1. What Is Risk Calculation?

Risk calculation is a fundamental process in risk management that quantifies potential threats by multiplying the probability of an event occurring by the impact it would have if it occurred. This approach helps organizations prioritize risks and allocate resources effectively.

2. How Does The Calculator Work?

The calculator uses the basic risk formula:

Where:

• \( Probability \) — Likelihood of event occurring (0-1 scale)
• \( Impact \) — Severity of consequences (1-5 scale)
• \( Risk \) — Calculated risk score (0-5 scale)

Risk Classification:

• 0-1: Low Risk - Minimal impact, acceptable level
• 1.1-2.5: Moderate Risk - Requires monitoring and controls
• 2.6-4: High Risk - Needs immediate attention and mitigation
• 4.1-5: Very High Risk - Critical threat requiring urgent action

3. Importance Of Risk Assessment

Details: Proper risk assessment enables organizations to make informed decisions, prioritize resource allocation, develop mitigation strategies, and improve overall resilience against potential threats and uncertainties.

4. Using The Calculator

Tips: Enter probability as a decimal between 0 and 1 (e.g., 0.25 for 25% chance). Impact should be rated on a scale of 1 (minimal) to 5 (catastrophic). The calculator will provide both quantitative and qualitative risk assessments.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between probability and impact?
A: Probability measures how likely an event is to occur (0-100%), while impact measures the severity of consequences if the event occurs (rated 1-5).

Q2: How should I determine probability values?
A: Use historical data, expert judgment, statistical analysis, or industry benchmarks. For new risks, start with conservative estimates and adjust as data becomes available.

Q3: What factors should influence impact scoring?
A: Consider financial loss, operational disruption, safety concerns, reputational damage, regulatory compliance, and customer impact when rating consequences.

Q4: Can this method be used for all types of risks?
A: While applicable to most operational and project risks, some specialized risks (cybersecurity, financial markets) may require more sophisticated quantitative models.

Q5: How often should risk assessments be updated?
A: Regular reviews are essential - typically quarterly for dynamic environments or whenever significant changes occur in the organization or external environment.