Dynamic risk

Dynamic risk
See also
Visual inspection SWOT analysis Research strategy Competitive risk Cost risk Accident management Marketing research UDAAP Insurance risk

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”. 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	Static risk
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”	“unlike dynamic, static risks are predictable and would occur with some regularity”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”
“these type of risks would not be insurable since they would involve a speculative process behind”	insurable
“normally benefit society over the long run, since they are the results of adjustment to the misallocation of resources”	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 (…)”.

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”. 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:

• “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”.

References

• Cienfuegos Spikin I., (2013), Risk Management theory: the integrated perspective and its application in the public sector Estado; Gobierno; Gestión Pública, ISSN 0717-6759 Nº21
• Kristamuljana A., van Loon RA B., Bolt J.,Terblanché A., (2018), Above and Beyond the Hidden Structure of Interconnections between Risks Compact, ISSN 2
• Parast L., Mathews M., Friedberg M.W., (2019), Dynamic risk prediction for diabetes using biomarker change measurements BMC Medicl Research Methodology
• Rozhok A., Tatarinov V., (2019), The application of dynamic risk analysis methods for safety improvement on highways located near or on the territory of hydraulic engineering dams IOP Conference Series: Materials Science and Engineering, 492 012005
• Sethi J. Bhatia N., (2012), Elements of banking and insurance, Second edition PHI Learning Private Limited, New Delhi

Author: Aleksandra Wróbel