Underestimating Risk

In an article published in the N.Y. Times entitled, Spillonomics: Underestimating Risk, http://www.nytimes.com/2010/06/06/magazine/06fob-wwln-t.html, the author discusses the fact that many business, like BP, underestimate the actual risks involved in an enterprise since the type of incident, such as the current oil spill/explosion in the Gulf of Mexico, hasn't occurred previously to them. And since this type of event is so catastrophic it seems hard for us as humans to wrap our minds around the possibility of it ever happening. Also, it seems the government may have unwittingly aided in this thinking since a little know provision in the 1990 law passed after the Exxon Valdez spill capped a spiller's liability at $75 million for a rig spill. For a large company like BP, the prospect of paying out this amount in the future should a spill occur is probably negligible considering the probable profits made from the enterprise. It is worth noting though that BP has agreed to waive the cap for claims it deems legitimate. The point here is that business' both large and small need to invest the time and energy necessary for risk management, specifically as it applies to their risk and exposure.