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An Analysis of the de minimis Strategy for Risk Management

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  • Jeryl Mumpower

Abstract

A de minimis risk management strategy sets a threshold so that risks below the specified level are defined as trivial and exempted from further consideration. The intended purpose is to help avoid inappropriate and wasteful concern with insignificant low‐level risks. In most instances a de minimis strategy is likely to have beneficial or innocuous effects, but under certain circumstances large differences may develop between nominal and actual de minimis levels. The potential for such discrepancies illustrates why de minimis (and all other risk management) strategies should be evaluated on the basis of the portfolio of risks that would accumulate from applying such strategies over time, rather than on the apparent reasonableness of any single instance of application.

Suggested Citation

  • Jeryl Mumpower, 1986. "An Analysis of the de minimis Strategy for Risk Management," Risk Analysis, John Wiley & Sons, vol. 6(4), pages 437-446, December.
    • Handle: RePEc:wly:riskan:v:6:y:1986:i:4:p:437-446
    DOI: 10.1111/j.1539-6924.1986.tb00956.x
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    References listed on IDEAS

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    1. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Björn Lundgren & H. Orri Stefánsson, 2020. "Against the De Minimis Principle," Risk Analysis, John Wiley & Sons, vol. 40(5), pages 908-914, May.
    2. Louis H.J. Goossens, 1991. "Risk Prevention and Policy‐Making in Automatic Systems," Risk Analysis, John Wiley & Sons, vol. 11(2), pages 217-228, June.
    3. Thomas Boyer‐Kassem, 2017. "Is the Precautionary Principle Really Incoherent?," Risk Analysis, John Wiley & Sons, vol. 37(11), pages 2026-2034, November.
    4. Terje Aven & Azadeh Seif, 2022. "On the foundation and use of the de minimis principle in a risk analysis context," Journal of Risk and Reliability, , vol. 236(1), pages 90-97, February.

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