A risk–benefit ratio (or benefit-risk ratio) is the
ratio
In mathematics, a ratio () shows how many times one number contains another. For example, if there are eight oranges and six lemons in a bowl of fruit, then the ratio of oranges to lemons is eight to six (that is, 8:6, which is equivalent to the ...
of the
risk
In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environ ...
of an action to its potential benefits. Risk–benefit analysis (or benefit-risk analysis) is
analysis
Analysis (: analyses) is the process of breaking a complex topic or substance into smaller parts in order to gain a better understanding of it. The technique has been applied in the study of mathematics and logic since before Aristotle (38 ...
that seeks to
quantify the risk and benefits and hence their ratio.
Analyzing a risk can be heavily dependent on the human factor. A certain level of risk in our lives is accepted as necessary to achieve certain benefits. For example,
driving an automobile is a risk many people take daily, also since it is mitigated by the controlling factor of their perception of their individual ability to manage the risk-creating situation. When individuals are exposed to involuntary risk (a risk over which they have no control), they make
risk aversion
In economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter is equal to or higher in monetary value than the more c ...
their primary goal. Under these circumstances, individuals require the probability of risk to be as much as one thousand times smaller than for the same situation under their perceived control (a notable example being the common bias in the perception of
risk in flying vs. driving).
Evaluations
Evaluations of future risk can be:
* Real future risk, as disclosed by the fully matured future circumstances when they develop.
* Statistical risk, as determined by currently available data, as measured actuarially for insurance premiums.
* Projected risk, as analytically based on system models structured from historical studies.
* Perceived risk, as intuitively seen by individuals.
Medical research
For research that involves more than minimal risk of harm to the subjects, the investigator must assure that the amount of benefit clearly outweighs the amount of risk. Only if there is a favorable risk–benefit ratio may a study be considered
ethical
Ethics is the philosophical study of moral phenomena. Also called moral philosophy, it investigates normative questions about what people ought to do or which behavior is morally right. Its main branches include normative ethics, applied e ...
.
The
Declaration of Helsinki
The Declaration of Helsinki (DoH, ) is a set of ethical principles regarding human experimentation developed originally in 1964 for the medical community by the World Medical Association (WMA). It is widely regarded as the cornerstone document o ...
, adopted by the
World Medical Association, states that
biomedical research
Medical research (or biomedical research), also known as health research, refers to the process of using scientific methods with the aim to produce knowledge about human diseases, the prevention and treatment of illness, and the promotion of ...
cannot be done legitimately unless the importance of the objective is in proportion to the risk to the subject. The Helsinki Declaration and
the CONSORT Statement stress a favorable risk–benefit ratio.
See also
*
Benefit shortfall
When the actual benefits of a venture are less than the projected or estimated benefits, the result is known as a benefit shortfall.
If, for instance, a company is launching a new product or service and projected sales are 40 million dollars pe ...
*
Cost–benefit analysis
Cost–benefit analysis (CBA), sometimes also called benefit–cost analysis, is a systematic approach to estimating the strengths and weaknesses of alternatives. It is used to determine options which provide the best approach to achieving benefits ...
*
Odds algorithm
*
Optimism bias
Optimism bias or optimistic bias is a cognitive bias that causes someone to believe that they themselves are less likely to experience a negative event. It is also known as unrealistic optimism or comparative optimism. It is common and transcends ...
*
Reference class forecasting
Reference class forecasting or comparison class forecasting is a method of predicting the future by looking at similar past situations and their outcomes. The theories behind reference class forecasting were developed by Daniel Kahneman and Amos ...
References
{{DEFAULTSORT:Risk-benefit analysis
Risk analysis
Ethics and statistics
Medical statistics