Chance encounters should have little to no risk to the party at large. To die in a side track is terrible.
I respectfully disagree. If there is no risk, there isn't the same excitement; at least, that's how our group feels. To die in a side track is terrible... but c'est la vie. That threat really keeps you on your toes -- and not just in the big battles, but all the time. Every battle becomes meaningful, and every victory a cause for celebration.
I didn't say "Cannot Die" I said Little to no, it still can happen, it mainly depends on the characters. As an example, I had an encounter for my players with an individual who had a temper and often duelled. He challenged a player, that player had the option to grovel, or apologise for the slight, run away, or fight. They chose to straighten out the misunderstanding. The NPC became a strong contact for the players and supported them in later episodes. This was totally random, in fact, I hadn't even intended that they really interact with this NPC, he was thrown in as a quick aside that was easily discarded, but the players chose to make him more involved in the storey. If they had fought the player probably would have died, but being rolemaster who really knows?
I have definitely killed more players in my campaign than the average, and more than almost anyone at a bet. My players know that they can die at any time. I do allow luck to modify the roll, but as I said it can only modify the roll by your luck stat bonus, and then the luck stat drops by the amount used. Additionally you may only modify the last roll, so if you are in a fight and the guy rolls a hit, you decide then and there to burn the luck to modify that roll, if you get a C critical on you and don't change that roll and I roll the next one That becomes the one you can change. As the player you hate to lose your level 5 sorcerer to that lesser orc scout with the bow, but it happens.
In all of my campaigns the players are basically free to do what they will, a completely open world. Pick a direction and travel, pick a building and try to get in. Want to be a crime lord, do it, want to take over the realm, go ahead and try. You face the consequences for your actions.
Another thing I add is fame and infamy. Help that little old lady across the street, here is a fame point, drag her into the alley and stab her for her purse here is an infamy point. The first one is easy to get, as you get more they become harder, the second fame point is not earned by helping that little old lady across the street. Your fame / infamy levels determine how well known you are in the town / city / land / world. If you have a lot of infamy, well there may be law enforcement / adventurers / soldiers looking for you. If you have a high fame, you may be summoned by the council / king to help with a big problem.
The players all know there are consequences both immediate and future to their actions at all times. Try to live life gaining only fame, it is pretty tough.