Risk Assessment: Frequency, Stakes & Cost

20121118-175227.jpgI was talking with a family member recently about why I choose to live a lifestyle that includes armed self-defense. “Surely the risk of becoming a murder victim is vanishingly small,” he said, “so why spend all this energy preparing for it?”

In trying to answer his question, I began thinking about how we assess risk in our lives. The way I make these decisions is to consider three aspects of any potential emergency: frequency, jeopardy and cost.

Frequency is how likely a given event is to happen. Running out of coffee is a much more likely occurrence than being attacked by a horde of zombies, for example. Becoming a victim of violence carries a risk of about 1 in 300 in any given year. Incidentally, according to the most recent data I could find online, this risk is just slightly lower than the risk of suffering a house fire.

But it isn’t enough to just consider how likely various risks are. We must also consider what I’m calling jeopardy. This is another way of asking this question: If the event I’m considering happens, what would it mean to me? It’s a way of looking at what the stakes are in a given crisis.

When we make preparedness decisions, we have to balance these two factors against one another. It doesn’t necessarily make sense to undertake extensive preparation for a high-frequency but low-jeopardy event. We don’t buy “light bulb burning out” insurance, because even though light bulbs burn out often, the risk to us when they do is generally low. Likewise, the potential stakes in a zombie invasion would be very high, but the likelihood of a marauding horde of zombies descending upon your town is low enough that preparing for it is a bit silly.

Consider a more real danger. The likelihood of a house fire is moderately high – about one in 250 in a given year. The potential jeopardy is high: in a fire someone could die, and we could lose our homes and possessions. House fires, then, are probably a danger worth preparing for. Having decided that, we turn to the third factor, cost. We look at the price of smoke detectors, fire extinguishers, and fire insurance and evaluate whether those costs make sense given the level of risk. For most people they do. If fire insurance cost a million dollars a year, it probably wouldn’t make sense for me to carry it since my home and its contents aren’t worth that much.

This is how I look at my decision to carry a gun:

  • Frequency: Violent crimes are fairly common – about 1 in 300 people will experience one in a given year. Granted, some populations (gang members and low-income minorities) are more likely to be victims of violence than middle-aged, middle-class white women. But the frequency of violent crime for me is not low enough to comfortably discount entirely.
  • Jeopardy: If I am a victim of violent crime, the stakes are potentially very high. Plainly, I could die or be seriously injured, or someone I care about could die or be seriously injured.
  • Cost : The cost of choosing to arm myself against violence is relatively low, especially given the ancillary benefits I accrue from shooting – self confidence, recreation and relaxation, camaraderie and social connections.

There is a wrinkle to this analysis process, though: It turns out our minds aren’t necessarily good at estimating the frequency of dangers. In particular, we tend to over-emphasize unusual events, and under-emphasize familiar ones. This is why the anti-gun folks focus on the “evils of guns” rather than banning cars, even though many more people are killed each year in car accidents than die from gun violence.

In truth, we can never reduce the risks of day-to-day life to zero. The best we can do is mitigate the level of risk in our daily activities to an acceptable level. We could be totally prepared for tornados, civil war, violent predators, and the zombie apocalypse, and still get struck by lightning and killed on the shooting range one day. Risk is everywhere, but by understanding ti and quantifying it, we can make intelligent decisions about how to best manage it.

What decisions have you made in terms of preparing for dangers that you might face? How do those decisions look in light of this way of thinking about risk? I’d love to hear your thoughts in the comments.

Photo credit: stock.xchng


  1. The Army calls this composite risk management. The terms are slightly different, but the concept is identical to what you are describing. There are even tables and charts to help idiots do it, but most people can grasp the principles and do it on the fly. You explained it quite well. There’s even a printable CRM matrix card.

    • Thanks for this insight! I didn’t know the military uses a similar process, but I’m not surprised. The military does risk analysis very well, and is very good at systematizing processes like this.

      Thanks for reading and for your comment! I’ll definitely check out the link you provided.

  2. Excellent! That’s pretty much a good matrix for decision making in any area of our lives or businesses. I’m going to work a little more of that into the decision making process part of my self defense class material.

    Keeping track of the “big picture” while we work on various areas of our preparations and training is just so important.

  3. Chuck Haggard says:

    Excellent article.

    Tom Givens of Rangemaster in Memphis gives a similar bit of info in one of his classes on feedback of the success of Rangemaster CCW students in self defense situations. Of note is that nationwide people are more likely than they think to be the victim of a violent crime, and in some places such as Memphis even more so.

    • One of the cognitive biases that people struggle with is called optimism bias which basically means that people believe they are less likely to experience negative outcomes compared to others. When you combine optimism bias with availability bias, another cognitive trap that means we over-estimate the probability of rare events and under-estimate the probability of common ones, it’s hardly surprising that people have an inaccurate mental assessment of the risks they face in daily life.

      To be sure, certain kinds of risks – the risk of being a victim of a firearms-related homicide, for example – are quite small. But even small risks are worth preparing for when the stakes are high enough. I figured out a while back that one’s risk of being the victim of a violent crime is just slightly smaller than the risk of experiencing a house fire in any given year — but we don’t think people are paranoid for installing smoke alarms, having fire drills, or purchasing homeowner’s insurance.

      Thanks for reading, and for your comment!

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