To improve risk informed decision making, a systematic approach is developed. The goal is to analyze and to evaluate safety investments aimed at mitigating and preventing major accidents involving e.g. hazardous materials that might trigger significant financial losses and fatalities. A formulation, explicitly using a disproportion factor, is proposed as a simulation exercise approach to this end. The disproportion factor can be used by any private and public investor to bias decision-makers toward safety. This is especially interesting for deciding about the prevention of high impact low probability (HILP) accidents.

Furthermore experimental simulations have been performed on realistic data to test the proposed decision model and to provide general recommendations. Several types of accidents were considered and the impacts of technical and financial parameters on the disproportion factor, possibly making a safety investment profitable from an economic perspective, are also investigated and discussed in this paper.@en

In this chapter an innovative approach is described to evaluate investments in safety measures under an economics perspective. By accurate risk and safety assessment it is possible to assign costs and benefits to a safety measure. In this way, the foundation of robust and long-sighted risk and safety analysis can be built for operational safety within any organization. Decision-making might be significantly improved by prioritizing and refocusing on safety rather than on short-term organizational objectives. Cost-benefit analysis can be used to evaluate investment decisions by translating safety and risk concepts into monetary values integrating well-known indicators and measures from economic theory such as net present value, internal rate of return, and payback period.@en

This chapter is intended to address cost-benefit analysis of safety investments aimed at controlling low-probability, high-impact accidents. Such events are characterized by high uncertainty owing to relative lack of data, and challenges may be encountered in the calculation of the related economic measures. For this reason, the notions of cost and benefit need to be broadened. A disproportion factor may be used as an adjustment in favor of safety when partial quantitative data about costs and benefits are available. When quantitative data are not available or qualitative measures associated with the safety investments are to be evaluated by decision-makers, cost-benefit analysis based on a multicriteria decision-making approach is suggested. Both the techniques are described by means of tutorials and specific examples of application.@en