuegos Spikin I. 2013 p.98
  7. Cienfuegos Spikin I. 2013 p.98
  8. Cienfuegos Spikin I. 2013 p.98
  9. Kristamuljana A., van Loon RA B., Bolt J.,Terblanché A. 2018
  10. Parast L., Mathews M., Friedberg M.W. 2019
  11. Rozhok A., Tatarinov V. 2019

References

Author: Aleksandra Wróbel