1. What is Risk Calculation?

Risk calculation is a fundamental process in risk management that quantifies potential risks by multiplying the probability of an event occurring by the severity of its consequences. This basic risk assessment approach helps in decision-making and resource allocation.

2. How Does the Calculator Work?

The calculator uses the basic risk formula:

Where:

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

Explanation: The formula provides a quantitative measure of risk by combining both the likelihood and impact of potential events.

3. Importance of Risk Assessment

Details: Risk assessment is crucial for identifying potential hazards, prioritizing risks, implementing control measures, and making informed decisions in various fields including business, safety, and project management.

4. Using the Calculator

Tips: Enter probability as a decimal between 0 and 1 (where 0 = impossible, 1 = certain). Enter severity on your chosen scale (typically 1-10 or similar). The calculator will compute the risk score.

5. Frequently Asked Questions (FAQ)

Q1: What does the probability scale represent?
A: Probability is measured from 0 (impossible) to 1 (certain). For example, 0.25 represents a 25% chance of occurrence.

Q2: How should I determine severity values?
A: Severity is typically measured on a scale (e.g., 1-10) where 1 represents minimal impact and 10 represents catastrophic consequences.

Q3: What do different risk scores indicate?
A: Higher scores indicate greater risk. Organizations typically establish thresholds for low, medium, and high risk based on their risk tolerance.

Q4: Are there limitations to this basic formula?
A: While simple and effective, this formula doesn't account for risk interdependencies, multiple scenarios, or qualitative factors that may be important in complex situations.

Q5: How often should risk assessments be updated?
A: Risk assessments should be reviewed regularly and updated whenever there are significant changes in the environment, processes, or new information becomes available.