Risk Exposure

Definition - What does Risk Exposure mean?

Risk exposure refers to the level of loss that an employer may potentially incur by engaging in a particular activity combined with the probability that he or she will incur that loss. The lowest-risk-exposure activities have both low potential loss and low probability that the loss will be incurred, while the opposite is true for high-risk-exposure activities.

Risk exposure is a major factor in determining occupational safety guidelines, as well as in determining whether an employer has committed a safety infraction in the event of a safety incident. Compliance with OSHA’s General Duty clause, which requires employers to provide their workers with a safe work environment, is generally determined by examining whether or not an employer has taken all explicitly required and otherwise reasonable steps to reduce employee risk exposure to as low a level as is reasonably practicable.

Safeopedia explains Risk Exposure

OSHA and occupational health and safety authorities in other advanced countries mandate the determination of risk exposure through requirements (e.g. OSHA 1910.132) for employers to perform hazard assessments in certain work environments. These assessments include both the identification of hazards and the determination of the level of risk associated with their use in the workplace. Activity and job-specific occupational health and safety guidelines are premised on the goal of reducing risk exposure associated with an activity to an “acceptable” level.

The two types of risk exposure associated with occupational activity are pure risk and speculative risk. Pure risk refers to types of uncontrollable risk that are inherent in the activity being performed, such as natural disasters. Speculative risk refers to voluntary risk that occurs as a function of the activities the employer has chosen to engage in as well as the method through which he or she has chosen to engage in them. A relatively elevated level of risk exposure is an unavoidable aspect of certain jobs. For instance, many workers in the medical industry are exposed to significant risks due to working closely with pathogens.

For employers, risk refers to both safety risks to workers and financial risks related to engaging in a specific activity. Insurance costs and associated legal liabilities rise when risk exposure is high, creating a financial incentive for employers to reduce risk exposure to as low as reasonably possible. In developing nations without strong occupational safety programs, the employer’s financial risk exposure may not be strongly tied to the health and safety of the workers, which can result in the employer accepting relatively large amounts of risk to the employees to maximize financial gains.

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