Frequency and Severity: Keys to Understanding Risk

Before I write an article about the difficulty in categorizing industries into low hazard, medium hazard, and high hazard categories, which is worth some examination and discussion, I need to write some about the how the concepts of frequency and severity factor into understanding risk and safety. I will return to the concept of the hazard level of industries, but first, here is some discussion about frequency and severity.

To begin with, frequency and severity (as they relate to potential losses to people or property) are factors that help a risk manager or safety professional get a sense of the magnitude of a particular risk. Though objective measures are sought whenever possible, there is typically some element of subjectivity inherent in any examination of these concepts and their relationships. There is also the significant difference in the analysis of these factors from a basis of historic experience versus potential future outcomes.

Frequency
Frequency, also sometimes referred to as “likelihood” in certain models, refers to how often a particular adverse outcome will happen or is expected to happen. When looking at historic data, the frequency of actual events can be rated compared to factors such as work hours, days, months, quarters, production units, or even revenue dollars. When looking forward without the benefit of historic data, consideration can start with the simple question: “How likely is it for X to happen?,” which, of course, can lead to a wide range of conclusions related to what the answer is based on and what assumptions are made.

Examining Frequency
Frequency or likelihood can also be examined in a very detailed way, by looking at potential causal factors in detail and how those factors are linked together in cause chains or cause trees. For very large risks, and process safety environments, this sort of analysis is worth doing with a great amount of focus. Unfortunately, though, for lesser risks, assumptions are often made with very little in the way of analysis. There are ways to include some quality analysis that is reasonable in terms of time and effort required, and it is very beneficial to always at least consider what a given ranking of frequency or likelihood level is being based on and if that is sufficient for the given risk.

Scales for Frequency and Severity Levels
Before we discuss severity levels, it makes sense to discuss what scales are used in these analyses. Because frequency and severity are very frequently depicted in a two-axis arrangement, with frequency going from low to high on one axis and severity along the other, it is common for a single scale to be used for both frequency or severity, though there is no reason that the scales must be the same. The simplest version is a binary scale, with “low” and “high” as the only options.

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Scales
It is much more typical (and easier for those attempting quick categorization) to see three levels used, with the addition of ” medium” or “moderate” between low and high. There are examples of much more detailed rankings as well, including rankings that use numerical factors to express a level. Though these give an appearance of precision, there is the issue that seemingly precise rankings may not be as scientific as they seem, particularly considering the process used to arrive at a given numerical ranking. A basic three-by-three grid, as depicted below, is a common and useful starting point for risk ranking.

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Axes and Relative Weighting
It’s also useful to note that frequency and severity can be depcited across either axis, but using the vertical axis for severity and the horizontal axis for frequency tends to communicate relative risk ranking more effectively, especially if severity is give more relative weight than frequency.

Understanding Severity
Severity relates to the possible outcome of a given adverse event. Unlike frequency or likelihood, there are more natural sets of groupings that may be employed to place potential outcomes into categories. An example of such a set of groupings places outcomes such as non-lost-time (medical only) injuries as “low severity,” injuries that result in lost time or indemnity claims as “medium severity,” and injuries that result in some level of permanent disability being classified as “high severity.” There are many groups of other criteria that may be used as well, such as dollar values of claims, and also more complex categories of the nature of injuries.

Multiple Individuals
When multiple individuals are subject to possible injury by a given event, even if the injuries are minor, more weight will be given on the severity scale. Exactly how to factor multiple smaller injuries versus single larger injuries does present some challenges, though, so this must be done with some careful consideration.

Using an “Impact Factor”
A value can be developed, with frequency and severity relatively weighted, for any spot on the grid. My examples above use a simplified analog for that value, with green-yellow-orange-red color progression representing more total risk. The idea of an impact factor can take the total risk position on the chart and place a value on that place, with the highest risk items being assigned a higher value. Once again, the use of numerical values can provide for some interesting analysis possibilities, but also is subject to the same illusion of precision that applies to individual factors given numerical values. If numerical values are used, make sure to consider the source of those numbers and to be careful to not assign excessive importance to them just because they are expressed numerically.

Why This Matters
There is naturally much more to explore in the realm of frequency and severity, but the concepts presented above should form a starting point at least for applying them in practice. It is also important to consider how the conceptual framework for the relationship between frequency and severity form an underpinning of a solid understanding of risk, that is at least as valuable as any placement of a given possible scenario on a grid or matrix.

Putting Risk and Severity Consideration to Use
If you have familiarity with the textbook treatments of this topic, you will likely have noticed that not every term and definition related to the topic has been covered. One of the reasons for that relates to the value of these concepts in application versus theory. Theory is important, and sound theory is necessary for any practical application to take place. But the application is the most important consideration for the risk and safety practitioner, including the explanation of these ideas to those who need to put them to use. Simply put, people need to understand that a given potential risk might have a certain level of likelihood and a certain severity of outcome, and that those considered together give a glimpse of the relative overall level of risk. It is also essential to understand that the average person is typically subject to varying levels of clarity in their understanding of risk factors. A matrix of frequency and severity affords a better basis for discussion of the actual risks involved, and can elevate a discussion beyond uninformed assumptions.

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