API 580 Risk Based Inspection Practice Test

In risk calculation, what does "risk" equal?

1. Cost of insurance minus losses

2. Probability of an event plus consequences

3. Probability of failure multiplied by consequence of failure

4. Historical data plus stakeholder opinions

The correct answer is: Probability of failure multiplied by consequence of failure

In risk calculation, "risk" is defined as the probability of failure multiplied by the consequence of failure. This framework emphasizes that risk is not only determined by how likely an event is to occur but also by the impact it would have if it did occur. Understanding this relationship is crucial in risk-based inspection since it allows for prioritizing inspections and interventions based on both the likelihood of failure and the severity of potential consequences. When evaluating risk, merely considering the probability isn't sufficient; one must also factor in what would happen if that event were to take place. This understanding helps organizations allocate resources effectively to mitigate risks that pose the greatest threat to asset integrity and safety. As such, focusing on both probability and consequences allows for a comprehensive understanding of risk and helps guide decision-making processes in risk management.